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Boeing, Airbus Look to Land Profits by Making Their Own Aircraft Parts

The world's largest plane makers are testing a seemingly simple formula to smooth production, cut costs and fatten profits: Make more of the parts that go into their jets themselves.

In the wake of United Technologies Corp.'s proposed $23bn deal to buy Rockwell Collins Inc., that push is taking on more urgency. The deal is the latest in a round of consolidation among the world's biggest suppliers of aviation parts - something Boeing Co. and European rival Airbus have eyed warily.

Last week, Boeing said it might cancel some of its parts contracts if the deal undermines competition further in the aerospace supply chain. Airbus had previously expressed its skepticism over it.

Worried about getting squeezed by the consolidation, Boeing and Airbus have moved to protect themselves by building more of their parts in-house. This month, Boeing will start construction of a new production facility in Sheffield, England, that will make some of its own actuation equipment — motors that help move a wing’s flaps. Airbus, meanwhile, is planning to build some of its own nacelles, the metal casings that house a plane’s engines. United Technologies is one of the world’s largest nacelle suppliers.

“We are constantly revisiting our ‘make or buy’ decisions,” said Fabrice Brégier, Airbus chief operating officer and head of commercial planes.

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In the wake of United Technologies Corp.'s proposed $23bn deal to buy Rockwell Collins Inc., that push is taking on more urgency. The deal is the latest in a round of consolidation among the world's biggest suppliers of aviation parts - something Boeing Co. and European rival Airbus have eyed warily.

Last week, Boeing said it might cancel some of its parts contracts if the deal undermines competition further in the aerospace supply chain. Airbus had previously expressed its skepticism over it.

Worried about getting squeezed by the consolidation, Boeing and Airbus have moved to protect themselves by building more of their parts in-house. This month, Boeing will start construction of a new production facility in Sheffield, England, that will make some of its own actuation equipment — motors that help move a wing’s flaps. Airbus, meanwhile, is planning to build some of its own nacelles, the metal casings that house a plane’s engines. United Technologies is one of the world’s largest nacelle suppliers.

“We are constantly revisiting our ‘make or buy’ decisions,” said Fabrice Brégier, Airbus chief operating officer and head of commercial planes.

Read Full Article