Honeywell sells airlines its R&O expertise

 - December 13, 2006, 7:36 AM

As airlines seek to shed costs associated with expensive component repair and overhaul (R&O) activity, lucrative opportunities are emerging for companies with the wherewithal to provide such capability. U.S. engines and avionics giant Honeywell considers itself one such entity.

There’s no disputing that the emergence of low-cost carriers has forced the legacy airlines to rethink how they perform in-house maintenance. Recently, some airlines have begun outsourcing their R&O-related activity and are focusing instead on their core competencies, namely flying passengers and making money. The trend should continue as flight hours rebound to pre-9/11 levels, but to what extent remains a largely unanswered question.

While it might seem counterintuitive to the uninitiated, Honeywell insists that its top priority in terms of aftermarket support for airline customers is to deliver parts that last longer and cost less. By helping customers save money, Honeywell says it can ease some of the financial pressure related to high oil prices and low fares. According to the theory, airline financial health ranks as the biggest indicator of operational spending. In other words, when the airlines make money, companies like Honeywell make money as well.

No End to Outsourcing Trend

Tim Mahoney, Honeywell vice president and general manager for aftermarket services, said he anticipates airlines will continue the recent trend of outsourcing R&O as a way of reducing costs.

“Traditionally, airlines have maintained repair and overhaul capabilities in-house, but that is changing as airlines seek to rein in costs,” he said. “Airlines are learning they can save a significant amount of money by reducing their parts inventories and signing agreements for guaranteed availability and parts pricing.”

The transition has presented Honeywell with the challenge of developing new approaches to airline asset management, logistics  and parts supply, as well as to improve overall cost of ownership. Mahoney said Honeywell continues to streamline its parts supply capabilities and to enhance its global repair and overhaul network with service agreements tailored to meet customer needs. To help extend the life of parts and drive down costs, Honeywell uses such advanced repair technologies as laser repair processes, high-tech coating and so-called adaptive machining, whereby the company employs computer-aided design and manufacturing techniques to repair various components.

Cargo and Defense

Besides the airlines, Honeywell maintains major R&O contracts with FedEx and the U.S. Navy’s Total Logistics Support arm. In the case of FedEx, Honeywell provides end-to-end supply chain management, R&O services, vendor management and engineering services for the freight carrier’s fleet. The FedEx agreement includes provisions for guaranteed availability of parts, reliability and  pricing. Honeywell clearly hopes the success of the R&O service it has tailored for major customers  will lead to new opportunities down the road.