IT supports Delta's MRO growth strategy

AMR Research examines how Delta Airlines' SAP strategy is helping it build a $175m service business.

AMR Research examines how Delta Airlines' SAP strategy is helping it build a $175m service business.

Delta Airlines wants to be a major Maintenance, Repair, and Overhaul (MRO) service provider to other airlines. Delta's statements were presented at Aviation Week's recent MRO conference, where a hot topic was the competition for MRO revenue between Original Equipment Manufacturers (OEMs), Independent Service Organisations (ISOs), and airlines. Delta Technical Operations (Delta TechOps) estimates revenue of $175m this year versus approximately $100m in 2001, growing to $500m by 2005. The use of Information Technology (IT) to streamline the MRO process is an important part of Delta TechOps strategy.

The foundation of the Delta TechOps IT strategy is SAP; Delta TechOps is scheduled to go live with SAP's financials and Supply Chain Management (SCM) systems in December 2002. Xelus will enhance SAP's SCM system by providing service parts planning unique to an MRO facility. Delta TechOps is still undecided on applications to handle Configuration Management (CM) or documentation management, and continues to operate a homegrown system for shop-floor maintenance execution. Mxi Technologies appears to be the front-runner for CM at Delta, where a pilot is underway, but no final selection has been made.

The battle for MRO services is heating up in the current economy, in which Delta posted a 2001 net loss of $1.2bn. The competition is leading all MRO vendors to improve operations and customer service. Delta TechOps plans to create Web-based engine condition monitoring services, with SmartSignal under consideration as a software partner. But ISOs are not standing idle either: Pemco Aeroplex will use Avexus, and OEM GE Engine Services has partnered with IFS to bring Spectra MRO management systems to customers. MRO growth is estimated by Frost & Sullivan to be a modest 2.05% Compound Annual Growth Rate (CAGR) through 2008. Still, for participants in the struggling Commercial Aviation industry, MRO offers a revenue stream to help offset the lackluster growth in other operations. As ISOs, OEMs, and Airlines carve out their share of the MRO market, they will be partners and competitors. IT will play a role in streamlining internal operations and the flow of data between all these partners to remove inefficiency from the MRO supply chain.

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