Aviation Exchange Waiting in the Wings

Consolidation among business-to-business marketplaces reached new heights Thursday when two ventures backed by major airlines and large airplane-parts manufacturers announced plans to merge.

AirNewco -- the working name of a marketplace being created by American Airlines, British Airways PLC (BAY) , Continental Airlines (CTTAY) , Delta Air Lines (DAL) , United Airlines and other carriers -- will join forces with MyAircraft, an exchange for aircraft replacement parts that was created by Honeywell and United Technologies (UTX).

Neither marketplace is yet operational. MyAircraft recently received regulatory approval from the European Commission, but it hadn't signed up any customers. AirNewco was still in the early stages of building out its technology and hadn't signed up suppliers. The deal is the first big merger between marketplaces being developed by coalitions of brick-and-mortar companies. It makes sense for both sides. Honeywell and United Technologies get access to 11 airlines that want to buy components and replacement parts. AirNewco gets access to two of the world's largest suppliers of airplane parts. United Technologies owns Pratt & Whitney, the world's second-largest maker of aircraft engines, after General Electric Co. (GE) .

The deal establishes the new marketplace as the front-runner in the $500 billion aviation industry. The other two major players are Aeroxchange -- backed by Air Canada Inc. (ACNAF) , America West Airlines, Japan Airlines Co. Ltd. (JAPNY) , Lufthansa AG, Northwest Airlines Inc., Singapore Airlines and others -- and Exostar, which is being built by Boeing Co. (BA) , British Aerospace PLC, Lockheed Martin Corp. and Raytheon Co. (RTN.B) .

The new venture, to be named later this year, will be based in the Washington, D.C., area. It hopes to offer members basic e-procurement services, such as electronic catalog purchasing and requests for quotes and reverse auctions, in the first quarter of 2001. It plans to roll out inventory management and supply-chain management tools as quickly as possible after that.

The aim is to reduce transaction costs and inventories for buyers and sellers. As with other coalition marketplaces, the venture will be independently managed and aims to make money by charging members subscription and transaction fees. The 13 individual members of AirNewco and MyAircraft will jointly own the new company.

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More about AeroxchangeAir CanadaAmerican AirlinesBoeing AustraliaBritish AerospaceBritish AirwaysContinental AirlinesDeltaDelta Air LinesEuropean CommissionExostarGeneral ElectricHoneywellJapan AirlinesLockheed MartinLufthansaNorthwest AirlinesRaytheon AustraliaSingapore AirlinesUnited AirlinesUnited Technologies Australia

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