Subsidiaries: On the same team

When you think of the companies that make up Boeing, names such as McDonnell Douglas, Rockwell, North American and Hughes might come to mind. But don't forget about subsidiaries such as Alteon and Boeing Travel. Here's a look at how subsidiaries fit into Boeing's strategies.

BY DEBBY ARKELL

Thanks to acquisitions made in the last decade, the list of companies that make up the Boeing of today seems to read like a "who's who" of the aerospace industry. Hawker de Havilland, Hughes, McDonnell Douglas and Rockwell International are just some of the companies Boeing has brought into the fold.

While Boeing has merged some acquired companies into its operations, other firms such as Alteon, which trains pilots and maintenance crews, and Jeppesen, a provider of aeronautical information, operate as separate, distinct subsidiaries. A subsidiary company is a business that is wholly owned or controlled by another company, and is set up deliberately by the parent company as a separate legal entity.

Subsidiaries might retain their own distinct identities to maintain the continuity of their brands. But for Boeing and its subsidiaries, don't let any name differences fool you. Subsidiaries play a vital role in helping Boeing execute its business strategies and best serve its customers.

"There is room for growth in our major markets, and these ideas often come from subsidiaries such as Jeppesen," said James Bell, Boeing president, CEO and chief financial officer at a recent employee meeting at Jeppesen.

Subsidiaries and strategies

Boeing's Vision 2016 mission statement spells out three business strategies, and the company's subsidiaries play a key, visible role in supporting them. These strategies are

• Run healthy core businesses. This strategy touches on what Boeing people do every day—designing and building the safest, highest-quality airplanes, rotorcraft and space vehicles; working with customers to understand the marketplace's requirements; collaborating with partners to develop networked or other solutions that address customers' needs; improving processes and reducing costs.

Two subsidiaries that tackle this strategy from different angles are Boeing Australia and Boeing Realty Corp.

The Aerospace Support business unit provides maintenance, modifications, upgrades and lifecycle support of military aerospace platforms and associated systems. And for commercial and other civil airline operators, Aerospace Support delivers integrated fleet maintenance solutions, engineering and technical support, and regulatory repair authority.

Boeing Australia's Network Enabled Systems business unit is a lead systems integrator. It combines expertise in networked architectures, system-of-systems solutions and support services for both military and commercial customers.

Boeing Australia also has a subsidiary of its own: Hawker de Havilland. It produces components such as flight control surfaces, major structural assemblies and landing gear doors—made out of metal and composites—for military and commercial aircraft built by Boeing and other companies.

Meanwhile, Boeing Realty Corporation is focused on business infrastructure. As the entity that manages all of Boeing's real estate transactions, Boeing Realty's role is to align real property requirements with business needs for all Boeing business units.

Indeed, Boeing Realty is playing a key role as Boeing evolves to a more network-centric workplace, supporting employees and connecting them to each other, to crucial data and to customers.

"Our mission is to give business unit leaders the space they need to conduct their business in a changing environment," said Steve Barker, Boeing Realty president. "As Boeing continues to adapt to a dynamic customer environment, it gives us opportunities for consolidation and cost savings."

• Leverage core strengths. This strategy refers to moving the company's expertise, products and services into adjacent markets, or profitably taking new technologies and applying them to markets and customers Boeing knows extremely well.

Boeing Commercial Airplanes is well acquainted with the challenges airlines worldwide face in meeting pilot and mechanic training requirements. Enter Alteon, a Boeing subsidiary that's in a different arena than BCA's primary business of designing and building commercial jetliners. With 20 locations worldwide, Alteon offers pilots and maintenance crews a full suite of training and flight simulators for Boeing and competitors' aircraft.

"In today's environment, we know carriers are looking to Boeing to manage infrastructure-related activities such as training, so we're leveraging that strength through our ownership of Alteon," said Lou Mancini, vice president and general manager of Boeing Commercial Aviation Services.

Other businesses established by Boeing and held as subsidiaries also help leverage core strengths. For example, Boeing has tapped into the travel industry to take advantage of the economies of scale the company generates meeting the business travel requirements of its large workforce.

With travel often cited as the second-most-controllable cost for a company after labor, managing travel choices is smart business. This is where Boeing Travel Management Company comes in. Originally, part of McDonnell Douglas, it's now the 19th-largest U.S. travel company, the third-largest purchaser of air travel in 2003 and the purchaser of 500,000 U.S. hotel room nights last year. Besides being the agency for all employee business travel, Boeing Travel has other corporate clients and offers leisure travel services.

BTMC works with air, rental car and hotel suppliers to secure the best prices and terms, especially for the locations where Boeing employees frequently travel, said Marsha Landgraf-Leeg, BTMC chief operating officer.

"These offerings are clearly displayed in our online reservation system, TRIPS, and employees choose them because they see the value," she said.

As an example, Boeing travelers in 2004 chose to spend nearly 70 percent of their nights in preferred hotels using Boeing-negotiated rates. These actions saved Boeing $18.8 million, Landgraf-Leeg noted.

• Open new frontiers. This strategy refers to investing in long-term growth by turning ideas and expertise into business.

Boeing Commercial Airplanes' combination of aircraft, support services, detailed customer knowledge and technology create tremendous opportunities for growth. And the abilities provided by subsidiaries to BCA's Commercial Aviation Services organization are helping make that growth happen.

"Our vision of the future of flight is fundamentally linked with technology, services and keeping customers flying," Mancini said. "I believe Boeing and its subsidiaries will take a network-centric approach to flight operations and aircraft maintenance, to enhance airlines' productivity."

That vision could include combining two-way data links with technology championed by Jeppesen and subsidiary Preston Aviation Solutions—a leader in the development of airspace and airport simulation, decision support and scheduling systems—along with services provided by Alteon. The end result: Technology, services and support are integrated seamlessly with Boeing's commercial aircraft product line.

The Electronic Flight Bag, a Jeppesen innovation that gives pilots a digital version of the information they need to fly, and Airplane Health Management, a system that lets airlines monitor engine and airframe systems information in real time, will work in concert with Boeing's Maintenance, Repair and Overhaul and Integrated Materials Management organizations and the CAS Operations Center. Together they'll help ensure planes stay in service longer and have faster turnarounds at the gates, pilots are trained promptly, and needed parts arrive nearly instantaneously.

When this suite of services is combined with Connexion by Boeing, which offers high-bandwidth mobile communications at a reasonable price, the technology opens up a whole new world for CAS and Boeing customers. Soon reams of data will be able to be transmitted between the air and ground about the health of an aircraft and engines, issues in flight, whether crews need to be changed and more. Boeing will be the prime integrator of these services, which help carriers operate more profitably and efficiently.

"We can't just sell airplanes any more," Mancini said. "We need to get involved with our customers and know where they're going, where they are in their business models and how we can help them be successful. To support this, CAS has assembled a team of experts to help us achieve Boeing business goals."

It's Boeing subsidiaries such as Preston Aviation Solutions, Jeppesen and Alteon that provide the intellectual capital necessary to take Boeing to the next level. Individually, each subsidiary helps Boeing run healthy core businesses, leverage its core strengths into new products and services and open new frontiers. They're also helping increase Boeing competitiveness in fiercely competitive global aerospace markets—winning new business that helps keep jobs and creates new, higher-paying career opportunities.

In aggregate, subsidiaries are helping change the future of flight.

"Boeing subsidiary companies are—and will be—a part of our vision of the future," Mancini said. "Our subsidiaries bring unique qualities that make us what we are today. They play an undeniably vital role in CAS, and in the future of Boeing."

debra.j.arkell@boeing.com