As Conner retires, Boeing to expand aftermarket services

EVERETT — Facing the prospect of flattish aircraft sales in the next few years, the Boeing Co. on Monday doubled down on its push to make more money off airplanes after they leave the factory. The company aims to greatly expand its aftermarket services, a term that encompasses activities such as selling spare parts, modifying in-service airplanes and maintenance support for airlines.

The aerospace giant carved those activities out of its two major business units — Boeing Commercial Airplanes (BCA) and Boeing Defense, Space & Security (BDS) — and put them into a new division: Boeing Global Services. The company also announced that the head of BCA, Ray Conner, is retiring and that his successor is Kevin McAllister, who has run GE Aviation since 2014.

Boeing Commercial Airplanes has been the company’s biggest moneymaker in recent years, as defense and space budgets generally have been down in the United States and elsewhere. BCA is based in Tukwila, and most of its operations are in Western Washington, including factories in Everett and Renton.

McAllister, 53, brings to Boeing a reputation for balancing growth and profitability at GE Aviation, where he has worked for 27 years, said Richard Aboulafia, an industry analyst and vice president of the Teal Group in Washington, D.C.

It is the first time an outsider has been tapped to run BCA, which was created in the 1960s.

Conner, 61, took over BCA in 2012, after his predecessor, Jim Albaugh, retired. Since then, he has struggled to keep market share from Boeing’s chief rival, Airbus Group, without dropping prices too far.

“He was in a difficult position, and responded to serious pressure to get more sales by getting into a commodity pricing game,” Aboulafia said.

Those pressures are most apparent on the 737 and 777 programs. For several years, Boeing and Airbus have been in a bare-knuckle fight for control of the single-aisle market. Boeing’s plan to develop the 777X meant BCA has had to sell lots of the huge twin-aisle airplanes to meet production plans. As Boeing executives have said, making those sales has required cutting the sales price.

Conner also oversaw development of the 737 MAX, the turnaround in the 787 program and launching the 777X program, which includes more than $1 billion investment in new buildings and machines at the company’s Everett plant. His tenure also included a bitter contract fight with the biggest union at the company, District Lodge 751 of the International Association of Machinists and Aerospace Workers.

He is staying on to help McAllister step into his new role, Boeing CEO and Chairman Dennis Muilenburg told reporters during a conference call Monday. Conner also will stay on through 2017 as Boeing’s vice chairman. He took on that role last year as a concession after Boeing’s board of directors chose Muilenburg, who headed BDS at the time, to run the entire company.

McAllister, 53, has spent 27 years with GE Aviation, one of Boeing’s biggest suppliers, and is “deeply respected” in the industry, Aboulafia said.

Stanley Deal was named head of Boeing Global Services, which encompasses several of the company’s customer service operations and will be based in Dallas. It will have about 20,000 of the company’s roughly 153,000 employees.

Most of the division’s workers will stay where they are today, Muilenburg said.

Boeing aims to triple its revenue for aftermarket services in the next five to 10 years. Now, the company has about 7 percent of the commercial market and 9 percent of the defense side, he said.

With new sales expected to stay flat for several years, Boeing has to find new profit sources or cut back on rewarding shareholders, said Scott Hamilton, owner of Leeham Co., a Bainbridge Island-based aerospace consulting firm.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com. Twitter: @dcatchpole.