{"id":21146,"date":"2017-11-09T21:48:10","date_gmt":"2017-11-10T02:48:10","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/maintain-the-pace-digital-disruption-in-the-aviation-maintenance-industry\/"},"modified":"2017-11-09T21:48:10","modified_gmt":"2017-11-10T02:48:10","slug":"maintain-the-pace-digital-disruption-in-the-aviation-maintenance-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/maintain-the-pace-digital-disruption-in-the-aviation-maintenance-industry\/","title":{"rendered":"\u201cMaintain the Pace\u201d: Digital Disruption in the Aviation Maintenance Industry"},"content":{"rendered":"

The aviation maintenance industry is considered one of the most fast-growing branches in the aviation industry. The industry\u2019s value is estimated at $70 billion, and is expected to reach $100 billion within a decade, at an estimated growth rate of 6% [1]. At the core of the industry are several hundred maintenance players (MROs) who provide repair services and spare parts for aircrafts. These players form a link between aircraft manufacturers (OEMs) and airlines, and are distinguished by their geographic focus, the types of aircraft they handle, and the business models they offer.<\/p>\n

Two parallel trends that have taken place in recent years have led to significant changes in the industry structure. At one end, aircraft manufacturers began to produce more sophisticated aircrafts, using information technology and networks connectivity. As a result, the maintenance players who until now had based their knowledge on “reverse engineering” have become dependent on the manufacturers\u2019 willingness to share technical information with them. This dependence became even more challenging as the OEMs enter the aftermarket themselves and offer maintenance services directly to airlines [2]. At the same time, airlines gradually began to move away from the maintenance business, seeking integrated solutions (“nose-to-tail”) that would enable them to focus on operating. The trend has increased with the introduction of low cost carriers (LCC), who prefer to outsource all aspects of inventory management and spare parts. The airlines place high expectations on their suppliers: spare parts availability and transparency (JIT), rapid delivery, and comprehensive control over the new aircrafts\u2019 technology [3].<\/p>\n

AAR is one of the largest independent MROs in the world. The company’s headquarters is in Chicago and it is operating in more than 20 additional locations, working with dozens of airlines. In recent years, the company has made several changes to adapt itself to the new challenges of the digital era. Under these efforts, the company has developed an internal system for computerized inventory management (\u201c1MRO\u201d) and has recently begun to sell this system to additional warehouses; It has set up a portal for its subscribed costumers (\u201cAARive\u201d) through which they can manage their inventories \u201cpool\u201d in real time and order spare parts based on an up-to-date picture of availability; and it developed an online website (\u201cpAARts store\u201d) through which it offers spare parts in discounted prices (\u201cShop B2B with B2C user experience\u201d). In addition, AAR has formulated new understandings with the major OEMs in an attempt to create cooperation that will ensure the availability of technological know-how. In return, the company was forced to commit not to use non-original spare parts, a commitment that creates a significant price advantage for the maintenance services provided by the OEM themselves [4].<\/p>\n

Shop B2B with B2C user experience (AAR Website)<\/figcaption><\/figure>\n

As a result, today most of the communication between customers and AAR is done through digital channels, using an ongoing statistical model performed automatically by IT systems. According to the company’s management, the steps taken were necessary to meet customers\u2019 expectations and the changes that occurred in the industry. However, they assess that in the coming years AAR will be required to make additional adjustments to remain competitive in the rapid-changing market [5].<\/p>\n

There are two areas that have become central in recent years in which AAR is almost not involved:<\/p>\n