SEATTLE (Reuters) - Boeing Co (BA.N) is looking for future deals “small or big” now that it has absorbed parts distributor KLX Inc, an executive told Reuters, as the world’s largest planemaker tries to beat out rival Airbus (AIR.PA) in the highly profitable market for aircraft parts and services.
Boeing last month closed the KLX acquisition for $4.25 billion (3.26 billion pounds), including about $1 billion of net debt, its largest deal since merging with McDonnell Douglas in 1997.
Now it expects further purchases to help it triple the revenue of its year-old Global Services division to $50 billion in a decade, the unit’s chief executive Stan Deal told Reuters in an interview.
“When we come up with selective, complementary investments, whether it’s small or big, we will make it,” Deal said.
“Our first thrust is organic,” he added. “We have plenty of things we can invest in organically to create growth.”
Both Boeing and rival Airbus are muscling deeper into the higher-margin market for repairs, maintenance and analytics services in a push that has rattled the aerospace supply chain.
Deal declined to specify a price range or geography for its next targets, but said any bolt-on acquisitions would expand beyond the “technology or breadth inside of Boeing.”
This could mean deals in areas such as avionics services, which is in increasing demand as airplanes become more equipped with complex electronic systems.
Parts suppliers often reap the bulk of their profit in servicing jetliners over their multi-decade lifespan rather than when they are first assembled, and Deal said Boeing has this week launched fresh campaigns for new business with airlines and equipment manufacturers as a unified Boeing-KLX front.
Boeing, which forecasts services to generate a third of the global aerospace industry’s $7.6 trillion in revenue for the next 10 years, is not alone in wanting to dominate the segment.
Europe’s Airbus has set a goal of tripling services revenue from its commercial aircraft business to $10 billion within seven years and sharply reducing the number of times its jets are stranded on the ground for technical reasons, industry sources said.
Boeing’s deal with Wellington, Florida-based KLX, which supplies materials like fasteners, bearings, and hydraulic fluids globally, will bring anticipated annual cost savings of $70 million by 2021.
“We’ve already begun to see results along that line,” Deal said. “Over the course of a year we’ll be collapsing (KLX’s) IT infrastructure.”
Boeing’s proposed stake in Brazilian planemaker Embraer (EMBR3.SA), which still requires government and shareholder approvals, “is part and parcel” of the services growth push, too, Deal said.
Reporting by Eric M. Johnson in Seattle; Editing by Tracy Rucinski and Clive McKeef