Update: Airlines, suppliers agree to merge B2B exchanges

Executives from the two groups of airlines and aerospace suppliers that yesterday announced plans to merge their separate business-to-business exchanges said they're open to the idea of cooperatively processing transactions with rival online marketplaces being set up in the aviation industry.

Under yesterday's deal, Dallas-based MyAircraft and Washington-based AirNewco will be combined into a single B2B exchange targeted at both buyers and suppliers of aviation-related materials and services (see story). AirNewco was being developed by a group of nine airlines, while three aerospace manufacturers were the driving forces behind MyAircraft.

During a press conference in New York that was broadcast over the Web, Silla Maizey, director of procurement at British Airways and a member of AirNewco's steering committee, didn't rule out the possibility that the merged exchange could eventually do business with competing B2B marketplaces such as Aeroxchange and Exostar.

The $500 billion aviation industry has "room for many exhanges," Maizey said. "We equally anticipate that we will be working not only with individual airlines and suppliers, but also across exchanges."

Pat Wildenburg, acting vice president of corporate purchasing at Delta Air Lines Inc. and co-chairman of AirNewco's steering committee, said the initial intent of the airlines backing that exchange "was to go at it alone" as a B2B venture. But the idea for a merger with MyAircraft developed during the past few months as AirNewco looked at both its short- and long-term business strategies, Wildenburg said.

The joining together of exchanges "is an inevitable part of the [B2B] process," said Shawn Willett, an analyst at Current Analysis Inc. in Sterling, Va. The biggest selling point for a B2B exchange "is that everybody is participating in it," Willett said. "It just makes sense that it's going to be hard to have a lot of different marketplaces in [a single industry]."

The AirNewco/MyAircraft venture, which has yet to be named, will be headquartered in the Washington area and is scheduled to launch an initial version of its Web site in the first quarter of next year. Ownership of the merged exchange will be shared by the 13 companies that have stakes in the two existing marketplaces, but specific details of how the stakes will be divided weren't disclosed.

Jim Taiclet, president of aerospace services at Honeywell International Inc. and co-chairman of MyAircraft, said the combined exchange will be run by a separate company that plans to recruit its own CEO and management team.

Taiclet added that the 13 current backers of the exchange plan to "invite and encourage" other airlines and aviation industry suppliers to participate, at least as users of the marketplace. "[They] can certainly be customers that benefit from the critical mass that we'll be able to put together here," he said.

Ari Bousbib, vice president of corporate strategy and development at MyAircraft and co-founder of United Technologies Corp., said the new exchange will earn revenue through the same kind of business models that were envisioned for the two separate ones. For example, the exchange will charge participants a combination of subscription and transaction fees.

The combined exchange plans to focus on linking buyers and sellers in five operational areas related to the aviation industry: maintenance and engineering, fuel and fuel services, catering and cabin services, airport support services; and general procurement. Rival B2B software vendors i2 Technologies Inc. and Ariba Inc. will jointly provide the core technology that will be used to fuel the new exchange, according to yesterday's announcement.

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