Boeing is targeting annual growth rates of 5-10% in its services business with digital platforms both leading the way and getting the “lion’s share” of investment near-term and top-line growth taking a back seat to prudent investments, the company’s top executive said.
“I expect services to continue to be a mid-single to double- digit growth portfolio,” Boeing President and CEO Dave Calhoun told Aviation Week. “Our digital platform operating with Jeppesen and other applications will be a double-digit grower and will take a lion’s share of our investment appetite with respect to services.”
The company’s Boeing Global Services (BGS) business generated $3.7 billion in the first quarter—55% of it from government customers and the rest from commercial entities. Two years ago the total was 20% higher and the ratio reversed. The changes are largely due to the global commercial passenger business downturn that began in early 2020 and has hit most air transport businesses not focused on cargo revenue.
Once tapped as a business that could hit $50 billion in annual revenue by the end of the decade, BGS has—like the rest of Boeing’s work heavily dependent on commercial customers—been re-tooled during the downturn. While growth remains a goal, BGS will focus more on investing in products and services with high capital-return potential, Calhoun said.
“We will earn our cost of capital in each of our discrete product lines,” he said. “That is a different approach than where we were pre-COVID, when growth was the most important objective with less attention to returning our cost to capital. We will not turn wrenches just to turn wrenches.”
Boeing will continue to leverage growing demand for cargo lift through its expanding freighter conversion work and services that support all-cargo operations. It also will generate aftermarket revenue from its own intellectual property, including parts for its aircraft programs. However, the company is less focused on capturing as much work as possible, and will take the most prudent approach on a case-by-case basis.
“There are a lot of parts even our suppliers don’t want to provide the support for and therein lies the opportunity for [Boeing Distribution Services] to really consolidate, use its economics, deliver on time, make things a little more predictable for the suppliers themselves, and frankly, [provide] better availability for our customers,” Calhoun said. “I think that’s intact, but the idea that we’re going to get some of the more technologically-advanced packages, wrestle support away from technologically-advanced suppliers, I’m a little less focused on that. That was definitely a focus before.”
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