Breaking News Breaking News Breaking News

February 10, 2000 Aerospace

Big GE Unit to Offer Services,
Sell Parts on a New Web Site
Business 2 Business
By MATT MURRAY
Staff Reporter of THE WALL STREET JOURNAL

General Electric Co.'s largest single unit, GE Aircraft Engines, plans Thursday to unveil a
new business-to-business Web site that will enable commercial airlines and military
customers to buy parts, among other functions, via the Internet. The site launch is the
latest flowering of GE's company wide move to integrate the Internet into its daily
operations in an effort to speed transactions and reduce costs.

Kyriakos Leonidou, Francis Montet, Linda Moya,

Ridzwan Nordin, Andrew O'Shaughnessy, Priscilla Pang
 The Aerospace Industry
• “Aerospace” term coined in the 1950’s, when the space race was
heating up
• Impetus for growth was war and the Cold War
• Since the demise of the Cold War, companies have found it necessary
to merge with or acquire competitors
• Since 1989, downsizing and cost-cutting have been rampant
– streamlined operations, cut R&D, reduced inventories, employment slashed
by 50%
• Today Aerospace is a $1B industry. Major players are the following plus
Airbus Industrie - a European consortium expected to go head-to-head
with Boeing:

60,000

50,000
Revenue $ millions

40,000

30,000

20,000

10,000

0
Boeing Lockheed United Raytheon Northrop B.F. Goodrich
Martin Technologies Grumman
February 16, 2000 2
 Major Players and B2B Players
Current Online B2B

Parts Suppliers Intermediaries Manufacturers Customers

AARCorp Aerospacemall.com Airbus Industrie Commercial

Sita Carriers
Aviabid.com
Boeing
BF Goodrich Partsbase.com
Lockheed Martin
GE Aircraft
Military /
Northrop Grumman
Government
Honeywell
Raytheon
United
Technologies

February 16, 2000 3


Parts Suppliers
• Aircraft engine sales &
leasing and overall
• Aircraft overall
• Made-to-order equipment
systems
• Auxiliary power units
• Commercial avionics
• EGPWS warning systems
• Flight control systems
• Environmental control
systems
• Landing systems
• Interior and exterior lighting
February 16, 2000
What They Do
Intermediaries
• Portal for aerospace, aviation and
industrial information
• Auction community to buy and
sell aviation parts, aircraft,
services, and equipment.
• Career brokering
Manufacturers
• Short, medium, long-haul aircraft
(military and commercial)
• Defense electronics, systems
integration, military aircraft
systems, commercial aircraft
assemblies
• Business aviation and special
mission aircraft, engineering and
consultation
4
 Where They Do Business
Parts Suppliers
• AAR – North America, Europe and Asia
• BF Goodrich – North America, Europe and Asia
• GE Aircraft – North America, Europe and Asia
• Honeywell – North America, Europe, Asia
• United Technologies – Worldwide

Intermediaries
• Primarily North America

Manufacturers
• Airbus– Europe, North America, Middle
East/Africa, Far East/Asia/Pacific, Latin America
• Boeing – United States, Asia, China, Europe,
Oceania, Africa and Western Hemisphere
• Lockheed Martin – Government and commercial
customers around the world
• Northrop Grumman – primarily US
• Raytheon – primarily US
February 16, 2000 5
 Who are the Customers?

Parts Suppliers Intermediaries Manufacturers

“Our Space and • Airplane OEM • International

Aviation Control markets
business serves • Small parts
customers that companies • Commercial
range from aircraft markets
manufacturers and • Aviation consumers
business aircraft and professional • Military, defense,
operators to prime buyers and sellers civil, government
space contractors markets
and the U.S. • Aviation
government” professionals • Aircraft leasing
Source: Honeywell looking for a job companies
SEC –10K, March
1999 • Air carriers looking
for airplanes

February 16, 2000 6

 What is the Value Proposition of
Online B2B?
• Intermediaries provide “level playing field” for small and medium
parts suppliers with large parts suppliers
• Parts Suppliers B2B and Intermediaries B2B enable reduced
costs for Manufacturers
– Reduced procurement staffs and costs
– Reengineered procurement process
• Eliminate manual paper process
– Common history of business transactions between buyer and seller
• Intermediaries provide Manufacturers up-to-date product
comparison information across suppliers
• Intermediaries broker effective relationships between aviation
professionals looking for jobs and aerospace companies
• Intermediaries provide Airline Carriers opportunity to by
airplanes, through auctions for example, “comparison” shop
across manufacturers

February 16, 2000 7

 Online Basics
• Computer Sciences Corporation recently conducted a study of
the e-business strategies of the major players in the aerospace
industry. All the IT executives of these companies “said they had
Web sites, however 55% said those sites were strictly
informational, with 18% interactive, 18% able to deliver
information and 9% percent able to make transactions.”
Source: AerospaceOnline http://www.aerospaceonline.com (November 1999)

• Parts suppliers
– Generally provide company and product information as
educational content
– More advanced sites have capabilities to
• place orders (GE, AAR)
• search products, track orders, check inventory availability,
technical support, customized pages for customers and other
suppliers (GE, AAR, Honeywell, United Tech)
• purchase online (GE)
February 16, 2000 8
 Online Basics (cont.)
• Intermediaries
– Information about the aviation market
– Revenue plan
• Free registration
• Commission based
• Advertising commission
• Manufacturers
– About the company (all)
– Company history / milestones (all)
– Meet the executives (all)
– Company financial information (Boeing)
– Career opportunities (all except Airbus)
– News and events (all)
– Product information (all)
– Online procurement processes (Airbus, Boeing, Lockheed Martin)
– Supplier relations information (Boeing, Lockheed Martin)
– Investor relations information (all except Airbus)
February 16, 2000 9
Sample Online Value Added Web Pages
Online
training
offered by
Honeywell

Airbus member-
Auction community based service:
/ marketplace to check parts
buy and sell availability,
aviation parts, interchangeability,
aircraft, services excess material,
and equipment prices
February 16, 2000 10
 Online Value Added –
Parts Suppliers

 Personalized pages
 E-mail subscription to news and new
product information
 1 hour guaranteed delivery at select
airports
 View pictures of ongoing repair work
 Online training
 Options to either exchange or borrow
parts

February 16, 2000 11

 Online Value Added –
Intermediaries

 Web design consulting services

 Discussion boards
 Personalized pages - account status, monitoring
auction items, end an auction early, edit personal
information, feedback
 Auctions allow members to set their own
price
 Escrow payment services
 Multiple auction schemes - English Auction|
Dutch Auction, Japanese Auction, Sealed Bid
 Multiple shipping options
 Allow search for parts and aircrafts
 Aviation news

February 16, 2000 12

 Online Value Added –
Manufacturers

• Market status update / stock quote

• Online publications THE LINK, quarterly
newsletter, Above & Beyond magazine
• Photo or Video gallery
• Kid’s page
• Gift store
• Philanthropy
– Education, grants, scholarships,
donations to not-for-profits…
• EDI interconnection for online e-
commerce
• Latest multimedia technology (FLASH)
• Small business relations (women and
minority owned)

February 16, 2000 13

 Online Opportunities
Opportunity Benefit
• Multilingual interfaces • Increased global reach
• Attract undiscovered
customers
• Recruitment of smaller • Increased revenues
carriers and private
owners
• Provide tools for EDI to • Cost reductions,
B2B transformation enlarged supplier &
customer network

February 16, 2000 14

 Online Opportunities (cont.)
Opportunity Benefit
• Purchase contract • Customer access to
negotiation via the web information on their
– Password protected work terms
area where account – Access web
executive and customer – Call their account
can negotiate terms representative
• Ongoing • More powerful
communications via the communications than
web paper or e-mail
– 1:1 Bboard between – Can be secured
customer and account
executive – Version control
– History of all online – Common history of
conversations business relationship

February 16, 2000 15

 Industry Issues
• Transfer of design and technology base
– This does not necessarily mean giving up the most advanced
technology. It could involve something as simple as showing foreign
workers how to operate a particular piece of equipment. To
maintain technological and informational superiority, companies
restrict what they make available online.
• Government involvement in the industry
– In the international arena, the US aerospace industry is competing
against companies that are directly or indirectly owned by foreign
governments. Asian and European governments have a strong
influence in the aerospace industry and this is a barrier of entry for
US companies trying to increase their market share.
• Some European countries condone bribes for solicitation of
contracts, this is some thing US companies cannot offer.
• Trade barriers and sanctions also limit international transactions.

February 16, 2000 16