Two aviation industry B2B marketplaces agree to merge

Two business-to-business online exchanges that were separately looking to broker the purchases of aviation services and aircraft parts today announced that they're joining together, a move that continues a trend of mergers between different Internet-based marketplaces within a single industry.

Dallas-based MyAircraft and AirNewco in Washington said they plan to team up to create a neutral B2B exchange for both buyers and suppliers of aviation-related supplies and materials. The 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.

AirNewco was announced in April by a group of six airlines (see story) and currently counts Air France, American Airlines Inc., British Airways PLC, Continental Airlines Inc., Delta Air Lines Inc., Iberia Airlines, Swissair, United Air Lines Inc. and United Parcel Service of America Inc. as members. MyAircraft, which was detailed last February, is a joint venture between aerospace suppliers such as United Technologies Corp., Honeywell International Inc. and BF Goodrich Co., as well as software vendor i2 Technologies Inc.

Both exchanges faced competition from rival groups of airlines and suppliers that also are setting up B2B marketplaces. For example, a team of airlines including America West Airlines, Federal Express Corp. and Northwest Airlines Inc. is developing an alternative to AirNewco called Aeroxchange, with help from software vendor Oracle Corp. (see story).

On the supplier side, The Boeing Co., Lockheed Martin Corp., Raytheon Co. and BAE Systems PLC are building an exchange called Exostar with software vendor Commerce One Inc., under a plan announced last spring (see story). And Raytheon also is behind EverythingAircraft.com, a planned trading exchange that will target the leisure aircraft market.

Harry Wolhandler, an analyst at ActivMedia Research LLC in Peterborough, N.H., said the merger of the AirNewco and MyAircraft exchanges follows similar shakeout moves in the aviation industry and in other businesses such as the automobile industry, where Ford Motor Co., General Motors Corp. and DaimlerChrysler AG teamed to develop a single B2B exchange called Covisint.

"I think it's a logical rationalization," Wolhandler said. "If there's overlap among both parties, then it becomes very natural." And it makes sense for participants in industries such as the aviation world to control their own exchanges instead of relying on third parties to run the marketplaces for them, he added.

For aerospace suppliers, creating a single exchange owned jointly with some of the major airlines reduces the number of B2B marketplaces that they potentially need to support, said Kama Krishna, an analyst at Beck, Ryan & Co. in Livingston, N.J. "The idea of combining all these exchanges together makes sense, as long as they don't exchange each other's transaction information," he added.

Ownership of the new merged exchange will be shared by the 13 companies that have stakes in the two existing marketplaces, according to today's announcement. The combined exchange will focus on five operational areas: maintenance and engineering, fuel and fuel services, catering and cabin services, airport support services and general procurement.

Dallas-based i2 will work jointly with rival B2B software vendor Ariba Inc. in Mountain View, Calif., to provide the core technology that will fuel the new exchange. That's similar to the approach taken by Covisint, which required Oracle and Pleasanton, Calif.-based Commerce One to work together after Ford and GM had signed separate contracts with the two vendors.

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