Business Plan. April 2010 Part Time Aerospace MBA

Transcription

1 Business Plan April 2010 Part Time Aerospace MBA Jaime Irastorza Mediavilla Ángel Poyato Ayuso Samuel Rufo González Vanesa Sánchez Pacheco Monje Antonio Suárez Amieva

2 Preface This document presents the business plan for the MRO venture GREENJET. This document is foremost directed to investors, economical institutions, and donators of subsidies, aiming to collect the funds necessary to launch the project. This business plan has been written as part of the final project for the MBA Part-time Aerospace Program carried out at EOI Business School in Seville, Spain, during the period from July 2009 to March All five authors have experience in the aeronautics sector through a one year traineeship, accomplished at Airbus Military during the same period. After four months of hard work we are proud to say that this business plan represents the commitment, efforts and vision of the five members of the team, but the document we are presenting today, would not have been possible without the help and support of a number of people. First of all, we would like to extend our highest appreciation and gratitude to our tutor, César Sánchez López, who has supported and guided us, always showing the right track and providing us encouragement and support when needed. We are also very thankful to Joaquín González Cantizani (Airbus Military) for his valuable help. His useful suggestions and the visits he arranged to some MRO companies cleared our minds and constituted a key factor in the achievement of this project. There are many professionals that have helped us in the elaboration of this business plan, by answering our questions or simply sharing their experience inside the MRO industry. We will now name some of them, but the list is much more extended. We want to give our most sincere acknowledgments to: Yolanda Boto (Aerospace Engineering Group), Daniel Canales (CESA), Mario Rojo (Airbus Military) for their time during our visits to their companies and to Rene Savoie (Airbus), David Uclés (Iberia Maintenance), José María Pérez Llonch (Iberia) and Arturo Benito (ICAO) for their valuable assessment to understand the main industry drivers. We want to make a special mention to Emiliano Mata Verdejo, Javier Ruiz de Ojeda and Gabriel Alonso Pérez for being able to open wide our minds through their assessments and teachings. Finally, we would also like to thank EOI Business School and Airbus Military for providing us the opportunity to participate in this Aerospace MBA 2009/2010 edition at Seville. It has been a tough and demanding year but surely a valuable and unique learning experience. AEROSPACE MBA I

3 EXECUTIVE SUMMARY Executive Summary A) Overview The main concern of a MRO system is to assure a completely safe and reliable air transportation system. Traditionally, the key players in the MRO industry were a handful of airlines having sufficient size and capacity. Over time, some activities related to component MRO and not to aircraft MRO that were initially performed in house, began to be outsourced to some independent MRO service providers. This opportunity was initially undertaken by component manufacturers. As a consequence, companies such as Lufthansa Technique, Air France or Iberia Maintenance still have more than half of the European market regarding MRO Aircraft, but for the components segment, outsourcing is a continuing tendency in our days. A few years ago, since September 11 th, the air transportation started to suffer a decrease in its commercial side. This has forced many airlines to adopt huge cost reduction plans and strategies. As a consequence over the past ten years the main industry airlines have been presenting business schemes which included the outsourcing of some of their component MRO activities to the new players that have been appearing during the years of the economic boom. Today the industry is recovering and the commercial fleets of the aircraft operators are growing. This fact supposes an increase of the potential number of components that could be repaired; in fact, the component MRO market is now growing. Airlines tend to outsource MRO and are projected to reach 85% in 2020, being components and engine maintenance leaders in outsourcing. AEROSPACE MBA II

4 EXECUTIVE SUMMARY The main strategic drivers of the MRO market today, assuming that the quality is always achieved, are costs and times of delivery. Lead time is particularly critical in a highly competitive industry that cannot afford the costs of having an aircraft on ground for more than the planned periods. GREENJET Nowadays, the sector is shaped by an intense outsourcing tendency forced by a severe cost reduction trend. In this context, GREENJET has seen an opportunity and taking advantage of this current situation and of its internal flexibility, plans to enter the MRO market to present its competitive advantages to the customers. GREENJET capabilities have to reflect what the market is demanding, always bearing in mind the customer needs. This is translated into agile bureaucratic processes, an extremely efficient use of the available resources. GREENJET is dividing the market in sub sectors, reflected by ATAs, and specializing only in some capabilities to achieve the excellence in its service. GREENJET is going to work under unscheduled conditions and due to the high need of resources that the engines demand (they need to be dismantled, inspected, assembled and tested) and the line maintenance (it requires very intensive labor); GREENJET is specialized in giving the component service. The flexibility is translated into the internal planning of resources, highly skilled professionals already present in the sector, excellent commercial capabilities and LEAN manufacturing procedures, allowing it to distribute its activities in different manufacturing lines and information flows in order to improve the global response time to its clients. GREENJET presents itself in the market with the following value proposition: Deliver HIGH QUALITY MRO solutions to companies operating in Madrid-Barajas, and improving the industry LEAD TIME in a considerable way with no higher costs than the average in the industry. As a small and flexible MRO company, GREENJET will have the relevant capabilities to be subcontracted by the maintenance services of commercial airlines, Wet Lease companies (providing Aircraft, Crew, Maintenance and Insurance Services for the airlines), Component Manufacturers. It will also have the possibility to build up agreements with international MRO groups in order to have a pool of exchange services. On the other side, the competition is mainly represented by big groups, such as Semasa Ingeniería, Corjet or AEG Group. Taking into account the various outsourcing agreements that are present in the sector, those big groups could also become customers in some occasions. AEROSPACE MBA III

5 EXECUTIVE SUMMARY B) Market opportunity Usefulness and Customer need We have to state a main assumption: a direct economic link exists between the air transportation industry and the MRO market. There are four main drivers that shape the tendencies in the air traffic industry and that help to understand the market opportunity for GREENJET: Market World economic crisis has led to a cost cutting environment and the need for the airlines to outsource their noncore capabilities. Market resilience to economic cycles. There is a direct relation between the GDP growth of a country and its air traffic demand. The alliance systems. Airline alliances are today presenting common maintenance policies between its members. The air traffic liberalization. It is a major tendency today, and it will increase the competition inside the industry with two consequences: o The air traffic will increase. o Delivery times regarding MRO issues will be critical in order to keep aircraft flying and profitable. The main customers will be traditional commercial airlines or its maintenance departments that are willing to subcontract or outsource some of their component MRO activities. Other potential customers that can be approached are Wet Lease companies offering Aircraft, Crew, Maintenance and Insurance services (ACMI) to the airlines. Due to the complexity of the MRO industry and its implications, some of the apparent competitors can also be translated into customers, such as MRO service providers smaller than the airlines. Competitive advantage Taking into account its value proposition, the competitive advantages of GREENJET can be summarized as it follows: - The company flexibility allows to take advantage of some inefficiency in the market and to trim down the global delivery time to the customer without increasing the final cost. This is achieved through an important lead time reduction in the repairing process. - This flexibility is translated into the management of the process structures. This allows the company, to be excellent in the planning of its resources and to achieve a process lead time reduction. Through it, a prompt delivery of its orders is attained. AEROSPACE MBA IV

6 EXECUTIVE SUMMARY Lean manufacturing and management techniques, such as process re-engineering, parallel work flows and information streams permit this improvement. - This flexibility is also possible due to a high degree of specialization. GREENJET operates with a small number of components. The market outsourcing tendency is key here to find out which are the part numbers, determining the success of the company. - Regarding the location, GREENJET is settled down in Madrid, close to Barajas Airport. This grants a more direct access to the parts and components to be repaired and therefore assures that the logistic system is simplified. This fact is really important when talking of a scale of lead times measured in hours. - Human Resources and Procurement management is also a key factor. In order to achieve its planned results, GREENJET has to contract some of the best specialized technicians and managers that put in place the company and develop its operations. The purchasing and the commercial point of view are also critical, and so, the company has to hire the best experienced professionals. - The Exchange process: this service is not provided by every single MRO company and clearly differentiates GREENJET from its competitors. This allows presenting an image of high reliability to the customers. C) Business Idea and Product Capabilities and components GREENJET is an aircraft component MRO company specialized in a set of capabilities belonging to ATAs 24, 29, 31, 34. This has been determined by an extensive market study revealing the most profitable and adequate market segments for a startup company. Since it has these capabilities, it is serving a list of components related with them. The market study also reveals that single-aisle aircraft are to be found in bigger number than double-aisle aircraft, so that with comparable number of components per aircraft and similar failure rates, the overall number of components sent to the workshops from these fleets is bigger too. It is for this reason that GREENJET will serve the fleet of the Airbus A320 family operating in Madrid. The potential customers are the traditional airlines having maintenance departments or companies who want to outsource part of their MRO duties. Ex house initial services Due to the fact that GREENJET is a starting company and needs to get certain certifications in order to work as a MRO company, it is necessary to wait up to 14 months for the fully independent operation. Thus, in order to earn profits our technicians will work for Iberia Company in its facilities offering it our services. GREENJET is going to take advantage of the current policy of Iberia Maintenance by covering the gaps in ATAs 24, 29, 31 and 34. AEROSPACE MBA V

7 EXECUTIVE SUMMARY They are demanding MRO companies to release this workload and be able to focus on their core business, mainly engines. It will last up to the eleventh month. Up to that moment we will exclusively offer repair services. From the eleventh month, we will move to our facilities. Finally, during the fifteenth month, as we will be certified in EASA PART 145 certificate, GREENJET will be considered as a MRO independent company. We will be able to offer the exchange and the repair services. In house services GREENJET will start offering its two services from the eleventh month of its implementation. It will provide reduced Lead Time repair services in ATAs 24, 29, 31 and 34 to our customers following a Lean methodology. Initially, until the EASA Part 145 is obtained, the workload will come exclusively from Iberia Maintenance. Once we are certified, we will offer our services to different customers. Regarding the customer s need, GREENJET may offer an Exchange service instead of its standard offer. Exchange services It is one of the two services that GREENJET will offer. If a client needs immediate reparation, and our industrial processes are not able to comply with its requirements of delivery time, we will launch the exchange process. This procedure implies to have access to a pool of spare part brokers. Just In Time suppliers will be used in order not to keep stocks and to provide to the client the part needed on time. The Exchange process is not granted by every MRO company and clearly differentiates GREENJET from its competitors. With it, GREENJET is able to project an image of high reliability to the market, through a full time operability. From the total sales, around 70% of revenues are expected to come from the In-House repair service and 30% from Exchange, in line with the sector. D) Legal and Quality Status Legal approach GREENJET will be constituted as a Limited Liability Company. This Limited Liability Company is registered under the name of GREENJET S.L., operating under the Spanish law. It will be established in Alameda de Osuna in Madrid, Spain. The company is constituted for an undefined period of time and will begin its corporate operations the day of the granting of the deed of incorporation. The social capital of the society is set on Euros. AEROSPACE MBA VI

8 EXECUTIVE SUMMARY Quality standards In order to be able to provide its MRO services, it is necessary that GREENJET accomplishes all requirements determined by the correspondent authorities. The norms that apply to each of the different aspects of the organization are the following: ISO-9001: requirements needed for the certification of the Quality System. ISO-9100: requirements needed for covering all the requirements that are specific to the QMS in the aeronautical sector. EASA Part 66: requirements to obtain Maintenance Technician Licenses. EASA Part 145: requirements needed for the certification of Approved Maintenance Organization. E) Financial highlights This business plan refers to a company building up industrial capacity to service customers in the aerospace industry. This industry has long business cycles. Accordingly, the forecasts have a long time span in order to take into account this fact. For these long forecasts the assumptions made are of conservative nature. The main figures of the company are presented in the following table: Amounts in Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Total Sales Total Costs and Expenses EBITDA Operating Margin Net Profit Return on investment -8% 0% 4% 8% 9% 14% 15% 16% 19% 19% To build up the industrial capacity large investments are needed at the start of operations to an amount of 1,275 M in the first year. The funding structure for these months of operation is the following: ST Borrowings 11,8% LT Borrowings 19,6% Stocks 29,4% Subvention: 23,5% CDTI: 15,7% During the initial certification period, 11 months, the operations will be performed within a pilot contract with Iberia. The start of autonomous operations will be during the second year, once certified in EASA Part 145. The company asks interested investors to support the start of operations with in capital. For them, the Break-Event point will be reached in year three and the AEROSPACE MBA VII

9 EXECUTIVE SUMMARY payback period will be six years. The company expects a Net Present Value of the future free cash flows of 3,5 M with an Internal Rate of Return of 18%. F) Team The business plan is composed by the following team: TEAM MEMBERS Jaime Irastorza Mediavilla Ángel Poyato Ayuso Samuel Rufo González Vanesa Sánchez-Pacheco Monje Antonio Suárez Amieva EDUCATION Aeronautical Engineer, Aerospace MBA Industrial Engineer, Aerospace MBA Telecommunication Engineer, Aerospace MBA Chemical Engineer, Aerospace MBA Industrial Engineer, Aerospace MBA AEROSPACE MBA VIII

10 CONTENT Content Preface... I Executive Summary... II Content Introduction Airline MRO industry overview The importance of MRO Mission and vision Mission Vision Values and culture Limitations Strategic Plan External analysis Legal and political environment Economic environment Outsourcing Cost reduction Socio cultural environment Technological environment Geographic environment Conclusions Market demand MRO in the world The market in Near environment Customers and clients Competitors Suppliers Internal analysis Business Organization AEROSPACE MBA 1

11 CONTENT Competences and capabilities SWOT ANALYSIS Strengths Weaknesses Threats Opportunities SWOT assessment table Analysis SWOT Competitive Advantages GREENJET as a profit center Analysis Strategic Profile Manufacturing means Lead Time Resources Management Location Supply chain IT Systems H.R Financial resources Brand recognition General Strategic Objective General Competitive Strategies Marketing Plan Introduction Demand Definition A model for the analysis of the demand Developing a segmentation hypothesis General axes brainstorming Segmentation hypothesis definition Market research Qualitative research Quantitative research Market trends Market research conclusions Selection of the target segments Segments selected AEROSPACE MBA 2

12 CONTENT Competitive fit Marketing mix Product management Customized services Capabilities and components Ex-House initial and future services In House services Exchange services and lead time commitment Guarantee management and product life cycle Pricing strategy Internal factors External factors Price strategy Price structure Placement, distribution and sales force management Channel priorization analysis Promotion plan Branding and promotion Communication strategy Conclusions Operations plan Introduction Value chain Inbound and outbound logistics Operations Procurement Technological development Procurement management Procurement of components Procurement for the exchange services General procurement Operations Process diagram Comparison and Justification Lead Times market Vs GREENJET Final comparison and conclusions Dimensions and requirements Installations AEROSPACE MBA 3

13 CONTENT Test and repair areas Warehouse Reception and outbound logistics Office space Total installation needs Personnel Equipment and means Equipment for hydraulics Equipment for avionics Logistic equipment ERP System Implementation Introduction Implementation plan Sales Quality Procurement Engineering Human resources plan Introduction Management Departments Commercial department CEO Key account manager Customer support Marketing assistant Financial department Supply chain department CPO Logistics engineer Operations department COO Plant engineer Quality engineer Production control engineer Technicians AEROSPACE MBA 4

14 CONTENT Warehouse operator Workforce planning Policies Remuneration Performance evaluation Trade unions Quality management system Introduction Certification External regulation EASA FAA ISO Others Internal quality management General quality manual Memories of design, production and maintenance Contract and quality plan ISO certification Internal regulation system Quality summary Health and safety Legal plan Legislation V.A.T Bylaws General resolutions Social capital shares Common rules Accounting year Operations and liquidation Complementary resolutions Steps Financial plan Introduction Scenarios considered AEROSPACE MBA 5

15 CONTENT Macro environment Fiscal Economic Micro Investment analysis Premises Equipment Personnel Other costs Subsidies and subventions Subventions Subsidies GREENJET funding strategy Sales Statements Balance sheet Income statement Cash flows Analysis Service profitability Ratio analysis Sensitivity analysis Risk management plan Introduction Risk approach Principles Risk identification Risk categorisation Risk assessment Risk response strategies Risk monitoring and reporting Future perspectives Conclusions Annexes Monthly financial statements Balance sheet AEROSPACE MBA 6

16 CONTENT Income statement Cash flows statement Alternative scenarios References List of figures Figure 1 Purpose of MRO... 2 Figure 2 Growth of Spain over the years (source INE)... 7 Figure 3 Typical aircraft cost structure Figure 4 Airline MRO market Figure 5 Component Market Share in the world, Figure 6 Air transport fleet in Figure 7 Air transport fleet in Figure 8 MRO Market Figure 9 Porter s five forces Figure 10 Strategic profile Figure 11 Marketing plan diagram Figure 12 Segmentation Process Figure 13 Iterative strategy process Figure 14 Hypothesis segmentation process Figure 15 Segmentation hypothesis Figure 16 Motto of the marketing agency Figure 17 Fomulation of the survey Figure 18 Evolution of the world annual traffic Figure 19 Air traffic forecasted evolution Figure 20 Air traffic elasticity in function of GDP and air fares Figure 21 Aircraft Demand Forecast (units and US $) for the period Figure 22 Growth of single aisle fleet over years Figure 23 Traffic flows in Figure 24 Marketing mix scheme Figure 25 Price structure in house service Figure 26 Price structure for exchange service Figure 27 Porter s Value Chain Figure 28 GREENJET s Process diagram Figure 29 VSM GREENJET Repair procedure for Motopumps Figure 30 VSM GREENJET Exchange Service Procedures Figure 31 Office space units Figure 32 GREENJET s implementation diagram Figure 33 Organization Chart of GREENJET s Managers Figure 34 Organization Chart of GREENJET s Commercial Department Figure 35 Times zones potential clients of GREENJET Figure 36 Organization Chart of GREENJET s Supply Chain Department Figure 37 Organization Chart of GREENJET s Operations Department AEROSPACE MBA 7

17 CONTENT Figure 38 GREENJET s margin Figure 39 GREENJET s EBT Figure 41 Sales vs Break even Figure 42 Risk Management Process Figure 43 Different possibilities for GREENJET to grow Figure 44 General MRO procedure figure 45 VSM GREENJET Repair Procedure Display List of tables Table 1 Current economic Spanish situation... 7 Table 2 Distribution of costs for Boeing 757, Table 3 MRO worldwide companies... 9 Table 4 MRO companies in Spain... 9 Table 5 Fleet for different airlines Table 6 Airline with Maintenance Table 7 MRO Companies Table 8 Potential manufacturers for GREENJET capabilities Table 9 SWOT analysis Table 10 Potential customers of GREENJET Table 11 Principal characteristics of the potential customers Table 12 Alliance system Table 13 Survey performed Table 14 Example of board of experts, fields of competences Table 15 Demand for single aisle passengers aircraft Table 16 Performed assesment Table 17 Capabilities offered by GREENJET initially Table 18 Classification of the component offered by GREENJET Table 19 Channels for each market segment Tabla 20 Channel profitability Table 21 Market Lead Times Table 22 GREENJET Lead Times Table 23 Summarize Lead Times reduction Table 24 Total space needs Table 25 Labour force estimations Table 26 Hydraulics equipment Table 27 Logistics equipment required Table 28 Workforce planning Tabla 29 Annual salary for each employee Table 30 Minimum number of stewards depending on number of employees Table 31 Time spent for representation depending on number of employees Table 32 Legal characteristics of GREENJET company Table 33 Cost and maintenance for Avionics AEROSPACE MBA 8

18 CONTENT Table 34 Cost and maintenance for Hydraulics Table 35 Cost and maintenance for Logistics Table 36 Cost and maintenance for ERP Table 37 Amortization investment Table 38 Personnel salaries Table 39 General costs Table 40 Price list for components services Table 41 GREENJET s sales Table 42 GREENJET Balance Sheet Table 43 Income Statement of GREENJET Table 44 GREENJET s profitability Table 45 GREENJET Cash Flow Table 46 Value of GREENJET company Table 47 GREENJET s ratios Table 48 SEMASA s ratios Table 49 AEG s ratios Table 50 Analysis GREENJET s risks Table 51 General overview of how to evaluate the areas of risk impact Table 52 General chart of how to calculate risk index Table 53 Probability vs impact GREENJET Table 54 Strategies and actions considered for each risk Table 55 GREENJET S Balance Sheet in the first year Table 56 GREENJET S P&L first year Table 57 GREENJET s cash flows first year Table 58 Income Statement in an scenario of reduction sales volume Table 59 Scenario reduction of sales volume Balance Sheet Table 60 Scenario reduction of sales volume cash flow Table 61 Scenario financial environment Balance Sheet Table 62 Scenario financial environment Cash Flow AEROSPACE MBA 9

19 INTRODUCTION 1 Introduction 1.1 Airline MRO industry overview Traditionally, the key players in the MRO industry were a handful of airlines that possess in-house maintenance capabilities together with some independent MRO service providers. However, original equipment manufacturers, facing diminishing profit margins from their products and abundant profits in the MRO industry began offering maintenance services in the 1990s. Although the leading global supplier of MRO services was Lufthansa, followed by Air France, their market shares have been declining steadily. In recent years, the equipment manufacturers have even started to offer overhaul services not only for their own proprietary products but other manufacturers products as well. They were relatively successful in penetrating the aircraft overhaul market that used to be dominated by the airlines and now 75% of MRO services still remain in the hands of airlines, while independent maintenance companies take the remaining 25%. Despite this low percentage in independent MRO companies, outsourcing in airlines is being more common due to the necessity of trimming costs. So, airlines tend to outsource MRO work and it is projected to reach 85% in 2020, being components and engines maintenance leaders in outsourcing. MRO companies have different classifications: According to what is maintained: MRO can work focusing on the whole aircraft or its components. GREENJET will be focus only on components maintenance, leaving the whole aircraft for the main industry players (mainly maintenance services of commercial airliners). According to the frequency with which maintenance is executed in the components: schedule Vs unscheduled maintenance Schedules maintenance is carried out in certain moments of the life of a plane. It can be periodic (such as annual), on time, progressive, conditional or heavy maintenance checks. With regard to the unscheduled maintenance, it includes reported anomalies, line replacement units and airworthiness directives, service difficulty reports. GREENJET is based on the last one. This means that at any time that a failure occurs in one of the components, the company will offer a maintenance service in a short lead time. According to who undertake the maintenance of the aircraft components On one hand, we have manufacturers OEM that, besides manufacturing the equipment, generate business by means of the maintenance of the same one. Another type would be workshops with maintenance capabilities, entrusted with the component MRO by AEROSPACE MBA 1

20 GREENJET BUSINESS PLAN INTRODUCTION the client demands. In fact, this is GREENJET business. The last ones are the operators of complex equipments, who have their own workshop internal MRO, they can execute works for other clients, whose infrastructures are very expensive and they need a better use. To summarize, GREENJET is going to be focused on unscheduled component maintenance. 1.2 The importance of MRO The key to have a safe and reliable air transportation system lies with imposing strict standards for aircraft and components MRO to minimize the possibility of inspection and maintenance errors. The highest regard for passenger safety in commercial airlines, coupled with aircraft reliability issues and EASA and FAA directives form the basis for all MRO activities. The significance of MRO on commercial airlines is evident. It has been noted that 15% of worldwide accidents involve a maintenance system error on board each year. The first half of 2003 saw 180 unscheduled or emergency landings according to official EASA and FAA records. Of which, 80% were due to maintenance inadequacies such as an engine failure or landing gear problem. In the past 10 years, 8 out of 14 fatal U.S flight accidents were linked directly to maintenance problems, accounting for 466 maintenancerelated fatalities. There were 160 deaths in 7 maintenance-related failures the decade before. Figure 1 Purpose of MRO During the lifecycle of a typical system, the initial failure rates are high due to errors in design or production. As illustrated in the figure, this early period of infancy will be replaced by an interval known as the design productive lifetime which is characterized by a low constant failure rate. Subsequently, when the system is worn out, its failure rate will increase drastically. Regarding the costs of MRO services, they are typically comprised between two or three times the aircraft price during its whole lifecycle, so it supposes a big majority of what is commonly known as the life cycle cost. An MRO system provides service through the complete life of an aircraft and in general its mission can be explained as it follows: AEROSPACE MBA 2

21 GREENJET BUSINESS PLAN INTRODUCTION The purpose of MRO is to prolong the design productive lifetime of a system by routine maintenance and overhaul, as well as repairing and implementing modifications to the system to drive its operational reliability back to a higher value. It is the last case where GREENJET is focused on since GREENJET does not maintain the whole aircraft AEROSPACE MBA 3

22 GREENJET BUSINESS PLAN MISSION AND VISION 2 Mission and vision 2.1 Mission To provide Aircraft Component MRO services in an agile and effective way decreasing delivery time through flexibility and specialization with a similar cost than the industry average. 2.2 Vision To consolidate in the medium term as a Spanish company located in Alameda de Osuna, near Barajas airport (Madrid) to provide MRO component services, being focus on avionics and hydraulic capabilities (ATA s 24,29,31,34). The core activities of GREENJET are components. The choice of the placement for the installation of the facilities is really important. GREENJET is going to be settled in Madrid, near the airport, concretely in Alameda de Osuna. We have chosen Spain because it is one of the most developed countries with a low labor cost due to the low cost of life compare to other countries. Specifically we have chosen Madrid due to its strategic position for the market. In Madrid, the flow of planes is the biggest compared with the existing one in other airports in Spain. There is a wide variety of airlines which operate in Madrid, so there will be a huge maintenance market, which is the goal we are pursuing. 2.3 Values and culture GREENJET intends to satisfy the customer needs and offers elaborated services in a short time. To achieve this, GREENJET will be comprised by high skill labor, specialized in some capabilities and will apply the Lean methodology in order to offer services with high response. 2.4 Limitations GREENJET is a new company, so it will have some limitations such as the limited experience or the brand recognition compared with its competitors which started the business many years ago and have gained the reliability of their own clients. AEROSPACE MBA 4

23 STRATEGIC PLAN 3 Strategic Plan 3.1 External analysis Through this analysis, it is shown all the characteristics in the environment in which GREENJET is developing the business idea. It is going to be used a PESTEL Analysis which stands for Political, Economic, Socio-Cultural, Technological, Environmental and Legal Analysis, describing the current situation of all of them. Taking into account that the location where the company is settled determines the external parameters, with the objective of doing a good external analysis, we assert that GREENJET is going to be located very close to Barajas airport-madrid Legal and political environment Legal framework plays a very important role in a project like this, which we should profit from. In the aeronautical sector, the Quality Management System (QMS) needs to comply with regulatory authorities requirements. Civil and Military Authorities require an updated Quality System which ensures that every product or service is performed according the requirements and is able to operate safely. The International Aerospace Quality Group (IAQG) developed a series of international regulations based in the ISO9000, AS/EN 9100, to cover all the requirements that are specific to the QMS in the aeronautical sector. In Spain there are two different authorities who are able to issue Airworthiness Certificates, EASA-AESA (Civil Market) and DGAM (MoD, Military). GREENJET will only perform its activity in the civil market, so EASA will be the only one to take into consideration. Even so, according to the episode of Quality Management System, FAA will be considered in order to increase the number of airlines which GREENJET can offer its services, such as American Airlines. In order to GREENJET be an aeronautical repair station, the company must be granted by a license EASA Part 145 for Maintenance Operations Approval issued by the General Directorate of Civil Aviation and Part 66, for Maintenance Licenses requirement, Aircrafts Maintenance Technicians. GREENJET also needs to certify its Quality System according to ISO-9001, which shall be done trough the Spanish Normalisation Association. ISO-9001 is mainly, which provides standards and guideline to de assurance of the quality, certified by third parties. With regard AEROSPACE MBA 5

24 STRATEGIC PLAN to EN9100, was created in 2003 and adding the specific requirements to 9001 related to the aeronautical sector. Finally, it is important to mention that there is a high concern about environmental issues; so many countries in the world have already expressed internationally their concerns by joining the Kyoto Protocol. Thus, GREENJET will be a company which will be certified with ISO that assures the management of the organization in a sustainable manner without environmental risk or lower impact. Furthermore, GREENJET will project an international image of about positioning on environmental concern. With the aim of having a deeper vision in the subject of certifications, in chapter 8 the information related to this issue will be with much more detailed Economic environment GREENJET is located in Madrid, so it is going to operate with airlines that also operate in Madrid, or at least the flights have some stopover in Madrid. Due to GREENJET is a new company, it is settled in a strategic city, where the flow is bigger, so we have more chance to get equipment for checking, maintaining or repairing. As the years go by, it could be possible to expand the business out of Spain, or operate with airlines that operate in Europe. The euro is the current currency in Spain. Derived from this, it facilitates business inside EU because of its strong value. However, it also brings about problems in terms of GREENJET performing, so it does not ease dealings with international countries. So, once the company has earned enough profits, the market will be studied in order to be spread out of Spain. Since Spain is the country chosen to locate GREENJET, it would be important to study the economic situation of the country over the years. After the Francoism period, there was an economic growth. Around the eighties there was a recession that affected the economy of the country, and it recovered in the mid nineties thanks to the government performance. However, by the end of 2008 up to now, there has been a new recession that has affected to much the economy of over the world, being its biggest recession in half a century. Due to the problem that happened in USA in 1991 that affected directly to all the airlines and the fleet, it also has had repercussions in Spain. So in terms of current days, there is a financial restraint in MROs since they depend on the airline industry. The current financial condition of the airline industry is weak. Weaker travel demands, tighter credit markets, and fuel hedge losses have reduced cash, earnings, and profits. Airlines are preserving cash, renegotiating contracts with their suppliers, selling owned aircraft, and leasing back to build cash reserves, all of which affect the MRO. The control of costs of maintenance is essential for the company; since not only it allows increasing the market share due to the regularity in the operations, but in addition to achieve profitability with high levels of safety. It is expected that the Spanish economy will recover in the next years according to the figure 2. AEROSPACE MBA 6

25 STRATEGIC PLAN Figure 2 Growth of Spain over the years (source INE) There is a summarize of the current economic Spanish situation, it is explained in the next Table 1 Table 1 Current economic Spanish situation ECONOMIC SITUATION IN SPAIN Currency $ to 1euro $1,414 STATISTICS GDP (3rd term 2009) $1512 trillion GDP growth 0,0 GDP per capita $32,416 Inflation (december2009) 1,1% Unemployment 18,8% Exports Imports Public debt Revenues Expenses Outsourcing EXTERNAL $362 billion $402,6 billion PUBLIC FINANCES 43,1 % GDP $443,3 billion $535,6 billion As airlines outsource more maintenance work and focus on their core business, opportunities open up for new companies to compete in the MRO space (increasing competition, expanding the potential for improving service and driving down costs). Until the 1980 s, airlines performed their own aircraft maintenance. Since then, the companies have been trimming costs. Consequently, more airlines are outsourcing MRO work. MRO outsourcing has increased from 30% in 1990 to 50% in 2000, and it is projected to reach 85% in AEROSPACE MBA 7

26 STRATEGIC PLAN Inside the four main services that MRO offers, component and engine maintenance lead in outsourcing, each with over 70% outsourced Cost reduction There is an invariable need for the MRO industry to seek opportunities in order to reduce costs. The typical cost structure for an aircraft is shown in the next figure 3. The flight operating cost relates to all costs concerning aircraft flying operations, and includes pilots, fuel, and maintenance and aircraft ownership. Ground operating cost arises from servicing of passengers and aircraft at airports, and includes aircraft landing fees and reservations/sales charges. System operating cost results from marketing or administrative items. According to the graph, the 23% of the total flight operating cost is made up by maintenance. It turns translates to 50% of total operating cost. Thus we can conclude that there is a need to make MRO activities as efficient as possible to keep overall costs down. Figure 3 Typical aircraft cost structure 2002 Table 2 Distribution of costs for Boeing 757, 2002 BOEING (2002) Cost per flight hour Crew $489 19% Fuel $548 22% Maintenance ac/components $590 33% Ownership $923 36% Socio cultural environment The core business of GREENJET cannot be negatively interpreted by the population; otherwise it may be seen as a source of employment. In addition, nowadays there is an increasing interest in cutting edge technology. Public administration and companies are more aware of investing in new and innovative AEROSPACE MBA 8

27 STRATEGIC PLAN technologies. Taking care of the environmental impact is also important in our society and GREENJET pursues also this idea Technological environment MROs companies have been founded all around the world. There is around 500 Maintenance, Repair &Overhaul companies worldwide. Some examples of MRO companies in the world are: Table 3 MRO worldwide companies Maintenance Service Company Country Airframe Engine Components/Systems Avionics Repair services Aircraft interiors Honeywell Aerospace UK x x Denel Aviation South Africa x x x x Air Works India Engineering India x x x x x Meco Beijing x x x x x Aveos Canada x x x x x TAP Brazil x x x x x x GMF Indonesia x x x x x x According to the previous chart, depending on the company, it offers different maintenance services. Some examples of MRO companies in Spain are: Table 4 MRO companies in Spain Maintenance Service Company Airframe Engine Components/Systems Avionics Repair services Aircraft interiors Globalia Mantenimiento Aeronaútico X X Iberia Maintenance X X X X X X Industria de Turbo Propulsores S.A-ITP X X Ingeniería Semasa S.A Furthermore, there is no reason to believe that the core business of GREENJET will have any problem, so it is an activity that has being already founded worldwide and in our case it will be composed by a certain number of skilled professional technicians and personnel and the procedures to develop the activities inside the company are already firmly established. With regard to the IT, there are different IT systems that are used by companies in order to deal with the orders. The IT system that is needed in a MRO company may provide means to perform realtime maintenance and decision-making in a more productive and adaptive manner. The benefits of such a program include congregating information under one common system, more efficient and cost-effective aircraft MRO. If done correctly, it is possible to increase throughput of repairs and reduce the number of late jobs. It also creates a flexible and dynamic architecture that responds to continuously changing market conditions Geographic environment Our business will be located in Madrid, close to Barajas airport, concretely in Alameda de Osuna. The Airport of Madrid is a public Spanish airport of the first category managed by AEROSPACE MBA 9

28 STRATEGIC PLAN AENA placed in the surrounding areas of the city of Madrid. It is the first Spanish airport for passengers' traffic, air load and operations, as well as Europa's fourth for number of passengers and tenth of the world. The airport is placed in the North-East of Madrid. Besides having very good connections with almost all the Spanish airports, it is the European airport that has more connections with Spanish America. In the airport, the airlines have operational headquarters Iberia (that is the dominant airline in the airport since there moves almost the half of the total passengers). Consequently, GREENJET will be able to operate with the traditional airlines since they are composed by the biggest fleet, and the more airplanes GREENJET give service, the more component repair will be done and more profits will be earned Conclusions Once all the external parameters have been studied and could affect GREENJET location, we can assume that there is no opposition to enter this market in Spain, in this particular case in Madrid Market demand Aircraft failures are generally unpredictable and they tend to occur more frequently during flight operation than otherwise. Even though the expected time to failure of a particular part is proportional to some known and measurable quantities such as flying hours or number to take-off and landing cycles, component failures are still difficult to foresee. Aircraft MRO has several segments. The attractiveness of the aircraft maintenance business is underscored by the number of new companies entering the field and the fact that existing MROs are shifting and expanding their roles. Aircraft MRO is commonly segmented into four main service groupings: - Line maintenance: which diagnoses and corrects troubles on the aircraft and carries out minor and major aircraft checks and repairs. - Component maintenance: which repairs components such as wheels, brakes and interior components. - Engine maintenance: which includes dismantling, inspecting, assembling and testing aircraft engines. - Heavy maintenance: which encompasses structural modifications, landing gear repair, and engine changes. AEROSPACE MBA 10

29 STRATEGIC PLAN Figure 4 Airline MRO market The previous figure 4 represents the percentages of the four services that a MRO company offers. GREENJET is going to work under unscheduled conditions and due to the difficulties that the engines offer (they need to be dismantled, inspected, assembled and tested) and the line maintenance (it requires very intensive labor); GREENJET is specialized in giving the component service. According to that, it represents almost the 20 percent of the airline MRO market. Taking this idea into account, GREENJET will give its service to single aisle aircrafts that belong to the A320 family (A318, A319, A320, and A321). They will dispose at least two components of each part number in each aircraft and they will be repaired when necessary. Table 5 Fleet for different airlines AIRCRAFT AIRLINE Total Iberia x British airways x Vueling x x 35 x 35 Finnair x Air France Looking ahead, the number of components that would be repaired or even the variety of airlines that the company will offer its services would be expanded. It will be explained in the chapter of Future Perspectives. AEROSPACE MBA 11

30 STRATEGIC PLAN MRO in the world The increased demand for MRO services can be attributed to aircraft maintenance growth from budget airlines as well as other MRO companies. More maintenance jobs can also be expected from conventional airlines, which are looking at ways to extend the life cycle of their existing transport aircraft. Moreover, expansion of cargo aircraft fleets and the conversion of passenger aircraft to freight aircrafts is likely to generate an increase in the overall demand for maintenance services. In the era of globalization, the trend in the MRO industry is to establish smaller maintenance facilities and locate them closer to the customers so as to reduce delivery costs and provide more timely service. In order to compete more aggressively and attract a larger pool of customers, more facilities are also upgrading their capabilities to handle a mixed fleet of aircraft. This goal is going to be achieved by GREENJET. The commercial aviation MRO industry, which includes airframe and engine maintenance, was estimated to be worth high values. Even though there has been an important decline from the previous years due to the fallout from Sept 11 and the economic recession. The industry is dependent on the size and utilization rate of commercial aircraft fleets. In addition it is known that the number of aircraft in service has increased rapidly in the last decades, so the number of components to be maintained, repaired or checked has increased as well. Focusing on component maintenance since GREENJET is going to offer this kind of service; North America retains the largest market share in the aircraft component market, followed by Europe and APAC (Asia-Pacific) (see figure 5). APAC is expected to have the greatest growth, increasing its component market share from 19% in 2009 to 24% by North America s component market share is forecasted to decline from 35% in 2009 to 29% by Aircraft fleet growth is expected to increase in APAC and the Middle East while declining in North America. The component market segment in North America equals 20.1%, while engine, HMV/mod, and line maintenance retains the balance of the market at 79.9%. Figure 5 Component Market Share in the world, 2009 AEROSPACE MBA 12

31 STRATEGIC PLAN MRO services are becoming an attractive and growing opportunity nowadays. Today is $40.1 billion for maintenance market commercial aircraft and it is still growing. The market is expanding at a 3.6% compound annual growth rate, and it is expected to reach $58 billion by Nearly 2/3 of today s MRO market is split between North America and Western Europe. The largest MRO growth will be seen in Asia ($5.6 billion). Few MRO segments can fulfill every requirement, creating new and expanding opportunities for this business The market in 2018 By 2012, the value of the MRO market for Western-built, commercially operated jet transports is expected to increase to $51,8 billion, and then to $62,9 billion by For purposes of the forecast, the market is divided into four sectors, as it has been explained previously. Engine MRO represents, by far, the largest portion of the MRO market, accounting for $17,1 billion, or roughly 42 percent, of the total spend this year. That proportion is expected to remain steady over the next decade. Spending on engine MRO is expected to increase at a rate of 4,5 percent to 4,7 percent a year over the life of the forecast, reaching $21,6 billion in 2012 and $22,4 billion in In 2018, the air transport fleet numbers aircraft. The fleet is heavily concentrated on two aircraft models, the Airbus A320 and Boeing 737 from the world's two major airframes, whose families combine to represent around 48% of the fleet. With an enterprising degree of stealth, they have together locked in 50% of those single-aisle customers with integrated MRO contracts that include airframe/component maintenance, rotable logistics and/or fleet management options, thereby leveraging their key strengths in aircraft health management systems and distribution networks to increase competitiveness. The global fleet has increased by aircraft since 2007, a 4% compound annual growth rate with the installed base of aircraft comprising future orders, firm orders, 206 parked aircraft and aircraft in the retained fleet. The Asian and European fleets in 2018 are nearly the same size as the North America base. Orders stand at aircraft, with new single-aisle aircraft accounting for 41%. Boeing and Airbus launched their next-generation models in 2014 and 2016 respectively together, representing 41% of the orderbook. The Boeing 787, introduced in 2009, now accounts for 4% of the active fleet with more than aircraft in service, while the A350XWB comprises 18% of the orderbook. A recent move by both airframers to launch new widebody designs to replace the Airbus A330/A340 families and Boeing 777 has resulted in 300 orders from airline customers. AEROSPACE MBA 13

32 STRATEGIC PLAN Figure 6 Air transport fleet in 2009 Figure 7 Air transport fleet in 2017 According to the figures 6 and 7, the percentages of A320 family aircrafts continues being huge. However, the predicted proportions are minors whom year 2009 due to the development of new models of aeroplanes. GREENJET is going to offer its services for components which are located in the 320 family aircrafts. So, according to the data, the number of components that will be repaired is going to be huge since the fleet of 320 family aircraft is big, and the company will have work for furture years. The 2017 MRO market is worth $61 billion (figure 8), a $15 billion increase since Modifications account for $5.3 billion (2.8% compound annual growth rate), heavy airframes $7.2 billion, and the component business represents the highest compound annual growth rate at 3.9% being $13.3 billion. Figure 8 MRO Market 2017 Line maintenance work is valued at $13.1 billion, while engine MRO totals $22.4 billion of annual work, a 3.8% compound annual growth rate. In total, air transport MRO accounts for 45% of a broader $140 billion global maintenance market, with outsourcing at 75% up from 52% 10 years previously, although this could yet be owned or partially owned by airlines. AEROSPACE MBA 14

33 STRATEGIC PLAN Around 90% of engine MRO, 30% of line maintenance, 85% of component support and 75% of heavy airframe maintenance support is outsourced. All in all, the component maintenance for future years is going to be one of the main markets that MRO companies will be focus on, so GREENJET will be well positioned to offer its services and to compete with the existing market Near environment Customers and clients There are five potential different kinds of clients: 1. Huge MRO companies, for any reason decide to outsource/subcontract MRO activities for some of its capabilities, subcontracting other MRO companies which probably will smaller but more specialized, so this will give place to a cost reduction. 2. Operators without maintenance, they subcontract MRO companies such as GREENJET in order to get the components repaired. 3. Operators with maintenance such as Iberia Maintenance, they subcontract other MRO companies due to the operator cost reduction and the specialization in some capabilities. So this will give place to a cost reduction and will enable to reduce workload and can send the operator technicians to other tasks. 4. Manufacturers. Establishing partnership relation with the component manufacturers to provide maintenance and repair services. Some manufacturers do not allow that any company of repair has the necessary manuals to the repair of components. They are those that repair the pieces by themselves or have their own companies of repair which they work like partners for the maintenance of its components. Therefore, GREENJET could be a partner of a manufacturer and to exclusively offer its services to this one. 5. ACMI (Aircraft Crew Maintenance and Insurance). It is an aircraft lease. The lessor provides the aircraft, one or more complete crews (including engineers) including their salaries and usually allowances, all maintenance for the aircraft and insurance, which usually includes hull and third party liability to an airline that could be Iberia. Furthermore, these aircrafts could operate in Madrid and be repaired by GREENJET. Today, airlines role in maintenance is changing as they outsource more maintenance activities. Some airlines have seen MRO as a business opportunity and have set up their MRO operations on a commercial basis. Some of the MRO organizations have become separate companies (1), while others operate as profit centers within the existing airline (3). The purchase of new components involves many suppliers and a big effort in terms. The buying deal would usually be built as a long term relationship. AEROSPACE MBA 15

34 STRATEGIC PLAN Customers look for a maintenance provider that best matches the program s requirements: Capabilities Facilities Labor force on-site and immediately available Tooling availability Relationship to certification authorities Pricing Understanding of the SOW Responsiveness to RFQ Customer service response Handling of change costs and changes in scope of work References, particularly in relation to quality of workmanship, schedule, and customer service. GREENJET MRO Company offers almost all the requirements that a client requires. It is specialized in a few capabilities, it has new facilities, the labor force is high skilled, the supply chain management is excellent thanks to qualified people working within the company and due to an optimized use of sources, the response is high since it is a flexible company and, trying to return the component with a lead time lower than its competitors. Even so, there are a few weaknesses since it is a question of a new company, such as the brand recognition, the limited experience, etc. Consequently, the number of airlines operating in Madrid is very high, so there will not be any problem in terms of locating GREENJET in Madrid in order to offer its service. All in all, firstly, among all the possible clients that the company would have, Iberia will be the only one. As it will be explained in the chapter of Implementation, during the first months GREENJET technicians will work at Iberia workshop, in order to reduce Iberia workload and reduce operating costs. Once the facilities are built, the company will keep working for Iberia up to the company gets the certification of Part 145. Then, the potential clients would be British Airways and even Oneworld; since it is composed by eleven airlines and is represented by A320 aircrafts. Looking ahead, the possible clients could be other MRO companies, or even the manufacturers of the components. It will be discussed in the last chapter Competitors The strengths of service competitors lie in their cost advantage; they can offer a wide breadth of services and/or comparable services at a lower price. In terms of international MRO companies, Lufthansa Technik is a successful airline MRO which excels in technical capabilities. Due to our company is located in Madrid; the main competitors are the ones who are detailed in the following charts 6 and 7. Bearing in mind that there are four kinds of AEROSPACE MBA 16

35 STRATEGIC PLAN maintenance and GREENJET is only focused on the components, we can distinguish two different companies, and also it is important to mention that due to GREENJET is a small MRO, the main competitors will be the ones who are similar to us, since the other ones could be our clients. Table 6 Airline with Maintenance MRO INSIDE THE COMPANY EMPLOYEES AREA m2 IBERIA MANTENIMIENTO Table 7 MRO Companies MRO OUTSOURCE EMPLOYEES INGENIERIA SEMASA SA 35 GLOBALIA MATENIMIENTO AERONAUTICO 80 CORJET MAINTENANCE EUROPE 100 INDUSTRIA DE TURBOPROPULSORES SA 550 PARAMOUNT AIRCRAFT SERVICES 27 CESA 225 Iberia Maintenance is an airline with MRO included on it, which works repairing the whole aircraft and also offers other services such as the maintenance of components (the services are detailed in the chart 4). It is the hugest MRO Company in Madrid. It also has huge maintenance facilities with large number of workers. When these major airlines seek to improve bottom lines by adopting cost-cutting measures, they have a tendency to scale back MRO operations to reduce expenditure. In the other chart are detailed independent MRO companies. All the companies are only focused on the maintenance of components of the aircraft. The number of employees is smaller. These revitalized airlines MRO tend to be more efficient than the big ones and the resulting cost advantage gives them a competitive edge and many operate as profit centers for the airlines. Those ones are more similar to us, so they are the real competitors of GREENJET. There are different steps that MRO companies can do in order to compete, such as: Consistently deliver on schedule Compete on pricing, quality and services Aggressively market, communicate and have a robust public relations campaign Properly manage programs and expectations Be flexible to adjust to customers changing requirements The main advantage that GREENJET has is that due to it is a small company, the internal management is easier compared to the big ones, so it allows to operate in a fast way and reach good lead time. In addition, since it uses optimized resources and processes, GREENJET can offer a high response to its clients adjusting its services depending on the requirements of the clients. In other words, depending on how urgent the repair is needed, AEROSPACE MBA 17

36 STRATEGIC PLAN GREENJET will offer the repair itself or the exchange service, being available whenever they are needed Suppliers As new companies enter the aircraft maintenance business and others change or expand their value propositions, MRO providers will be compelled to become more collaborative, more opened and more competitive. To position themselves for the future, these organizations must be prepared to take on new roles and heighten their value by working more closely with others. Once the company is settled down and works the first years, it needs to have components within its storage in order to be able to offer exchange service and also to have enough elements to repair broken components. In this case, the suppliers will be the manufacturers of the elements or the pool of brokers. Some of the potential manufacturers are shown in the next chart. Depending on the components that need to be repaired, some manufacturers will be used more often than others. Table 8 Potential manufacturers for GREENJET capabilities ABS C Collins Ect industries Hoover industries Rogerson Aerazur Concorde Fenwal Intertechniquec Thales Air cruisers Dow Key Goodrich Messier Bugatti Amerex Dowty Grimes Ozone Bendix King Dunlop Hamilton Sundst Parker Casa Eastern Aero Marine Honeywell Rockwell Collins Later, in the Marketing episode, it will be detailed with more precision GREENJET suppliers according to the P/N that will give service. Some suppliers have even started to offer overhaul services not only for their own proprietary products but other OEMs as well. It would contribute negatively to MRO independent companies, since they will not enable a free access to its manuals in order to increase its profits. Classical economic theory suggests that a lack of competition will drive up prices and bring down quality. This implies that the chosen supplier might not be the one offering the best deal. However, the price of the part will be less expensive if we have the maximum number of suppliers to compete against each other and allow markets forces to operate freely. Although the advantages of having a bigger pool of suppliers are evident, nevertheless, there are also certain drawbacks. For more suppliers mean more coordination work to ensure timely delivery and make it more challenging for the MRO shop to review and provide feedback on the quality, tolerances and specifications of parts. With regard to the brokers, when a company offers exchange service and it does not have the repair component available, it must communicate to pool of brokers that there is a necessity for getting the component. Consequently, GREENJET needs to have skill workers in order to have good contacts/network to having a brokers list available whenever is needed. AEROSPACE MBA 18

37 STRATEGIC PLAN 3.2 Internal analysis Business Organization In the internal organization of the company there will be: - The whole management which is given by the chief executive officer (CEO), with an overall responsibility, is also the head of the commercial department. He holds the highest position of the structure. Below him, there are four subordinates. The departments which depend on the CEO and belong to primary activities are: - Commercial/marketing: The Key account Manager is the one who manages the relationship between the company and its clients, he works focusing on the key accounts. With regard to the sales/ marketing department, the marketing assistant is the responsible. Both employees will work along the CEO. A call centre operator is also needed in order to offer customer service. - Financial: CFO is going to be in charge of managing expenses, costs, human resources, etc. - Procurement: CPO is the responsible for this department. He will be in charge of managing the supply chain, purchasing, taking care of the relationship among suppliers, logistics, etc. - Operations: the company will work on different models of aircraft, so it is going to be important in terms of equipment. This department is also responsible for operations, tool maintenance, machinery, and quality. The departments that belong to secondary activities are: -Subordinates: composed by the workers. Those are technicians and engineers. Due to the size of the company, there will also be departments that will be subcontracted to other more specialized organizations. The activities that will be outsourced are: Personnel selection Personnel vocational training Payroll Labor relations Health & Care Lawyers Informatics Assistance Cleaning Services AEROSPACE MBA 19

38 STRATEGIC PLAN Competences and capabilities The business of the company consists of offering non scheduled MRO capabilities in the area of avionics and hydraulics for 320 family aircrafts operating in Madrid-Barajas which belong to non low cost airlines, such as Iberia, British Airways, etc. GREENJET works focusing on a few number of ATAs (24, 29, 31, 34), so it is going to be specialized in certain components of the aircrafts. For this reason, the service that offers will be more specialized in the equipment that it is focusing on, so it carries out that its position is better than its competitors. GREENJET will deliver the repaired component in less time than its competitors due to the excellent management of the supply chain, the flexibility, the outstanding skilled people, the equipment that the company has and the Lean procedure that is followed to develop the engineering procedure of the process. In other words, the company is going to give a high response to its clients, once an operator has a component that has to be checked, repair or maintain we are going to offer our services as soon as possible returning the component under a few perfect conditions of quality. Even though GREENJET has attractiveness within the component maintenance business and can fulfill requirements that other companies does not do, there are critical factors for future success that have to be taken into account, which are: The competitive service products The global scale The ability to run a MRO business Customer focus Firstly, due to GREENJET is a new company, will offer its service for a few P/N. As the time flies, in order to be profitable and competitive, GREENJET will be able to expand its service in different ways, such as increasing the P/N it gives service, or joining with other company that operates in Europe in order to expand its market, or being a partner of a manufacturer in order to be the only MRO company that gives the maintenance service to the manufacturer. However, despite it is a flexible company and is characterized to reduce the time that last certain processes, the company is not really known, and will have the same problems that a start company has, taking into account that GREENJET cannot offer its product at lower price than its competitors. In addition, as starters of a new business, the company will be leveraged the first years and will have to ask for a loan. Financially speaking, it will have worse position in the market than its competitors. 3.3 SWOT ANALYSIS In the macro-environment and micro-environment analysis we detected some opportunities and threats: AEROSPACE MBA 20

39 STRATEGIC PLAN Strengths - Skills human resources: GREENJET will be formed by people who recruit high skill workers. The availability of skilled labor will be a challenge for the company. Thanks to having high skill people allows reducing lead time and the chance of maintenance error is also decreased. - Good at managerial skills: GREENJET will spend an important amount of money in order to hire skill people such as engineers, commercial responsible, financial responsible, director, technicians, etc. The manager and director will have to fill the gaps that other staff is not able. They have to be good at managing the process. A good procurement is really important to have, so we consider him into a separate strength. - Location: The company is located in Madrid, next to Barajas airport. GREENJET concretely is going to be located in the polygon of Alameda de Osuna, due to its proximity to the airport, the good access to this by motorway and the size of building terrain, it allows to construct 3600 m 2 around. Madrid is a strategic city due to its location. Many flights take off and land in the aforementioned city, so it allows our company to obtain parts of the aircrafts that have to be checked, maintained or repaired in a reduced time. - Short lead time: A short lead time to repair, maintain, or check pieces contributes to keeping up the level of spares circulating in the system, increasing the need for additional inventory. With the aim of mitigating the risk of dependency of the providers, it would be necessary a greater inventory. If repairs are deferred to a less time sensitive period, the absence of time pressure also helps to reduce maintenance error. This not only enhances safety, it also reduces maintenance actions in the longterm. It depends directly on the technical leverage. The reduction of lead time will be achieved taking into account Lean manufacturing applied to our process. - Supply chain management: Building relationships and sharing information with key suppliers foster sharing goals between organizations and greatly improves coordination and effectiveness. In a lean production system, suppliers need to be part of the total coordination scheme so that the right parts can be delivered at the right time and at the right place, ensuring smooth and efficient operations. Successful coordination of schedules with key suppliers can lead to high performance by potentially minimizing inventory levels and minimizing the shortage of spares parts at the same time. GREENJET is characterized by solidity. The suppliers are able to get the pieces as soon as possible. There is an optimization of sources and processes which carries out a flexible company. The person who is going to be in charge of the procurement, relationships among suppliers, availability of parts and equipment and also purchasing will be the CPO. He will be the person who will have all the mentioned knowledge previously, allowing the company to be very competitive with regard to the ones that emerged few years ago. - Specialization equipment: GREENJET takes pride in its capabilities, many of which are unique in the marketplace in Madrid. It offers high quality and cost conscious solutions. The company is focused on a few numbers of ATA s (24, 29, 31, 34). AEROSPACE MBA 21

40 STRATEGIC PLAN Weaknesses - Financial situation: Financially speaking, the company presents a financial leverage the first years. - Brand recognition: In order to publicize our company, it is necessary to establish a marketing plan. This plan could lead to high costs and would increase the indebtedness of the company. It must be a dynamic plan, different from competitors, permitting rapid brand recognition by customers. The recognition will be established by different means. - Limited Experience: The Company is emerging so the experience is limited and it does not help too much the progress of the company, especially the early years. - Manufacturing means: Even though the number of equipment could be limited by the initial investment due to it is an emergent company, it will have the necessary resources for the maintenance of the components in which is specialized. Furthermore, when being a company that works with optimized processes, this fact influences in the number of equipment; in other words, it will be composed by the equipment that will be needed. It is foreseen that in the next years, as long as the company operates properly and earns profits, there will be a budget for buying new means and offer service to new capabilities Threats - Market financial trend: At the beginning the company is indebted. The financial expenditures are linked to the interest rate. Therefore the dependency of the interest rate is really high. - Suppliers dependency: it is one of the bottlenecks that the company presents. Suppliers have to provide our company the aircraft pieces that have to be repaired, maintained or checked, or new ones and it can take more or less time depending on different factors. In addition, some pieces cannot be repaired, so we have to provide new pieces to the client, so it is needed that the supplier s delivery. There is a continuous and close relationship between the company and the suppliers. If the supplier does not deliver the pieces to GREENJET, the company fails delivering the piece to the client, so it is a really important matter. - Strong emerge of new countries/ competitors: Competitors are increasing and it has to be considered their response by reducing cost, increasing productivity, reducing waste, providing a timely and quality product, and focusing strongly on customer satisfaction. MROs that follow this strategy will be able to establish a competitive edge. The key differentiators being the following: Superior quality Quick turn-around time High degree of technical capability Low competitive cost AEROSPACE MBA 22

41 STRATEGIC PLAN Low cost Asian and Latin American MROs are capturing additional market. Competition for market share will increase in coming years. The forecasted steady growth of the MRO market masks significant instability as low-cost Asian and Latin American MROs capture increasing market share. In line with the trend to lower cost labor bases, African MRO bases have emerged. In Asia-Pacific, liberalization has facilitated numerous start-ups since 2007, while the Chinese fleet has tripled, absorbing most MRO capacity growth. Interestingly, Japan and South Korea have both emerged as engine and component MRO locations Opportunities - High response: Big companies such as Iberia Maintenance presents a complexity in their internal management (bureaucracy) that it prevents them to operate in a fast way, reason why are not able to reach good lead Time. This is a great opportunity for GREENJET since when being a small company with optimization of resources and great flexibility; it allows giving lead times better, giving therefore a high answer to its clients. - Operator cost cutting: In order to keep the competitor position to maintain a viable business, the provider s intent should be to provide reliable and cost-effective maintenance services. The control of cost of maintenance for GREENJET is essential; since not only it allows increasing the market share due to the regularity in the operations, but in addition to achieve profitability with high levels of safety. - Outsourcing trend: It is really linked with the above opportunity. Due to economic factors and in order to reduce costs, there has been a need of embracing the outsourcing trend, therefore, third party providers account for a high percent of the MRO market. More and more airline companies are choosing to outsource maintenance to subcontractors who can offer lower total costs though larger volumes and specialized know-how. Airlines will be forced to change to remain competitive in MRO. They will have to outsource maintenance work in order to cost cutting. Outsourcing allows aircraft manufacturers and the airline industry to find those suppliers who can provide quality work, on time, and for less than it would cost to do the work in-house. - Increase of fleets: Currently, the kind of aircrafts that take operation in Madrid are: % and : 20%, 757 6%, 767 6%, 777 5%. In the near future it is foreseen that there will be an important purchase which will be consisted of %, A350 20%, 330 8%, %, 777 7%, etc. Furthermore, there will be more pieces that will have to be checked, maintained or repaired, so more work for MRO companies. - Adaptation new types of maintenance: there are new trends for maintaining pieces such us those which are known as go if which can be putted off, so they are nonessential maintenance until a later date allows an airline to optimize when maintenance is performed, So that it can fly safely while eliminating superfluous maintenance. Other kind of maintenance consists of exchange where the client gives the piece to the MRO Company and the company keeps it for itself and gives AEROSPACE MBA 23

42 STRATEGIC PLAN the client back another one which can be a new one or which was in the stock and fits. Another option could be contracts full service, or new types of contracts SWOT assessment table In order to do the SWOT analysis, we build a table. The table is divided in two axes. One axis is composed by the strong and weak points of the company, and the other one it is based on the opportunities and threats in the environment. A scale from -3 up to 3 is used in order to see the effect of each of them. So, when a strong point makes the company taking advantage of the opportunity, a positive number has to be inserted. On the other hand, if strength prevents the company from taking advantage of the opportunity, a negative value is given. The value zero is used when there are not any implications. If a strong point can counter a threat, a positive number is used. We write a negative value if the strong point gives greater exposure to the threat. When a weak point prevents the company from taking advantage of an opportunity, we insert a positive value. When a weak point exposes the company to a threat, we insert a negative number. In contrast, when it helps the company to avoid it we fill the gap with a positive number. Table 9 SWOT analysis Analysis SWOT The most valuable strength that GREENJET has is the high skilled labor and the excellent supply chain management. These two strengths will permit GREENJET to take AEROSPACE MBA 24

43 STRATEGIC PLAN advantage of the opportunities and then be able to offer its services in less time. In addition they will allow to get clients and to protect the business from new entrants. Another strength that is not the most important but it affects positively to the company is the specialization. Few independent maintenance companies specialize in capabilities, GREENJET is going to work with some of them trying to offer the best performance. With regard to the threats, the biggest threat is the dependency of suppliers. Sometimes, in order to repair a piece, it is necessary that the OEMs gives us the document with the information of the piece (it is compulsory to have it, otherwise it is impossible to repair the piece). However, due to the airlines are in direct competition with OEM when it comes to offering MRO services, they are thus more reluctant to do so. Furthermore there is a big dependency of the supplier, so the more the manufacturer takes to provide us the information, the later we will deliver the piece to the client. In addition, there are some cases where the OEM does not want to give the information of the piece, so we are obliged to wait until he gives us back the repaired piece. In other cases such as exchange, the client gives us the piece and we have to give him back the piece which can be new or some that we had before and we have repaired it. Taking into account that we could need new ones and we have to receive them, it contributes to the dependency of the supplier. In spite of considering the financial situation as a threat, according to the chart it is blocked by the strengths and weaknesses, so it does not affect negatively to the company. With regard to new countries/competitors, they supposed to be threats; however, considering that GREENJET it is really good at human resources, at supply chain management and it works for a niche of ATAs, it works better than competitors. From the point of view of the opportunities, it is clear that we must be focus on getting clients by offering better services than the competitors. According to the chart, we could get benefits from the operator cost cutting and from the tendency outsourcing. Furthermore, in order to clients will choose us, we should work better than competitors. We have to reduce costs and be leaders on terms of lead time taking advantage of the strengths that GREENJET has. Finally, we can identify our limited experience as one of the two biggest weaknesses that GREENJET has. It makes us really vulnerable to the threats in the market and it may difficult the chance to get contracts with clients or to make good alliances with our suppliers. The other weakness is the financial situation of GREENJET. Due to GREENJET is an emerging company, it does not have enough money to finance itself, so it is necessary to ask for loans and present financial leverage at least the first years. So it also is a weak point to be considered. 3.4 Competitive Advantages GREENJET as a profit center In the past, MRO activities are usually viewed as cost centers and assimilated with captive maintenance operations of major airlines such as Iberia Maintenance. They tend to be huge maintenance facilities with large number of workers. When these major airlines AEROSPACE MBA 25

44 STRATEGIC PLAN seek to improve their bottom lines by adopting cost-cutting measures, they have a tendency to scale back their MRO operations to reduce expenditure. The difference in the efficiency between independent service providers such as AEG or even our company GREENJET and a captive maintenance operator such as IBERIA is the number of employees and the total maintenance facilities size. As a consequence, to their inefficiencies, some of the airlines are revamping their MRO operations along of independent service providers by getting rid of their past legacies, shedding workers, reducing extensive maintenance space and offering state of the art technology in maintenance products and services. These revitalized airline MRO setups now do not have to negotiate with powerful unionized workers, they tend to be more efficient and the resulting cost advantage gives them a competitive edge and many operate as profit centers for the airlines, which could be the case of GREENJET Analysis This Porter s Five Forces analysis will give us an overview of the factors involved in the sector and how they could affect us. They are all discussed and explained along this Business Case. Figure 9 Porter s five forces The barriers that should be overcome to start a new business in the MRO sector are similar to any sector, but it also has others due to the characteristics of this industry. Amount of capital needed Access to suppliers Existing Competitors Certifications How to differentiate from existing companies/services To be able to overcome this threat means that others can do too, even though it helps us in the early phase of our company, it would increase the strength of the new entrants. Regarding the possible substitutes, the different services offered, such as Exchange, that can be implemented, that reminds us how important is the continuous innovations in our process and services and forces us to keep evolving. AEROSPACE MBA 26

45 STRATEGIC PLAN Finally, the importance of the power of buyers and suppliers. Due to the size of the Airlines and the Equipment Manufacturers of the sector, this is a strong force. They are key factor and we have considered different actions, see Implantation Plan and Operational Plan, to face the possible threats Strategic Profile Figure 10 Strategic profile This tool will lead us to several conclusions which are going to be used to set the company strategy in terms of positioning, economic/financial policies, internal structure, process definition, etc. Regarding several parameters, a comparison is made among three different kinds of companies within the MRO sector. In the figure above those parameters are measured taking into account the different Companies profiles to show the current theoretical position in the sector. The three profiles shown are the following: - Our Company: As a new company, GREENJET can provide new ideas and innovation to the market, but it also has several disadvantages, as any other startup company. - Leader Company: Here it shows what could be a market leading company; this kind of company is the example of how to reach the first position in our field. - Mature Company: This is an example of a company which is able to survive, with good economics results, obtaining benefits and a good performance. These parameters are related to the business in which we are going to develop our activity. They cover the most important aspects regarding the MRO business and they are the key differentiators among all MRO companies. AEROSPACE MBA 27

46 STRATEGIC PLAN Manufacturing means GREENJET is going to have the adequate means, meaning facilities, tooling and equipment to perform work required. Our relative position does not only depend on our investment; our competitors are in a different point in the learning curve Lead Time This is key in our value proposition. We will provide a shorter lead time due to our flexibility and optimised resources management. We will be able to reduce the average lead time of the sector taking advantage of our size, specialization and the repair and exchange process that the components will follow; being developed according to Lean Procedures Resources Management Due to our size, we could be more flexible. We are focused on achieving the higher levels in terms of efficiency because that will be the differentiating factor against our competitors and it will allow us to grow as quicker as possible Location As said before, we will be located in Madrid, near to the airport, concretely in Alameda de Osuna. The leader company may have its facilities in a better location, such as a hangar in the Madrid-Barajas airport Supply chain This is a key parameter in our business, any problem related to the supply chain could affect to our working process dramatically, (and even more if we are reducing inventory to minimize costs). So we are making a big invest in our procurement responsible in order to reduce risks and to have better and closer relations with our suppliers IT Systems Related to the suppliers relations, a large investment in IT systems is needed. We need to establish a close relation based on transparency and efficiency. This is a basic requisite to this field. We need a robust and probed system which allows us to compete H.R. To achieve our target of being leaders in lead time, it is mandatory a high skilled team. That is why we will put our efforts in recruiting high skilled workers by having wages over the market average Financial resources As any starting company this is a weakness. Our competitors have a better negotiating position and they can find financial resources easier than us. AEROSPACE MBA 28

47 STRATEGIC PLAN Brand recognition Our relative position against the competitors is weaker. This should be faced in time, but this is our current situation General Strategic Objective The general strategic objective of GREENJET is going to be modified as the company grows and evolves, they should be adapted to the current and realistic status of the company. GREENJET is basing its activity in a substantial Lead Time reduction, developing value added processes to provide efficient MRO services. In these early stages of life of the company, the general strategic objective is to start growing and consolidate within the MRO sector in Madrid due to an operational Lead Time under the current market average. To achieve this, GREENJET must fulfil the milestones detailed as follows: Collect initial investment in the first year. 1,275 M. o ST Borrowings 11,8% o LT Borrowings 19,6% o Stocks 29,4% o Subvention: 23,5% o CDTI: 15,7% During the initial certification period, 11 months, start operations with pilot contract with Iberia. Start autonomous operations during the second year, once certified in EASA Part 145. Break-Event point in year three. We assume the commitment to head to excellence; all our processes follow the highest quality standards in order to satisfy all the possible needs of our clients with the highest efficiency General Competitive Strategies Taking into account the conclusions obtained in the strategic profile analysis, there are some potential strategies for success than should allow GREENJET to achieve a better position and a competitive advantage regarding our competitors. Better Lead Time at a same price A shorter lead time compared to our competitors is the added value that our company is going to provide as its main strength, this will provide us a privileged position in front of our competitors. AEROSPACE MBA 29

48 STRATEGIC PLAN To achieve that, the company should develop certain procedures and strategies in order to be able to guarantee a reduction of the average lead time in our operations described as follows. Our company is going to focus on the flexibility through size. We will take advantage of it to facilitate the lead time reduction. This feature will allow us to become more agile than the competitors to fulfil and exceed the customer s need. We need to maximize the efficiency in the resources management in order to minimize the possible impacts in cost and time. This mean, to be proactive and effective in terms of machinery and facilities use and personnel activities and to always have the traceability of the actions performed due to a Lean Organization applied to a standardized procedure. Specialization We also are going to develop our activity in a very specific field, hydraulic and avionics. And within this ATA s we will focus our efforts on eight different types of equipment. By this we are able to establish the sequence of operations in the most optimal way which will have a positive effect the efficiency mentioned before. H.R. and Lean Operations To achieve this target we need good skilled personnel whose activity and commitment allow us to continuously improve our procedures and therefore, our efficiency and lead time, within the framework of Lean Manufacturing structure. AEROSPACE MBA 30

49 MARKETING PLAN 4 Marketing Plan 4.1 Introduction The aim of this business plan is to demonstrate the viability of the brand new company, GREENJET, to enter the market of MRO in the component sub sector and its capacity to maintain a relevant market share position through time. As we are talking about a start up business, the marketing plan is going to be crucial to determine the success of this new adventure, so the marketing strategies implemented have to represent perfectly the market situation that GREENJET will be facing. Supporting the study in the previously performed external and internal analysis, we will try to define the main marketing variables in order to build up a sustainable marketing strategy that will serve to fight against the forces that are shaping this extremely competitive market. In order to do so, we will need to take advantage of our main strengths and opportunities and mitigate our threats and weaknesses. Marketing strategies to be applied in this case are quite different from the ones used in the typical consumer marketing analysis, and are more related to Industrial Marketing techniques, which take into account the business to business approach. Nevertheless, the final users of GREENJET services will be airlines (even if there might be some intermediate customers inside the value chain), so during this study we will also clarify why they would better maintain their equipments with us rather than with our competitors. As a result, the marketing plan is going to focus on the customer in order to find out its needs and elaborate an appropriate value proposition to fulfill them. The main MRO operators want the Airlines expectations to be satisfied, thus, not only the Airlines, but also our intermediate customers, if any, will take profit of the marketing strategies. As a start up, the main barrier we will have to overcome is the low knowledge our company is going to have inside the markets, so the ability to deliver properly our competitive advantage to the customer is going to be a key feature. Thus, an excellent communication and promotion strategy shall be performed. In addition to that, the other marketing variables, such as product, price and placement will sum up to help the company positioning itself inside the MRO industry. Another main objective of this business plan is to convince the investors to put money in a new company that wants to be present in a highly competitive market. In order to do that, the marketing efforts will need to take into account the conditions in which GREENJET will be operating and firstly, will have to focus on this investors phase. But as we have said, the general objective is to introduce the company products in its appropriate market and to inform the potential customers about the capabilities of the organization. So, in order to remain competitive in the phase were the company will be in operation, a sharpened Marketing plan is needed. AEROSPACE MBA 31

50 MARKETING PLAN As a result, the Marketing Plan is focusing on the potential customers, ascertaining its needs and elaborating an appropriate offer to fulfil them. The general scheme that will be followed is the one represented in the next diagram. Figure 11 Marketing plan diagram First of all, market demand and environment issues are estimated and analyzed. Next, the Marketing Mix is described, taking into account the product offer and the pricing, placement and communication strategies. 4.2 Demand Definition Before starting with the analysis of the demand, we have to explain some characteristics of the marketing analysis that is going to be performed along the following paragraphs. In fact, the approach performed will follow what it is called Industrial Marketing activities, which is slightly different to the commercial marketing approximations. Regarding the market structure, we will be facing a concentration in the MRO industry, the main players will be having similar attitudes and needs. About the service provider and the buyer relationship, we will be facing rational decisions, mainly driven by economical or cost reduction reasons. The buyer, is in this approach, as competent as the seller in which product characteristics refers. In industrial marketing, long term relationships between suppliers and customers are common and once a contract is gained it has a long term development. Once we have briefly exposed the main characteristics of the Industrial Marketing approach, let us start with the Demand Analysis. In this paragraph, the main fact that will have to be taken into account is the market characteristics in order to determine how our demand is going to be structured. The major tendency is to cut costs in a highly competitive environment. First of all, we have to make a preliminary distinction regarding the maintenance industry. The MRO market is divided into two subsectors: component MRO and aircraft MRO. The required capabilities to be present in one or another are completely different, and the competition inside those subsectors is also divided. On the aircraft side, we have enormous groups primarily supported by commercial airlines and making the MRO for aircrafts as a whole. On the component side, we have much smaller companies, often AEROSPACE MBA 32

51 MARKETING PLAN specialised in various sub systems, but not having the means to maintain a whole plane. Inside this segment, we also have some giants, but that are willing to subcontract some of its capabilities to the smaller specialists companies. As we will see, this is mainly due to the balance cost/core activities that the big players want to have. As we have said in the previous external analysis, we are assisting to an important outsourcing trend, regarding parts and equipments maintenance. This fact is our main opportunity to overcome the existing entry barriers of the component MRO sector. Another point is that the main operators are merging and developing partnerships while they are defining their core competencies, which leads, with no doubt, into the mentioned outsourcing tendency. In the case of the Airlines, the major tendency is to focus on Aircraft MRO and try to subcontract the component part of the business. As a last point for this pre-analysis, it has to be said that the global growth for MRO services has been higher in Europe than in the US for the last few years. All these facts present a market with attractive characteristics to start new businesses. Our main customers are going to be divided into operators of aircraft and MRO companies that will subcontract us. Regarding the operators of aircraft, they will be landing in the airport of Madrid- Barajas, so they will mainly be airlines and lease companies, but also particulars that can require our services. Having said that, we must precise that from a strategic point of view, our capabilities are going to be focused on the segment of fixed wing aircraft excluding fighters and trainers. We will make a sub-division regarding the size of the aircraft: even if our approach is focused on equipments and not on the plane as a whole, there is a direct link between the failure rate and the kind of equipments a plane has and its general payload. The operations planning will therefore, be deeply developed taking into account this fact. Doing so, we will be able to serve a much more diverse and wider client portfolio. Another important part of our customers portfolio is going to be other MRO companies that will have to subcontract us, taking into account the outsourcing tendency that exists in the niche market of parts and equipments maintenance. Although our operations are going to be based in Madrid-Barajas, our client base is international, that is why the number of commercial aircraft landing in this airport, is wide enough to cover our previsions of growth during the first years of activity. Taking into account this fact, we will have to adapt and personalize our commercial offer to each one of our customers, taking into account their particularities, needs and demands. The aircraft market is also international despite some regional interests; as a result the market of Maintenance, Repair and Overhaul services will have the same scoop. Since different companies and operators have the same aircraft, MRO companies like GREENJET can work for these companies with the same information about aircraft. Another important key point is the diversified offer. In this way, the risk can be shared between our different business units. In agreements with international clients to give them our services in Spain, the competition is not as direct as within national companies. AEROSPACE MBA 33

52 MARKETING PLAN Regarding the promotion, the type that this company requires is not an advertising public campaign: for the reason that the mass consumers are not our clients. The advantage is that our promotions and advertising will focus on aircraft operators. Therefore the marketing effort will be quite concentrated and it will be able to be more accurate matching our customer needs. Our marketing effort has to be extremely focused on gaining and attracting customers. We will emphasize in discovering which parameters are not working well in this industry, and why the delays are so important, making an extensive competition analysis. Once done, we will structure our business in order to feed the needs the market presents, and trying to serve the customers in a more efficient way, mainly regarding lead times, which is the main driver in this industry (as it has been seen in the strategy analysis and the strategic profile). Another point to analyze must be the legislation. Given the fact that our clients are national and international corporations, some might say that legal issues will be a problem, but for instance in Europe, the aeronautical regulations are common and issued by the European Aviation Safety Agency (EASA). There is also an international organism called International Civil Aviation Organization (ICAO), which issues the international laws for civil transport. This allows us to operate in a legally common framework, independently of the origin of our customers and the future destination of their airplanes. As indicated in the external analysis, GREENJET has a wide range of customers. With the segmentation process we are trying to congregate them in homogeneous group in terms of needs, behaviours and attitudes in order to be able to design value propositions adapted to the needs of each group of customers. Anyway, as we are talking about huge corporations, GREENJET will have the complete capabilities to present specific and shaped offers if the particular needs of a client require so. With this information we will evaluate which are the most profitable segments and we will focus our marketing strategies on them. There are two levels of segmentation, the strategic one and the tactical one. The strategic segmentation is the method we are focus on in this part, since it is used for strategic and organizational actions and valuates how to organize and assign the company efforts in the middle term. The information usually used for the strategic segmentation is based on external data, which allows understanding better the market. The tactic segmentation is principally used for commercial actions/ campaigns. The demand analysis that is going to be performed will follow two methodologies. At a first point, the main data available in the MRO market will be surveyed with the help of a marketing agency. Then, we will perform a DELPHI analysis. In the following paragraph, the main characteristics of the Delphi method are explained. The main objective of the DELPHI method is to reach a consensus based among a discussion between experts in the matter. It is performed as a reiterative process. A first questionnaire has to be answered by a panel of experts. Once the information sent by the experts is analyzed, a new questionnaire is performed, basing its new questions in the answers of the previous one. Finally, the responsible for the study will elaborate his conclusions taking into account the two interviewing rounds and thanks to a statistic analysis will be able to draw up a future tendency for the matter assessed. AEROSPACE MBA 34

53 MARKETING PLAN We are going to follow the scheme below to build the segmentation process: Figure 12 Segmentation Process A model for the analysis of the demand Once we have understood how the segmentation process is going to be focused, we will now define the model that will serve GREENJET to analyse the demand inside the MRO sector. One of the main characteristics of our market is that we will be facing a changing environment the marketing strategy and its starting point (demand elaboration) will be a continuous and iterative process performed through the years of GREENJET operation. Anyway, in this analysis we will be focusing on the first steps and assumptions that GREENJET will have to undertake during its first years of operation. Figure 13 Iterative strategy process As we are facing an industrial case we have to take into account that the industrial aeronautic demand has always three definitory parameters: it is always derived (and so difficult to forecast), often composed (it will be impossible to isolate the demand of a single component, because it will be linked with others in the framework of a bigger contract) and it is highly sensible to substitutive products. In this state of art, we will need to choose a basic scenario to make our predictions. Regarding the elaboration of the demand forecast, we will follow a hybrid system combining a statistical model and mathematical forecasts with the mentioned DELPHI method. AEROSPACE MBA 35

54 MARKETING PLAN In order to build up the model, we will examine three main characteristics of the market environment. Following a top down marketing approach, we will define the potential demand, the actual demand and the effectively served demand. This model will help us to assert which market situations we will be facing both in qualitative and quantitative terms. The main objective is to attain the customer and fulfil its needs, so this model will try to be the starting point to find out who our clients are going to be and which necessities they will have to fulfil. The potential demand The Potential Demand is the one that matches with the value proposition of GREENJET and is susceptible to subcontract the services offered by our company. In fact, this potential demand will be shaped by the cost cutting and outsourcing tendency and the lead time requirements of the customer. For the issues affecting our business, GREENJET potential demand will be composed by all the companies operating or working with medium sized aircraft inside the economic area defined around the airport of Madrid-Barajas. This will include airlines, but also leasing companies landing in the mentioned airport, maintenance companies offering their aircraft MRO services or part manufacturers in the area. In fact, having said that an airline is able to rotate its fleet regularly, all the middle size aircraft landing in Barajas airport will be susceptible to receive MRO services in Madrid. This supposes a whole bunch of airlines. The actual demand The actual demand is in fact the one that can be interested by our value proposition and willing to subcontract our services. At the end, this will be a percentage of the market two main groups of companies that will be determined in the following segmentation, as the most attractive ones. Those groups are MRO departments of traditional commercial airlines and Wet Lease companies. The served demand During the segmentation analysis, we will determine exactly which is going to be the effectively served demand, but as a first approach we can assert that the main customers for GREENJET are airline MRO departments (sometimes companies) and wet lease companies. In further analysis (mainly in the financial plan) figures supporting these arguments will be additionally explained. For a more quantitative and detailed description of this demand model, a sales forecast can be consulted at the Financial Plan chapter Developing a segmentation hypothesis The first step of the segmentation process is selecting two dimension axes that allow allocating the different segments that compose the market. The next figure shows the tasks to perform in order to get the segmentation hypothesis: AEROSPACE MBA 36

55 MARKETING PLAN Figure 14 Hypothesis segmentation process According to the External Analysis information, the potential customers of GREENJET will be evaluated taking into account the behaviours, attitudes and needs of every homogeneous group. Hereby there is a list of the different homogeneous groups of customers of MRO services that have been considered: Table 10 Potential customers of GREENJET POTENTIAL CUSTOMERS Traditional Commercial Airlines Maintenace Companies inside Commercial Airlines Groups MRO Companies Small Workshops Lease companies (Wet Lease, ACMI) Airline alliances (One World) APPLICATIONS Direct MRO Services Subcontracting Uncheduled MRO Activities Outsourcing Subcontracting Outsourcing Partnerships Sharing of Ressources Subcontracting Outsource Direct MRO Services Direct MRO Services Uncheduled MRO Activities Once that some potential customers have been named, a list of candidate axes will be generated in order to have references to prioritize the target customers. Several factors will be taken into account to classify the customers. Nevertheless, to better understand the segmentation process, we have to say that even if we are talking about clearly differentiated groups, some of the customers among the potential pool could have similar behaviours regarding the marketing mix variables (mainly in communication and placement issues). This is due to unique characteristics of the MRO market. Anyway, this will be further explained in the marketing mix analysis. The potential market, is large and heterogeneous so the first step, in order to define exactly our clients, is to divide it into smaller groups that can be reached more efficiently and effectively with products and services matching their common needs. First of all, the axes that will be used to segment the potential market must be determined. In order to do so, in the following paragraphs, a brainstorming will be carried out. As it has been said, our market is international and focused on aircraft operators (traditional airlines or wet lease companies in most cases), so the analysis will be focused on them because they are the most important customers of this initiative. In fact, GREENJET could help those customers in different moments of the aircraft life cycle, for spare parts or maintenance services. AEROSPACE MBA 37

56 MARKETING PLAN Here there is a brief description of how the process will be performed. There are some constraints regarding the axes in order to make our segmentation effective. They should be measurable, accessible, substantial, differentiable and actionable. By measurable we mean the segment resulting will have to be easy to quantify using a parameter. The segment will also need to be accessible: if it cannot be reached with our product, services and promotions, it is not worthy to target it. Regarding the substantiality and differentiability, the segments should be larger enough to be profitable, but also conceptually distinguishable to respond to different marketing strategies. Finally, the segmentation will have to be actionable according to the available economic resources. The following paragraphs present a slide view of which has been the Axes Brainstorming General axes brainstorming There is hereby a classification of the different potential customers along with its principal characteristics of demographic, behaviours and needs, summed up in the following table. Table 11 Principal characteristics of the potential customers DEMOGRAPHIC USES AND BEHAVIORS ATTITUDES AND NEEDS Who is my customer? How does the customer behave? What does the customer think? -Nationality -Usage rate / Occupation of the planes -Attitude toward risk sharing/ Outsourcing Developed/Emerging countries -Leisure or Private -Needs of new Aircraft European/Non European -Commercial -Critic factors of decision (worthiness) Spain and closer countries / further countries -Military: -Legislation -Geographical location -Type of Company -Environmental and public health concern Airport / Country of Operations -MRO -Profitability -Type of Company -Airline MRO -Customization Public / Private company -Airline / Operator -Price Commercial / Cargo -Type of Aircraft -Quality Military -Size of Aircraft -Safety and Security -Company size -Civil/Military design -Competition Number of Aircraft Managed / Flown -Power Plant -External image Incomes / Revenues -Buying Behaviour -Willingness to use new suppliers -Maturity of the company -New / Second Hand Aircrafts -Innovation -Market growth/share/occupation -Frequency of purchases -Type of plane Managed/ Flown -Frequency of Failure Model -Payment method Size / Payload -Operating area: -Airports / Zones Deserved -Loyalty status: -Level of resources Segmentation hypothesis definition Within all the possible axes of the chart, it is the moment to choose which ones are going to be present in our priorization strategy. The ones that are going to be used to elaborate the segmentation hypothesis are explained in the following paragraphs Size of the aircraft As we have seen in the previous analysis, the size of the aircraft is a very good indicator of how GREENJET should measure its business. This parameter is directly related AEROSPACE MBA 38

57 MARKETING PLAN with the business potential of the market. As the MRO market for components and equipments is strongly divided between wide fuselage and narrow fuselage planes, taking the size of the aircrafts as a segmentation parameter, will allow GREENJET to focus better on a specific customer with specific needs for services. Another issue to be taken into account is that the size of the aircraft is directly related with the equipments the plane has, and so, has a straight impact in the dimensioning of the facilities needed for operation. As a conclusion, we might select the size of the aircraft as the most important parameter inside GREENJET s market segmentation. The intervals used are qualitative going from small to large size, because, as we have said, the sizing of the equipments usually goes in the same direction Outsourcing tendency The outsourcing tendency is a constant inside the MRO market and will be deeply undertaken by the majority of companies in a near future. Nevertheless today not all the actors in the industry are taking decisions regarding outsourcing. In fact, two main characteristics drive this tendency: the necessity to focus on core business and the cost structure of a company. Outsourcing is always about cost, but today not all the companies have defined their strategies for core business and cost structure. So this parameter will serve to make a much accurate approach when defining the market segments. The following types of companies are adopting this tendency: Airlines and MRO companies inside commercial airlines. Wet lease companies assuming the maintenance of their fleets. Regarding the quantification, this variable goes from a low tendency (considering the actual business as core and cost efficient and thus willing to subcontract only a small part of it) to a high one (high willingness to subcontract the component MRO, mainly because explained by the need to leverage the cost structure and core business relation) Type of company As we saw in the External Analysis and its Conclusions, GREENJET will be approaching five kinds of companies that will have to be marketed separately, due to its different MRO needs. All of them are going to be explained in this paragraph. Airlines or Operators of Aircraft (commercial and cargo) The operators of aircraft are the first step of the extended value chain of the market, acting as the final customers of the whole MRO service organization. In most cases, it is those companies who take the decisions regarding the MRO assistance they want to receive, in which terms, and with which frequency, always in the framework of the IATA or EASA regulations. Regarding our value proposition and our business definition, GREENJET has taken the decision not to approach these customers directly, but do it through their maintenance services (sometimes huge companies), at least at the beginning the company operations. AEROSPACE MBA 39

58 MARKETING PLAN In fact, the business inside a commercial airline group is often split in the following manner: a company responsible for the aircraft operation, commonly known as the airline and a company managing and procuring the maintenance services, the MRO service provider. As GREENJET is a new business, limited by some environmental and funding circumstances, the managerial board believes that the best strategy to penetrate the market is to focus on outsourcers and the MRO service providers inside global airline groups, and not directly approaching the commercial airlines. There is a slight difference, because the airline will only be responsible for its aircraft, while the MRO company inside the group could have more aircraft to maintain than only the ones from its matrix. Anyway, the commercial airlines will be the final customers in the value chain, so the marketing approach will take into account this fact. Another group inside the aircraft operators will be the newly created low cost airlines. This group is neither going to be approached individually, because low cost companies often have different concerns about price and frequency of their aircraft maintenance. So, in a first stage, they will not be considered as a source of profit. Low cost carriers The entrance of low cost operators in the air traffic market has supposed an inflexion point that has contributed to create the previously cost cutting environment that has been already explained. Although it has revolutionized the competitions schemes between the principal actors, regarding the MRO industry, it is not interesting to approach those customers due to various reasons. The maintenance rules that are followed by these companies are completely different from the traditional ones. In fact, low cost carriers extend to the maximum the time between reparation and apply different methodologies, legal forms and cost structures in order to receive MRO services. Besides the fact that those operators outsource a huge part of their maintenance (aircraft and component) they do not suppose, for the moment, the most important part of the market. Moreover, low cost carriers have already outsourced their maintenance and can be considered as captive customers of our competition unless a new cost approach is presented to them. In fact, to tackle these customers, a new value proposition and marketing mix should be performed. As GREENJET will initially not be capable to reach all the market (due to its initial resources), a decision has been taken, and the strategy will be to approach in a first moment the big commercial companies. Having said that, and taking into account that it could probably suppose an interesting pool of customers (even if not the main ones), in a near future a portion of the marketing efforts could be refocused into these actors, but we will not consider them as preferred clients for the moment. MRO company inside an airline group AEROSPACE MBA 40

59 MARKETING PLAN As we have seen, two kinds of MRO activities are present in the market: services for the whole aircraft and more specific services focused on equipments and isolated components and parts. These issues will be developed in further analysis, but GREENJET will exclusively be present in the components and equipments sector. In fact, the market opportunity is available for component MRO and not for aircraft MRO. As we have already mentioned, inside potential demand, a specific mention has to be done regarding the corporations who also have MRO departments and are able to provide a first level of MRO services by themselves. These companies have to be approached separately, because they are willing to offer packages of work regarding the services that are focused on equipments, which are not considered as core competences by them. As a result of this reality, the market segmentation has to take them into account. MRO centers and outsourcers This kind of companies conform the network of MRO centers and small workshops that are deployed over the main Spanish hubs and airports. They are an intermediate step between the final clients (airlines) and the companies that perform physically the works. These companies will probably suppose a big customer base. But we will validate this hypothesis during the segmentation process. Leasing company The pool of leasing companies offering services to airlines is huge, but for business purposes, there is a category inside this group that seems very interesting for GREENJET: operative lease companies. In most of the cases, those businesses offer ACMI (Aircraft, Maintenance, Crew and Insurance) contracts to the airlines. This legal form, commonly known as wet lease, is getting more and more common today. Under it, the wet lease company is responsible for the mentioned parameters in front of the airline, implying that the maintenance decisions regarding the aircraft and its components are taken by the leasing company. As a consequence, it is a potential client for GREENJET. In this case, the lessor usually acts as an intermediate and always outsources the maintenance services to specialist companies, so the market opportunity is huge in that case. Airline alliances The global air transportation market has been suffering a decrease in its incomes since the beginning of the twenty first century. This fact leaded the main actors to join others with similar interests and create groups of alliances. The alliances system was created in order to remain competitive inside a cost cutting environment and trying to avoid competence between members inside the natural market of each one. Regarding the customer base, it will be easier to approach the members of an alliance once a contract has been signed with one of its members. At this respect, we can say that having Iberia as a client (which is present in Oneworld alliance) opens the door to a much wider customer portfolio, composed by the companies inside the alliance. The customer acquisition process will be the same, making a first move towards the maintenance service or company belonging to the commercial group. AEROSPACE MBA 41

60 MARKETING PLAN At this regard, we will firstly try to approach one of the alliance associates (it this case Iberia) and then extend our value proposition to match the needs of the increasing customers Segmentation hypothesis Once the axes have been selected, and validated by the market research, the potential market has been divided into groups or segments having the same characteristics regarding MRO needs. As we have chosen three main parameters the segmentation will cross the type of company in function of the outsourcing tendency and the size of the plane. Figure 15 Segmentation hypothesis Inside the commercial operators are included both cargo and passenger aircraft. Let s now explain some particularities of the segments selected, starting the classification by airplane size/payload. As GREENJET is a new venture, its resources will be in some way limited, so it would not be able to approach the whole market represented in the segmentation. Taking into account this framework, we will tackle as prime and preferred customers the companies with a huge need of subcontracting and operating medium sized aircraft. This segment is mainly represented by airline MRO services, Wet Lease companies and airline alliances (regarding its maintenance services). Airline MRO operating medium size aircraft This is going to be our main customer, from which the gross of our revenues is going to come in the first stages of GREENJET operations. As it has been explained, this kind of companies complies perfectly with the main criteria of the segmentation: they work with medium sized aircraft and have an urgent necessity to outsource some of their non-core capabilities. As an example we can enounce Iberia Maintenance, the company actually performing the aircraft and component MRO for the majority of the Iberia fleet (the rest is in the hands of the leasing companies) and additional MRO revisions for a considerable part of the aircraft landing in the Spanish civil airports, markets in which GREENJET has the aspiration to be present. Iberia, as we will see, has an urgent need of restructuring its activities to focus in its core: aircraft maintenance. AEROSPACE MBA 42

61 MARKETING PLAN Additional possible clients could be Lufthansa Technique or Air France maintenance services, just to enounce a few of them. Wet Lease Companies (ACMI Services) As we have said, the leasing companies that are interesting for our business purposes are the ones offering operative lease, and specifically ACMI contracts. In fact, those wet lease companies have the final responsibility of the aircraft and component maintenance, and so, a differentiated marketing mix should be performed to tackle them. Airline alliances (One World) There are three existing commercial alliances inside the air transportation industry: Oneworld, Star Alliance and Sky Team. All those three count with Spanish companies among its members: Iberia, Spanair and Air Europa respectively. This can be seen as an enormous opportunity to have access to a huge market supposing more than 70% of the world transportation industry. As a consequence of the alliances system and its deep implications, during the last five years, member airlines have been developing common specifications across their engineering and maintenance activities, reducing costs through bulk buying and parts sharing. Regarding GREENJET s business this supposes a huge commercial opportunity, because the MRO services of the airlines present in the three existing alliances are beginning to be shared. In fact, approaching one single relevant customer (as Iberia in the case of Oneworld), will help to get closer to the others. This would put our company in a magnificent position to increase its customer s portfolio with a not-so-high commercial effort because we will need to fulfil similar needs and a similar value proposal could be presented to the rest of the alliance members. Besides this apparently perfect situation, GREENJET management team does not forget that it is a new company with limited starting resources, and that things have to go step by step. Following this philosophy, the first commercial priority will be to access the MRO services of the Spanish members of the alliances (in priority Iberia will be the first). An overview of the alliance system is given in the following table. Table 12 Alliance system Alliance System Star Alliance SkyTeam Oneworld Rest of Industry Members Major non-alligned carriers Year of founding Passengers per year (Millions) Number of destinations Revenue (Billion US$) Market share AEROSPACE MBA 43

62 MARKETING PLAN Market research In order to validate the segmentation hypothesis, it is necessary to develop a market research. This will consist in the collection, analysis and reporting of data and information relevant to the marketing situation that the company is facing. The market research performed here will be basically based in a qualitative and in a quantitative study. With the company at full performance, these studies should be done by professional marketing consultancies, but as GREENJET is a new company, and has to take into account the funding issue, the company itself will develop the first stages of this study with the only help of a marketing agency to elaborate and perform some surveys. Anyway, a marketing consultancy will be chosen in further steps of development and it will mainly be responsible for the assessment in the following fields: Market studies and surveys Product and service communication Promotional events Price strategies Sales force configuration Definition of future market opportunities Evolution of the market and existing customers needs The marketing agency chosen might be Forrester Research, a widely known marketing consultancy that has a department specialised in the aeronautical sector. Its motto is the following: Qualitative research Figure 16 Motto of the marketing agency The approach regarding the quantitative research will be based on two approaches: one with direct surveys to the potential customers and another with the already explained DELPHI method Surveys Regarding the surveys and questionnaires involving the previously identified potential customers, a sampling plan will be developed: - Sampling unit: Who has to be surveyed? A priori, it is not easy to determine which the target customers in such a complicated market are. In order to solve that issue, a sample of each group of customers will be surveyed. AEROSPACE MBA 44

63 MARKETING PLAN - Accurate Sampled size: How many companies/people should be surveyed? It should depend on the type of customer, but samples of less than 1% of the population can often provide good reliability for industrial projects. - Sampling procedure: How should the respondents be chosen? Regarding this issue, we should determine who is going to be answering the survey. It is not the same to take an employee at the production line, an intermediate manager or the CEO of the company. They won t be able to deliver the same answers and neither they will be equally accessible. The survey will be performed as it is shown in the next table: Table 13 Survey performed Segment Potential customers Services Sample size Sampling procedure Direct MRO Services Purchases Iberia, Spanair, Air Europa Subcontracting 3 Department Uncheduled MRO Activities Outsourcing Iberia Maintenance, Purchases Exchange 2 Lufthansa Technique Department Subcontracting Outsourcing AEG, CESA, Corjet, Semasa Purchases Partnerships 4 Ingeniería Department Sharing of Ressources Outsource Purchases Subcontracting 3 Manager Sharing of Ressources Outsource Purchases Air Charter International 1 Direct MRO Services Department Direct MRO Services Oneworld, Star Alliance, Sky Purchases Exchange 3 Team Department Uncheduled MRO Activities Traditional Commercial Airlines Maintenace Companies inside Commercial Airlines Groups MRO Companies Small Workshops Lease companies (Wet Lease, ACMI) Airline alliances (One World) As a first step, a short interview will be performed with the potential customer in order to provide general information about the product and the services offered. Once the customer has been initially contacted, a questionnaire will be sent to him, trying to focus in the most relevant aspects needed to decide. The formulation of the survey will be focused to match the structure presented in the following graph: AEROSPACE MBA 45

64 MARKETING PLAN Figure 17 Fomulation of the survey A sample of how the questions should be answered is given in the following paragraphs: Do you think the general market lead time for MRO services matches your company needs? And the global market needs? Is your company satisfied with the actual market Lead Time regarding the main components in avionics and hydraulics that you are managing for your A320 B737 aircraft? Is your current MRO services provider fulfilling systematically with the compromised lead time? Is your current MRO services provider fulfilling systematically with the lead time you will desire in order to match your needs and be more competitive? Is your current MRO services provider fulfilling systematically with the compromised quality? Is your current MRO services provider fulfilling systematically with the quality you will desire in order to match your needs and be more competitive? How critical are these factors for your operational service? o Components/Equipments Lead Time o Supply chain management o Cost of the service Which of the following avionic and mechanic components will you be willing to outsource? [A list of components should be endorsed to this question] Would you be keen on subcontracting a third company to help you achieve your goals during peaks of work? AEROSPACE MBA 46

65 MARKETING PLAN DELPHI method Regarding the DELPHI method, the main principles have already been explained. According to the marketing needs, a board of experts has been elaborated. The following table presents, as an example, the main ones and its fields of competence. Table 14 Example of board of experts, fields of competences Expert Field of Knowledge Position Company #1 Airport Management Marketing and strategy vice president Iberia #2 Airline Management Head of planning department Iberia Maintenance #3 Component MRO Component MRO workshop director AEG #4 Aircraft MRO Aircraft MRO center director Airbus #5 New Business in MRO Air transport consultant ICAO The questionnaires will be elaborated together with the marketing agency, but the main topics assessed will be the following: Dimensioning Lead time tendency Cost cutting tendencies Future demand Fleet growth estimations Quantitative research To complete the qualitative research that will be performed following the steps described in the previous paragraph, we will need some objective data to help us elaborate our conclusions and forecasts. In order to obtain this information, we will need to perform a quantitative analysis, in which we will use different sources to try to build demand estimations for the years included in the provisional statements. As a first step, we will then search through the different resources available in the market. The marketing agency will help us in this duty, but one of the most complete and reliable sources of information will be the aircraft manufacturers reports. We will follow the next hypothesis to analyze the available data: If there are more aircraft flying, there will be someone who will have to maintain them, if not, the MRO business will decrease As the previous analysis are letting us foresee that we will probably have to concentrate on single aisle aircraft and taking into account that it seems that during the first years of operation our clients will mainly come from Europe, in order to elaborate the first AEROSPACE MBA 47

66 MARKETING PLAN studies we will use the available data on the Airbus publication Global Market Forecast for the period As a practical exercise, we will base our conclusions in this document. The main topics that will be assessed following a top-down approach are the following: Major tendencies in air traffic increase Aircraft deliveries and replacements European market in general and Spanish market in particular Global market tendencies and liberalization trends All these matters are susceptible to affect directly the MRO industry and so will have to be examined with attention. Just as an example, some graphs and figures coming from this report are explained in the following paragraphs Major tendencies in air traffic increase First of all, we will start our analysis by explaining some major trends inside the airline industry that could help us to forecast which is going to be its future movements. We do not have to forget that our main objective will be to forecast the MRO services demand and that this one will always be linked to the air traffic industry evolution. As a first point we can say that during the last decades the airline industry has proved a strong resilience to the various economical crisis suffered in the world economy. This fact can lead us to assert that it will be the same with the actual one. Moreover, after a world crisis the increase in the air travel market as been higher than before the inflexion point. The following chart exposes the evolution of the world annual traffic (in revenues per kilometer) since Figure 18 Evolution of the world annual traffic AEROSPACE MBA 48

67 MARKETING PLAN Regarding the conclusions elaborated in the Global Market Forecast the International Civil Aviation Organization and Airbus experts assure that the air traffic demand will double in the next fifteen years. The next figure presents this argument in a graphical way, taking into account the trend during the last forty years. Figure 19 Air traffic forecasted evolution Moreover, the air traffic demand is clearly related to the GDP growth of a country. That can suggest that the world GDP recovery that we are witnessing today will directly suppose an increase in the studied parameter. Talking in European terms, a GDP increase will suppose a 1% increase in the air travel demand. Figure 20 Air traffic elasticity in function of GDP and air fares As a conclusion, the global consensus for the air traffic evolution is that we will be attending, during the following years, an increase in the number of air travel operations. This fact presents a good opportunity for GREENJET, in order to increase its potential customers from a European, but also international point of view Aircraft deliveries and replacements Let s now examine how the increase in the air traffic will lead to a similar raise in the number of aircraft needed in order to fulfil the demand. Airbus and ICAO experts predict that around aircraft per year (i.e. 3,1 trillion US$) will be needed to match with the demand forecasted. This includes around single aisle aircraft, supposing billion AEROSPACE MBA 49

68 MARKETING PLAN dollars in sales for the manufacturers. Taking into account that the total cost of the maintenance of a single aircraft is often at least two times its cost, the situation is clearly favourable for GREENJET purposes. In fact, the global market for the world MRO in 2017 is expected to reach 61 billion dollar. The component and equipments MRO will represent the highest annual growth rate reaching 13,3 billion dollars in the mentioned year and 33% of the whole aircraft life cycle cost (during its operation). Figure 21 Aircraft Demand Forecast (units and US $) for the period A more complete explanation taking into account the replaced aircraft, the recycled and the new ones is presented in the following diagram. Figure 22 Growth of single aisle fleet over years Taking into account all the mentioned charts and explanations, the global market will be hugely increasing its actual figures. AEROSPACE MBA 50

69 MARKETING PLAN At this point, we have already have seen how the air traffic demand will directly influence the aircraft demand and so the global MRO industry in a global context. In the following paragraphs we will determine how the European market will be affected and which will be the main tendencies in the market European market Regarding the air traffic demand, in the next twenty years the air traffic flow inside Western Europe (which is GREENJET natural market) will be the third in the world. Moreover the demand for single aisle aircraft will attain 27% of the total, reaching almos aircraft in Figure 23 Traffic flows in 2028 Table 15 Demand for single aisle passengers aircraft Europe Total % of World deliveries % Taking into account our initial premise, with this data we can conclude that the particular analysis for the European continent also reveals profitable forecasts for the MRO market Market trends In this paragraph, we will briefly try to make a macroeconomic approach about how the evolution of the main regulations and agreements between countries and airlines can affect the global airline industry and indeed the particular MRO market. AEROSPACE MBA 51

70 MARKETING PLAN As we have said, the World economic and financial crisis has supposed a downturn in the global revenues of the whole industry. Anyway, in 2010 a recovery of the world GDP is expected in general. For the European case, we have to distinguish two zones: western Europe will reach between 2,5% and 3% in the next decade and Eastern Europe will even go further, attaining a 4,5% GDP growth in These figures will impact directly the air traffic industry and subsequently the MRO sector. Greater competition is expected in this situation. Regarding the legal and regulatory point of view, the EU-US Open Sky Treaty is today replacing the already existing bi-lateral agreements between European countries and the American power. This new legal framework develops the liberalization of the air traffic industry, allowing EU airlines to fly from any European nation to any US city and allows American airlines to fly within Europe. It also avoids restrictions on international routes between the two continents and on routes beyond them. In 2007, Heathrow accounted for a fifth of all trans-atlantic seats, and with this regulation, the new traffic flows will be shared by the main European airports, such as Madrid-Barajas. The agreement brings opportunities for enhanced co-operation in areas such as safety, environment, competition and maintenance, with a second stage already envisaged, which would bring further liberalization of traffic rights and the possibility of foreign investment. This situation is clearly favorable to GREENJET strategy, and will increase in a short term its possibilities to approach a much higher pool of potential customers, that can be tackled through the airlines alliance system as it has been explained Market research conclusions Once the qualitative and quantitative analyses have been performed, it is time now to draw some conclusions. In order to be brief in the description, we will enumerate the main opportunities that the market is presenting to us and why we should consider the future of GREENJET as a perfect business. As a preliminary step we have to say that, according to our research, there is a clear link between the air transportation industry and the MRO market, during the last forty years both sectors have been behaving in the same manner. Another preliminary deduction is that single-aisle aircraft are more abundant than double-aisle aircraft, so the overall number of components they contain is greater, and then the global failure rate is greater too. The three main conclusions that we can draw from the market research are the followings: World economic crisis lead to a cost cutting environment and outsourcing We have seen that, since the various economic and social crisis during the first decade of the twenty-first century, the airline industry has been suffering a decrease in its revenues. The air transportation industry has been forced to impose a cost cutting environment between the MRO service providers. This situation has lead to an urgent requirement for the AEROSPACE MBA 52

71 MARKETING PLAN aircraft maintenance companies: the necessity to focus on its aircraft MRO core activities and outsource the remaining capabilities that mainly are concentrated around the component MRO subsector. This outsourcing trend is today a reality and all the major MRO services from the main commercial airlines are adopting this behavior. In the case of Iberia and its maintenance services, the company is taking the decision to outsource some of its capabilities regarding avionics and mechanics for its single aisle aircraft (the most used, so the ones suffering most failures). As the process will be stepped, we can assert that new capabilities and new sizes will soon be outsourced. At this point we have to say this situation matches perfectly with the strategy developed by GREENJET. Market resilience to economic cycles During the last forty years, the airline industry has proved to be perfectly able to sort out the various crises and to reemerge stronger than before. In fact, there is a direct relation between the GDP growth and the air traffic demand and subsequently the MRO business. This trend allows us to foresee that when the global economy will start to recover, MRO companies will have huge opportunities to make business in both global and local contexts. The main fact to consider is that during the next twenty years, Europe will be the third market for air traffic in the world. Global situation and global framework of activity In this point, the industry is facing two major tendencies. The first one is that inside a globalization context, the major international airlines have been forced to perform some alliances in order to remain competitive in their local and global markets. These alliances are lead the companies to have similar policies regarding some aspects of the aircraft operation and life cycle. The most interesting for GREENJET purposes is the maintenance common policies adopted by the three main alliances: Oneworld, Star Alliance and Sky Team. The other tendency affects some legal and regulatory aspects. The air traffic liberalization is a major tendency today and permits companies from different countries and continents to operate in the whole market. The once forbidden cabotage is starting today to be allowed and the restrictions on international routes between two continents are not valid any more. These two facts will increase the landings in Europe (and in Barajas) of foreign airlines and will permit MRO companies to access a much wider pool of potential customers. Once a customer has been retained, the alliance system also gives a quick access to the MRO services of the rest of the members, increasing the potential demand exponentially. In this context, there will surely be an increase in the competition between the main airlines in the world and now, not only cost driving decisions will be taken. In order to remain competitive and cost effective, the need to have the maximum number of aircraft flying will be a must. At this point, the delivery time for MRO services enters into the game: the lead time for component MRO will surely affect this issue and will have to be as short as possible. As a conclusion for this market analysis we have to say that even though the forecasted situation appears to be advantageous, we will have to take into account that this global process will also increase the competition inside the MRO industry. The easiness to AEROSPACE MBA 53

72 MARKETING PLAN catch new customers and increase the potential demand will also be used by our competitors inside the component sector. That is why the urgency to enter the market is huge: we will need to be prepared to catch this upcoming demand. It will be imperative for a newly-coined company like GREENJET to perform a quick growth in order to take a sufficient size to be able to compete in the near future Selection of the target segments Segments selected Having performed the market analysis, our main and preferred customers will have to: Present a high outsourcing tendency for components (have an adequate cost structure/outsourcing tendency ratio) Operate single aisle aircraft Belong to an airline alliance Definitely be an aircraft MRO service inside a commercial airline Taking into account these conditions, the most valuable customers will be the traditional airlines having maintenance departments or companies needing to outsource part (or the whole) of their component MRO duties. The attractiveness of these customers is huge because it will allow us to access a much bigger pool of potential customers Once the first customers have been retained, we will tackle the rest of the alliance members that will surely have similar characteristics regarding maintenance services. In a second round we will also tackle other MRO service providers, not belonging to airline groups, but having the same need to outsource and concentrate on its aircraft MRO core capacities. In a third step and when the company will have already a strong background, we will also try to approach low cost carriers (remember they will suppose a relevant part of the market). For that, the value proposition will have to be reformulated Competitive fit In this analysis, we will briefly sum up the main characteristics regarding the intensity of the competition and the capabilities to compete that GREENJET will need to enter the component MRO industry. In order to simplify the study, we will mainly sum up the main requirements needed to be present in the market and the main internal features a company needs to have (more related with organisational issues). As we have seen, the component MRO market is requiring three main parameters Quality standards Cost competitiveness AEROSPACE MBA 54

73 MARKETING PLAN Delivery time competitiveness Regarding the internal capabilities, those will be mainly qualitatively assessed because it will be difficult to foresee them, but in general terms we can define the followings: Relevant EASA capabilities Relevant pool of clients (allowing to open the door to new ones when the liberalization process will be completed) Internal lead times and procedures (including exchange) The main competitors that we will be facing are the following: SEMASA Ingeniería Semasa Ingeniería is a Spanish company mainly permorming non destructive tests, aircraft components maintenance and equipments calibration, founded in AEG Europe AEG is a multinational MRO from the United States, in Europe they are mainly focused on the military market but also offer some services to the civil industry. Anyhow, its branch is relatively new in the market (2 years ago). CORJET Although Corjet is one of the biggest aircraft MRO service providers of Spain, they also perform some component MRO work. They have enormous financial resources and could try in a future to take advantage of the mentioned opportunities that the market is about to present CESA CESA was born twenty years ago, coming from the previous accessories department of the former CASA. Although they are mainly an engineering company they perform some component MRO (mainly for the military but also in civil) and could be seen as possible future competitors Once we have defined the main characteristics and the main competitors, the following table sums up the performed assessment: AEROSPACE MBA 55

74 MARKETING PLAN Table 16 Performed assesment Intensity & competitive fit CAPABILITIES SEMASA INGENIERÍA AEG CORJET CESA Quality competitiveness High High High High Market requirements Cost competitiveness Good Good Good Good Delivery time competitiveness Medium Poor Poor Poor Relevant EASA capabilities Yes Military Yes Military Relevant pool of clients Yes Yes but mainly aircraft Yes but aircraft MRO Yes Lead time Medium Bad Good Bad Manufacturing means Good Medium Excellent Medium Internal requirements Supply Chain Management Medium Poor Good Poor Location Preferent Away from the customer Away from the customer Preferent IT system Good Poor Good Good Human Ressources Good Medium Excellent Medium Financial ressources Medium High High Medium Brand recognition High Medium High High Comments Currently we will not compete in Direct competitor although Specialised in the military industry, components with them, because Specialised in the not only specialised in although they have some civil they are specialised in Aircraft military industry component MRO capabilities MRO As a conclusion of this brief analysis, we have to say that we will be facing a highly competitive environment. The main barriers we will have to overcome will be those related with brand recognition and cost competitiveness. Although, with an adequate list of capabilities and trying to start the operations with some components not covered by those companies, GREENJET has many possibilities to successfully enter the market. Although the main reasons supporting the lead time reduction will be explained in the operations plan, here are some hints explaining it and that will be transmitted to the customers: Flexibility through small size Process reengineering as a golden rule in order to achieve complete agility in the repair procedures Purchases management Human resources management Lean manufacturing techniques Client compromise And more generally: Our offers match perfectly the current needs of the customer 4.3 Marketing mix In the next sections the marketing mix used for the training centre value proposition will be thoroughly explained with sections dedicated to each of its pillars: Product Offer Pricing AEROSPACE MBA 56

75 MARKETING PLAN Placement (distribution and sales management) Promotion Figure 24 Marketing mix scheme Product management Customized services Before developing the main product analysis and explaining each service particularly, let us say a word about how the product structure matches perfectly with the current market needs. The market-product framing is clearly defined in our value proposition, so the services offering by GREENJET will have to be in accordance with this duality. At the beginning of operation, our company will sign a contract with Iberia Maintenance, but after the first stages of implementation a specific value proposition will have to be offered to the new clients. This will include new component portfolios, specific for each customer, and a service approach point of view. As seen in previous analysis, the MRO market is nowadays shaped by the urgent necessity of the MRO operators to reduce costs. This fact is translated into an outsourcing tendency that leads the actors to concentrate on their core capacities and try to subcontract processes and business structures that they consider non value adding. Another reason for the outsourcing tendency is the average industry delivery time. As seen in the external analysis and in the market study, the airline industry is facing many problems derived from the poor values in lead time presented by the main aircraft MRO providers. Going backwards in the sector value chain, it has been easily determined that the problem is mainly anchored in the processes inside the component MRO industry. In this context, the main aircraft maintenance service providers are trying to get rid of some of their businesses regarding components reparation. That is why GREENJET is offering services (and not only products) taking into account the actual market needs. The product management structure will then present a highly customized product adapted to the customers needs and the industry structure. As we are in a new rising AEROSPACE MBA 57

76 MARKETING PLAN company, the present product analysis will focus mainly in the needs and characteristics of the companies that are going to be our first clients. As a reminder, we have already concluded that Iberia Maintenance is trying to get rid of some of its capabilities in component MRO in order to release some of its resources to focus on the whole aircraft maintenance. Then, in the pilot contract with Iberia Maintenance, GREENJET will be offering a complete range of MRO services, regarding Avionics and Hydraulics, which are the capabilities that the Spanish airline want to leave. The first products and services we will be offering are summed up in the following table. Table 17 Capabilities offered by GREENJET initially ATA Equipment Manufacturer 24 Battery Saft Advanced and Industrial (France) 24 TR TFE Techniques et fabrication 29 Hydro Pump Parker Hannifin Gmbh (Germany) 29 Accumulator Parker Hannifin Gmbh (Germany) 29 Electric Pump Parker Hannifin Gmbh (Germany) 31 DisplayUnit Thales 34 AOA Sensor Thales 34 W.Rad CU Rockwell collins The proposal for new customers will anyway maintain the same structure, modifying only the offered capabilities in order to adapt them to the client specifications. As a conclusion we can assert that GREENJET is going to be offering to the market services, and not only products, perfectly matched with the customers needs, regarding their cost structure, lead time concerns and products required. This is what in marketing studies is commonly known as product-market framing Capabilities and components Once the analysis performed in the previous paragraph has been understood, we can now explain the main reasons to justify the pilot contract that GREENJET will be performing with Iberia Maintenance. The original cause is the need of the Spanish airline to release some of its capabilities in avionics and hydraulics (always talking about components) because they consider they can be better managed outside. In fact, Iberia is beginning to consider that the component MRO might not be inside the core capabilities they want to have. All of this is of course shaped by the omni-present cost cutting scenario. The components that are affected by this policy are simple and non difficult-to-repair parts that can be delivered in a much shorter lead time with a smaller process and organizational structure. As an example, Iberia, a giant in the MRO industry, faces sometimes huge problems to repair and put in service a small motopump for a landing gear. As it has been explained, this is mainly due to the bureaucratic processes, the amount of work they have, and the organizational structure of the company (including the labor unions power). AEROSPACE MBA 58

77 MARKETING PLAN Regarding the capabilities and components offered for this first contract, GREENJET will be specialized in a set of capabilities belonging to the ATAs related with Avionics and Hydraulics. This has been determined by the extensive market study that revealed the most profitable and adequate market segments for a startup company in these conditions. Since it has these capabilities, it is serving a list of components related with them. This list of components might be enlarged in a near future, if the pilot contract successes in the shortmedium time and GREENJET has access to other customers such as those included in the Oneworld Alliance. In this case, the list of capabilities might also have to be enlarged. The first contract will mainly have two different parts: at the beginning, GREENJET will mainly be acting as a subcontracted firm in Iberia installations, once our technicians get used to the working methodologies of Iberia, they will move to our facilities and start operating from there. The following table sums up the first components that we are going to be repairing in our first in-house services. Table 18 Classification of the component offered by GREENJET INITIAL COMPONENT OFFER Avionics Hydraulics Batteries Hydraulic Moto Pumps Altitude Displays Accummulators TR Electric Pump AOA s WRCU s Another main reason to choose these components among the whole amount that Iberia wants to outsource, is that those are simple parts, easy to repair and to remove from a plane. This will allow GREENJET, just by performing a simple re-engineering process, to reduce their process lead time and thus, the global delivery time perceived by the customer. The last cause to choose this starting point is the period needed to obtain the main MRO capabilities granted by the authorities. This time can go up to 18 months, so while working with Iberia in its hangars, and then in GREENJETs s, we can assure a work load without having to wait for the certifications Ex-House initial and future services Due to the fact that GREENJET is a starting company and needs to get certain certifications in order to work as a MRO independent company, it is necessary to wait 14 months. Thus, in order to earn profits until we get all the certifications, our technicians will work for Iberia Company in its hangar providing our services. This scheme will last until the eleventh month of operation. Up to that day, we start offering MRO services in our facilities. The starting period in our new facilities will last up to the eighteenth month of operation. During these months we will still be in the pilot contract with Iberia, since we will not yet have all the certifications. Nevertheless, we will be able to offer the exchange and the repair service. AEROSPACE MBA 59

78 MARKETING PLAN In a service context, the ex-house operations are here presented as a differentiated service due to the fact that it could be attractive to some customers having excessive production during short periods of time. In fact, this way of working during the first stage of the pilot contract, is somehow a form of subcontracting and could be set up again during our clients peaks of production. As GREENJET will be offering more and more capabilities through time, we will be able to use this way of contracting with the newly come customers, after Iberia, as a way of attracting and retaining by offering them in-house services In House services GREENJET will start offering its two principal services at the eleventh month of operation. Those are the component MRO counting on a lead time and the exchange process which has an immediate response. Depending on the urgency required by the customer and the access to component stock of the pools and brokers that the company has at that moment, one or another service will be offered. The in-house services will be offering full time capacity to repair the list of components and capabilities that we are authorized. The value proposal here is clear: deliver the parts in the compromised lead time and with the required quality. As it will be explained further in the operations plan, the process carried out for the repair and exchange of parts is determined following a Lean Manufacturing methodology. This fact, added to an excellent human resources and manufacturing processes management leads to a global delivery time reduction of 30% in comparison with the average in the market Exchange services and lead time commitment It is one of the two services that GREENJET will offer. Not all the companies give this kind of service so in this point, it is a clear differentiation from the existing competitors. GREENJET s objective is offering its services with greater customer satisfaction while maintaining a commitment to delivery of the repaired as quickly as possible. If the delivery time required be the client and if the demanded component is in the available stocks, the exchange service will be offered. Due to the lead time commitment that GREENJET acquires with its customers, these services are included in what is called Aircraft On Ground (AOG) services. GREENJET assures that if the lead time offered to the customer is not valid for the customer, the exchange procedures are immediately put in place. If the component required is in stock (i.e. is one of the parts worked by GREENJET), we deliver it to the customer and we exchange it by the part he wanted to repair, that will subsequently enter into our normal workflow. If there is no stock, a work around has to be achieved: GREENJET will search into its suppliers data base and offer a new delivery time to the customer, which will be the time taken by the supplier to send the component by an urgent way. In fact, during the exchange process we will ourselves be working as a just in time supplier of our customers. Even though GREENJET offers both services, the repair service is the one that provides greater benefit to the company. The market study reveals that our delivery time reduction in the normal operation is accepted in 85% of the requests from our customers. AEROSPACE MBA 60

79 MARKETING PLAN Guarantee management and product life cycle All the offered services will not be fully considered by the industry if GREENJET was not offering a complete Guarantee for the repaired parts. This includes the whole Life Cycle of the customer and is determined by the engineering department in accordance with the financial, for each specific case, but in general terms it includes new free reparation if the component gets down before the guarantee has expired. In some particular cases, we will even pay the transportation costs from the customer s workshop. The compliance with the guarantee terms will be examined for each particular case by the engineering department. The process is the following: when the customer reports a problem, we will operate in two ways, depending on the circumstances: go to its place and examine there the component or get the part to our workshop to make there the previous tests. In both cases, we offer an exchange part to the customer before determining if it is our fault. If after the testing, we find out that the problem was ours, we will not charge any extra cost to our client, but if not, the contract is performed as a normal exchange procedure: the customer pays and we keep the part to repair. In this point, information flows within GREENJET and its customers are going to be critical and a correct support has to be given before, during and after the sale. The main idea is to build an integrated logistics support system with our customers as soon as the economic resources will be available Pricing strategy The price is a key factor affecting the results of GREENJET as it is the main driver of the income, along with the total output of components serviced. The price is therefore the only element of the marketing mix directly producing revenues, the other three being costs. It so is also a powerful tool to manage situations that GREENJET could face, in example, in an environment of decreasing sales. In such cases, the price can be changed more rapidly than the processes to service the components or the lead times. Therefore pricing will be observed in GREENJET also as mechanism helping the risk management. In order to manage the price to meet the company s objectives, some considerations that determine a pricing decision must be taken into account. These will be for GREENJET of internal and external nature Internal factors Two of the main internal factors affecting the pricing are the definition of the Marketing objectives for GREENJET on one side, and the cost structure on the other. The marketing objectives of GREENJET can be considered to follow a market share maximization strategy. The competition at Barajas Airport has been described before and for GREENJET is key to achieve an amount of components serviced that can cover both fixed and variable costs. Therefore, turnover in the first years is to have higher priority than higher margins. Besides, too low prices may indicate lower quality, which in this industry cannot be tolerated in order to compete. Then, to match this objective, the prices of competitors must be analyzed. This is an external factor that is going to be explained in the next section. AEROSPACE MBA 61

80 MARKETING PLAN Nevertheless, in the situations foreseen in the risk management plan, in an environment of decreasing sales that put in risk the results of GREENJET, a survival strategy is the one to be followed. Within this strategy the prices are going to be lowered in order to increase the demand of serviced components. In these circumstances the price can usually cover only the variable costs and part of the fixed, so that this situation cannot be extended over time. As it has been said, this is a survival technique for extreme cases. The other internal factor affecting price is the particular cost structure of GREENJET. The company is offering in fact two different services. On one side, the repair activities performed In-House, which have a characteristic industrial cost structure. This means that heavy investments in machinery and resources must be done in order to guarantee the service offered at the level of quality to which GREENJET is committed. Therefore the price structure of the repair price is aimed at covering these costs along with the turnover of components. On the other side, some components are to be offered as an Exchange service. As it has been already explained, this service is very similar to the component broker activities. That implies a much less use of industrial resources. Here the factor is the acquisition cost of the component to be delivered. In this case a mark-up technique is to be used in order to secure the margin for GREENJET. This margin is to be decided by the Management to both achieve the operating results and the marketing objectives of market share maximization. To conclude with the cost structure, it can be said that it sets a lower limit for the price in normal operation. As mentioned before, in special cases this limit is lowered in order for the company to survive. Finally, setting the price is a decision to be taken by GREENJET s CEO. This person is going to be advised by the chiefs of procurement, operations and financial areas. The CPO will have an especially important role for the prices in the Exchange service, whereas the COO will have more weight in the decision regarding the In-House activities External factors The price is also strongly influenced by some external factors. Among these, the market demand and the price and cost structure of the competitors are the most important. However, in an environment of economic crisis, there can be important changes in macroeconomical factors affecting retail prices index or bank interates, which may also influence the results of GREENJET and therefore the prices offered to the clients Price strategy For the In house activities the cost based approach is to be selected, as it is the most adequate for industrial activities. AEROSPACE MBA 62

81 MARKETING PLAN Price structure The price structure of In House service components can include discounts linked to the volume negotiated with the client. The price will be the result of a base price, a charge depending on the lead time fulfillment, for the clients that value this opportunity that GREENJET is offering, and finally the discount based on volume. The table below shows the price structure for the In house service: Figure 25 Price structure in house service The price of the Exchange service is the result of the baseline price resulting of the cost of acquisition plus the mark-up. For certain clients or components a fee can be charged to have privileged access to the supply network. This is a common practice in the Exchange industry and will rely on the ERP System that is managing the access to the component pools. A discount can be also applied and finally the final price is obtained. The following table shows this price structure: Figure 26 Price structure for exchange service AEROSPACE MBA 63

82 MARKETING PLAN Placement, distribution and sales force management Before starting with the main distribution strategies, let us take a look to the physical location of GREENJET. As seen in previous chapters, we have two possibilities in order to deliver our services: in house or ex house. That is one major advantage because it permits GREENJET to match perfectly its customers needs. For the in-house services, the location that has been chosen represents a competitive advantage. In the following paragraphs we will be examining the main reasons why Madrid airport represents this competitive advantage and helps to develop the value proposition that GREENJET is offering. Madrid-Barajas Airport is one of the major European hubs and the main airport of Spain. The number of airlines operating there is huge. In fact, all major airlines in Europe pass through Barajas. Another fact to consider is that air traffic in the area has an enormous percentage of medium aircraft. Taking into account that our target customers are the major airlines and that we are specialized in components of medium range aircraft, we could not imagine a better place that Madrid-Barajas Airport. Another important fact that leads us to choose this location is that the majority of the main airlines have their hangars and aircraft MRO workshops located in the area. This can be seen as competitive advantage for GREENJET, because in a lead time reduction environment, logistic and transport times are really simplified. The last reason influencing the decision is related with the potential market that GREENJET is going to consider making its sales estimations. Quoting one of the experts consulted: All the European fleet of medium sized aircraft belonging to companies present Madrid-Barajas airport are susceptible to make their maintenance in this area. The explanation is the following: the main airliners often have a small extra capacity in terms of aircraft available, this implies the possibility to rotate their aircraft in order to pass through the mentioned airport. This is can be seen as an enormous advantage of the location, because if GREENJET is able to convince (it will do so) the main airlines with its value proposition, the potential market will be huge. As a conclusion, we have to say that the commercial team will have to be responding to the following activities requested by the customers all over the product life cycle: Anticipation, recognition of the requirements of the customer o Request for Information Determine specifications and quantify them. Description of the characteristics, attributes and performances o Request for Proposal Answer the customer s request for potential suppliers o Bid elaboration Reception and analysis of proposals o Tender contest AEROSPACE MBA 64

83 MARKETING PLAN Evaluation of proposals and supplier selection (roundabouts, make-or-buy...) Contract decision o Public relations important, CEO s communication activity is increased Post-order process. o Sales Support Seller evaluation and feed-back. o Sales support, Guarantee Management Channel priorization analysis Sales management As it will be explained in the Human Resources plan, our initial sales force department will be lead by the CEO of GREENJET personally. As we are talking about a new company, the main objectives of the commercial department will be to gain new customers as soon as possible. That is why, its initial activity, limited by the initial resources of the company, will be extremely active and important. The CEO will be helped in its duties by a key account manager, a marketing assistant and a call center operator. Those full time equivalent definitions, will be performing different tasks at the beginning of operations than when the company will be more consolidated in the market. As said, in a first stage, all the commercial resources have to be focused on gaining new customers. Once the market analysis has been performed (with the help of a marketing consultancy), the tasks of the commercial team will be deployed following the next scheme: Value proposition communication, comprising: o Initial contacts with the potential customers o Direct visits to potential customers Elaboration of bids Assure the presence in relevant publications Travel to MRO fairs around Europe Elaboration of the main functional requisites of the web page (subcontracted) Once the main initial activities have been performed, the incipient sales force will share its time between two main aspects: continue to increase the customers portfolio, adapting the value proposition communication to each client s specific needs, and perform the support activities to the existing customers. For the first years of operation, the commercial department will keep the same number of workers, even though, when the client portfolio attains a relevant value, some other assistants may be hired, but this will be directly influenced by the future sales. AEROSPACE MBA 65

84 MARKETING PLAN In order to open the market, a pilot contract with Iberia Maintenance is going to be signed, but before this milestone is attained, the commercial department will have to perform an excellent and constant work. Direct visits to the suppliers & outsourcing department of Iberia Maintenance will have to be carried out, and an outstanding services proposal will have to be drawn up. These two activities will mainly be under the responsibility of the CEO, his assistant and the key account manager. Once the contract is signed and the operations started, the sales team will have to start working in the discount management as a promotional tool. The discounts will be performed in different ways whether we are talking about in house services (higher discounts) or exchange services (lower or even zero discounts). The exact figures of the discounts plan can be consulted in the Financial plan Chapter. This tool, added to the visibility that the contract with Iberia will give to GREENJET, will catalyze our brand and value recognition and will permit to approach new customers, mainly those belonging to the Oneworld alliance (in which Iberia is present). Regarding the sales force management as a tool to implement GREENJET s strategy, the different tasks conducting to an increase in the sales (and though in the global incomes) will have to be adequately rewarded. This is why all the commercial department members will have salary distribution as it follows: A fixed Salary A variable salary linked to functional sales objectives: those objectives will be defined in accordance with all the department members. One part will be easily achievable and others will require an extra add of value and work. The rewards will be considerable (they can also be consulted in the Financial Plan). As a conclusion of this pre analysis, we have to say that we will mainly be facing short distribution channels, with no intermediates. This fact allows GREENJET to make the most of the profit of its resources and if well deployed, to achieve real ambitious sales goals Potential channels The objective of the channel mix is to prepare a list of the potential channels that GREENJET can use to reach its customers. Then, they will be classified depending on the customer needs and behaviors. Not all the channels will be appropriated for every customer. Some potential channels that have been analyzed are summed up as it follows Media: Specialized magazines, web site, newspapers Direct contact (mail, phone ) Promotions: Events, shows, specialized fairs Sales force Contacts and public relations by the commercial department Subcontracted public relations company In order to determine a channel priorization strategy, we will consider two factors: channel attractiveness and channel profitability. AEROSPACE MBA 66

85 MARKETING PLAN Channel atractiveness As the potential customers are quite homogeneous in the aspects regarding the distribution, the main channels are equally valid for each market segment. (Max 4, Min 0) Table 19 Channels for each market segment Channel profitability Regarding the monetary effort that is needed to implement each distribution channel, the following analysis has been performed taking into account some qualitative aspects. Tabla 20 Channel profitability Category Media Direct Contact Promotional events Sales activities Public relations Channel Implementation cost Running cost Cost efficiency Profitability Technical publications High High High Medium Web site Low Low Very High High Phone Low Low High High Mail Low Low High High Direct visits to Customers Medium Low Very High Very High MRO Fairs High Low High High Sales Force High High Very High Individual Public Relations (CEO...) Low Low High Low Subcontracted company Very High Very High Low Low High Conclusions and target channels selection As a result of the previous analysis, we can assert that the most effective channels, taking into account qualitative and quantitative factors, will be the following: Media: Specialized press and web site Direct contact through our commercial department AEROSPACE MBA 67

86 MARKETING PLAN Promotional events: European MRO fairs Sales force: CEO and his team initially. The main channels will be the sales force/direct contacts and promotional events. Nevertheless, the website will play a key role to assure the communication with the existing customers and suppliers. In some cases, some advertisements can be placed on specialized press such as technical magazines. In fact, the CEO and its team will have to perform an excellent communication activity in order to convince new customers and to increase the client s portfolio. This will be achieved by communicating adequately the value proposition in each particular case and making the individual customers understand the specificities of our proposals and how our services will help to fulfill their needs. The sales and marketing plan reflects this reality. For the financial aspects, the financial plan chapter can be consulted Promotion plan Once the main distribution strategies have been asserted, we will now draw up the main lines for the communication strategy. The main question here is: How are we going to present our competitive advantage? As we have seen in the channels analysis, we will mainly use three types of communication methodologies: Direct contacts through our sales people (CEO and his team) Media support: web and technical magazines Promotional events: European MRO fairs (as our clients are European companies) All these promotion tools have to be used taking into account the different synergies that can be presented between them. That is to perform the promotional activities in the most efficient way in order to translate perfectly the value proposal to the potential customers. In order to achieve that, a set of general objectives is defined for each communication tool. Those objectives will be later translated into economical performance rations Branding and promotion As it has been said, the main promotional activities are going to be focused on fairs, website and technical publications. As every promotional activity, they will suppose an investment that will have to be accordingly returned by accomplishing some sales objectives as it follows: Direct communication: o Attain the first Pilot Contract with Iberia AEROSPACE MBA 68

87 MARKETING PLAN o Increase the customers portfolio between the first and second year of operation, mainly regarding companies in One World alliance (they have common needs that we will have to discover) o Build a contact network of customers, suppliers and MRO operators (yes, competitors) o Build a general customers, suppliers and competitors data base Media support o Website Called to be the meeting point of the company stakeholders, but mainly for promotional and communication activities regarding suppliers and customers. News communicator: new contracts, new customers Direct link and Hot Line with suppliers and Customers o Technical press Promotional events Introduce the company inside the main communication channels of the sector and communicate our presence in the market. o Assure and communicate GREENJET s presence in the sector o Build up long term commercial relationships through contacts o Sign new contracts o Present the value proposition in international environments o Increase customers portfolio MRO fairs Regarding the main MRO fairs GREENJET is initially going to be present in the Berlin Aerospace Maintenance fair and in the aeronautical fair of Hamburg. For the closest Spanish market, we will be present in the Madrid Mantenimiento Aeronáutico yearly event. As a promotional activity, this will be an investment, which return has already been explained. We will have to take into account the communication activities in those fairs, but also Media communication The web site will be subcontracted to the company which puts in place our ERP system in order to reduce costs. ( Regarding the technical publications, we will initially put a monthly advertisement in the following technical publications: AEROSPACE MBA 69

88 MARKETING PLAN Aeronáutica Andaluza Overhaul and Maintenance Revista de astronáutica y Aeronáutica For specific promotional activities, we will contact the main economic newspapers, such as: Expansión Cinco Días Direct Communication Regarding the direct communication performed by our sales force, we will set a remuneration system by objectives. In fact, it will be one of the pillars of our communication strategy, that will mainly be focused on personnel sale even if we will be forced to undertake some advertisement and promotion campaigns through fairs and magazines Communication strategy Communication strategy has to show customers the competitive advantage GREENJET has over competitors: quality, customized product, delivery time commitment and customer loyalty. GREENJET wants all potential clients to know what its MRO and customer services are, and what they can obtain from it: quality, reliability, trust, dedication and professionalism. It will need to be very good, because it will be decisive for our purposes. In order to make the customers not only know our product, but also stay with our company, different media and channels are going to be used. As each customer has a different potential value and has different needs as well, direct and customized marketing focusing on each of them is required in order to gain their fidelity and create a trustworthiness feeling. In this business, customer care is vitally important to be profitable. A good communication strategy is needed for customer management and retention. As it has been said, the different communication tools that will be put in place have some synergies, and the success of our communication strategy is to integrate those different methods to adequately connect our value proposition with the customer needs. The important thing about communication is that it is going to be, at least in the first steps, mainly focused on personnel sale, even if we will have some part of public advertising. Then, the effort regarding the technical publications strategy, will be lower in the initial phases of the company. In order to break the market, we will firstly count on the fairs and the direct promotional activities. Two different phases are going to be analyzed independently, as the communication objective is different in each one: - Contracting phase: presentation of the product to the customer. The communication is aimed at gaining a new customer. - Retention phase: fidelity buying. Prevent customers to go with the competitors. AEROSPACE MBA 70

89 MARKETING PLAN The different channels, already enounced, are going to be used for these purposes: Communication channels: o Media: appearing in specialized magazines o Direct mail o Public relations o Promotion o Stands in air Exhibitions such as Le Bourget Paris, Berlin and Hamburg. Channels focused in services: o Customer care and sales: account manager, call-center o Sales force Contracting phase In order to achieve the potential market, the first step is to make the service known. This can be achieved by using the following communication channels: - Media: appear in specialized publications such as "Aviation Week", "Flight International". - Direct mail and telephone contact: each airline is going to be personally informed of our products and benefits. All of them will be invited to visit our facilities prior to the signings of the contracts. - Sales and public relations: they will explain GREENJET services in person. Besides, they would try to find their particular needs and requirements in order to adequate the individual value proposition and subsequently offer. - Promotion: GREENJET branding activities: technical publications, fairs The following personnel are going to be in charge of the communication and the negotiation of the commercial offer: - CEO: responsible for visiting the customers and finding their specific needs. Also responsible for the initial direct contacts and attending to the fairs with his assistants. He will be in charge to transmit the values proposals of GREENJET, but also confidence and closeness to the final customers. - Account Manager: responsible for developing the specific offers, attending to tender. - Marketing assistant: responsible for the branding, organizing the participation in the fairs, public relations with the media. Sometimes he will also act as a sales man, accompanying the CEO. AEROSPACE MBA 71

90 MARKETING PLAN Customer retention One of GREENJET future communication objectives will be to gain customer fidelity, especially in the case of the main airlines integrating the Oneworld alliance. For this aim, a specific follow-up of each customer is created. As it was mentioned before, one of the distribution objectives is to build be a database with the services performed to each customer and later be able to measure some parameters regarding quality in the service delivered. Furthermore, there call center operator will attend them whenever needed. In order to achieve better the market tendencies, some surveys will be performed periodically to our customers portfolio. In those cases, the customers will be able to evaluate the service provided by GREENJET. This will serve to understand better our clients needs and expectations. With this information, it will be possible to: - Establish and implement procedures in order to measure the quality of the services provided, as well as following its evolution. - Manage and implement cycles in order to measure the satisfaction level of the customers regarding the services received. - Collect the opinion and suggestions of all customers periodically. - Detect areas of improvement and promote adequate improvement plans. The sales forces stated above will keep in contact with the customers even after the service has been performed in order to create a long-term relationship. Regarding the web site, there will be an access dedicated only to the existing customers where they will be able to see their database, contracts, parts repaired and status The contact will also be possible through that channel as well. In fact, this web site will be one of the most important communication channels, as the customer can look for any information there and contact us if needed Conclusions As a conclusion for the whole chapter, we can say that our marketing effort will be low compared with our sales. That is because GREENJET will try to perform excellently in its marketing mix activities and then be extremely efficient in its promotional and sales activities. AEROSPACE MBA 72

91 OPERATIONS PLAN 5 Operations Plan 5.1 Introduction The operations plan depicts the activities that take place in GREENJET from the moment in which the client has a component that needs to be returned into service. In order to present that global picture the sources of value are identified in the first chapter with the value chain. The section after will look deeper inside two of the most important sources of value for Greenjet. Then, the requirements in terms of equipment and dimensions needed to perform the activities of GREENJET are presented. 5.2 Value chain The Value Chain introduced by Porter is a systematic tool to examine the company s activities and the linkages within it. From this analysis, competitive advantages can be identified and exploited. The figure below shows the main sources of competitive advantage in the Value Chain of GREENJET: Figure 27 Porter s Value Chain Among all these activities, some can be identified that are vital to GREENJET s success. From the primary activities, the Inbound and Outbound logistics are very important as Lead time has been set as one of the competitive factors in order to better service the customers. The lead time is also achieved in the operations function. From the support activities, procurement is going to have a capital role. These aspects and the relationships among them are considered in the following lines. AEROSPACE MBA 73

92 OPERATIONS PLAN Inbound and outbound logistics The inbound logistics has a double nature in GREENJET, as it comprises the components that come from the customer and the materials and components needed for the maintenance activities. For the first, the location close to Barajas Airport allows GREENJET to reduce the time-to-shop, whether the transportation is made by the client or by the company s personnel. This second possibility, included in Full In-Service contracts, adds even more value, as the customer can reduce the size of its own outbound logistics. For the materials and components used to perform the MRO activities, the Value is created with a proper reception system that, by means of a preventive inspection, helps engineering to take decisions, reducing rejections downstream from suppliers and customers. This represents a clear linkage between the inbound logistics as the maintenance activities, as it represents the first step into an efficient start of the repair, testing and exchange operations. This linkage is a creator of Value as well. The outbound logistics is another area creating value for the customer. As well as in the case of inbound logistics, the location reduces delivery times and costs in the transport activities, both for GREENJET and for the customer. Another source of value comes from the links of outbound logistics with operations and procurement. The order processing and the traceability of the maintenance are key elements in this industry. Therefore an outbound system that efficiently attaches documentation to the component in the flow downstream makes it easier for the customer to manage the information it needs to service the component back in aircraft Operations The maintenance operations involve a series of activities to be performed on a component as it flows from the customer to the repair station and then back to it. The process goes from the reception, the testing and reparation, to the activation of the supply channels for the exchange services and the management of documentation. All these steps imply a time in which the component is not serviceable. The value resides in minimizing the every processing time. On one hand, the optimized facilities, size and means of the company reduce the time and costs. On the other, optimized procedures matching the maintenance manual requirements improve the quality and also reduce delivery time Procurement The MRO activity requires whether to use materials to repair components or to get new ones to deliver to the customer on time. In both cases, and as shown in the SWOT analysis, the access to suppliers is vital. The procurement function is, along with logistics, vital to support the lead time reduction strategy. The value is added here by a Procurement Chief Officer with outstanding contacts and access to exchange pools and component suppliers. Also, thanks to the experience and skills to be linked and required for the post, the Procurement Officer is responsible for processes and decisions that are to be found within different functions in larger structures of established MRO Services of big operators. By means of this, decisions are taken more rapidly and bureaucracy is reduced. This is very AEROSPACE MBA 74

93 OPERATIONS PLAN valuable for the customer and one of the key advantages of GREENJET. This is reflected in the Organigram of GREENJET, where the procurement ranks directly below the CEO Technological development The value added with this support function relies on the ERP System and how it is linked to the logistics, operations and procurement functions. This tool is the key interface with the customers and permits to plan and adjust the operations to the inflows of components from the operators and MRO centers. As mentioned before, the extensive documentation of the maintenance operations performed on every component up- and downstream is not only mandatory but one of the key aspects in this industry. An outstanding fit of the ERP to the company s operational and logistics activities ensures a robust traceability and management of these data. The optimization of maintenance activities is also supported by the technological development, which ensures on time update of maintenance manuals and the modification of procedures and routes accordingly. Another aspect of the linkage of technology and operations as a source of value is the development of specific tooling to optimize maintenance procedure, as it has been mentioned. One further technology issue regards the interface of the ERP with procurement, which permits faster ordering of needed components and materials. 5.3 Procurement management The procurement department is in charge of two areas of activity. The most relevant regards acquisition of materials and components needed to service the customers. Other area of activity will be the general procurement, needed for the daily functioning of GREENJET and involves the acquisition of office consumables as well as materials for maintenance and other support activities not directly related with the production Procurement of components This area of the procurement department represents one of the core competencies of GREENJET and responsible of a better performance than competitors in terms of lead time. This acquisition process of components and materials for the production involves seeking and negotiating with partners in order to guarantee a robust supply, shortest delivery times possible and reduction in costs whenever possible. The manager of the area is responsible for these negotiations. This person is required to have an outstanding access to both component pools of the main MRO operators and to spare parts brokers operating worldwide. This function must be implemented by the manager with full authority over the procurement budget, in order to have decisions taken and immediately executed. For this AEROSPACE MBA 75

94 OPERATIONS PLAN process, the area must have full control over the inventory module of the MRP, which has to be tailored for it Procurement for the exchange services The procurement of components for the Exchange services is the other core activity under the responsibility of the CPO. The objective of this function is to secure immediate access to components brokers when the lead times cannot be achieved with in-house operations. We distinguish two steps in this process. The access to the new or used components, in the shortest time possible is one. The next step is the assessment of the component to be repaired and eventually the negotiation to trade that component for the procured one, where cost is the key driver. Here again the experience and contacts of the Chief Officer are the most valuable asset, especially in the step of having the needed component delivered. For that, coordination with the engineering area and access to the MRP system is vital. For the negotiations for the trade the support of the financial area is also valuable General procurement The responsibilities of the procurement area also involve providing GREENJET with office materials, consumables, and utility services such as energy and water. The contracts with providers of support services, cleaning, payroll management and other externalized activities necessary both for the maintaining of the operations and running the company, are also responsibility of general procurement. The objective in these activities is to contribute to cost control in line with the general strategy of efficiency of GREENJET. In order to monitor that, this area has its own account in the income statement, which will reflect its important impact directly in the company s bottom line. The Procurement manager is to be helped in this function by the staff. This support is fir the administrative procedures with the partners involved and the daily management of these accounts. 5.4 Operations Process diagram The process that is going to be followed when a client has a component that needs to be repaired is as follows: The customer makes a request to GREENJET in order to receive service from the company. An evaluation of lead time has to be done. Depending on how fast the component needs to be repaired, there are two possible services, exchange or repair. Afterwards it will be explained the processes of the two services offered. AEROSPACE MBA 76

95 OPERATIONS PLAN CALL FROM THE CUSTOMER TO GREENJET EXCHANGE SERVICE EVALUATION OF LEAD TIME BY ENGINEERING NO FULFILL REQUIREMENTS? GREENJET OFFERS EXCHANGE SERVICE RECEPTION OF COMPONENTS WITH CUSTOMER REPORT AND STORE STOCKOUT? YES GREENJET OFFERS REPAIR SERVICE YES CHECK BROKERS POOL FOR LEAD TIME NO TAKE THE REPAIR COMPONENT FROM THE STORAGE/ BROKER RECEPTION OF COMPONENTS WITH CUSTOMER REPORT GENERATION WORK ORDER THROUGH ERP SYSTEM BROKER MATCHES WITH LEAD TIME? NO YES GENERATION WORK ORDER OF EXCHANGE THROUGH ERP SYSTEM DELIVERY WORK ORDER ALONG WITH COMPONENT TO OPERATOR LEAD TIME OF OUTSOURCING IS OK? NO YES NO SERVICE CHECK CUSTOMER REPORT REQUEST THROUGH ERP SYSTEM DISASSEMBLING REPAIR/ TESTING FAILURE? NO NO YES FAILURE DETECTED= FAILURE CLIENT YES COST ANALYSIS COST ANALYSIS YES STOCKOUT? FAILURE CHECK NO FUNCTION? YES ASSEMBLING/ FINAL TESTING NO YES FUNCTION? STORAGE&SHIPPING & DELIVERING FORM 1 NO CLIENT Figure 28 GREENJET s Process diagram AEROSPACE MBA 77

96 OPERATIONS PLAN ERP CUSTOMER EVALUATION TIME&COST RECEPTION/ WORK ORDER MRP TESTING CUSTOMER PROCESS ENGINEERING CUSTOMER FIFO MATERIALS CHECK DISASSEMBLY REPAIR ASSEMBLY FINAL TEST CUSTOMER P-181 INFORMATION DIAGNOSIS SHIPPING TEST TEST FORM 1+REGISTERS DECOUPLING POINT SUPPLIERS INFORMATION DIAGNOSIS DECOUPLING POINT MOTO PUMP TOTAL TIME 24,5H 4 30min 4h 1h 1h 1h 4h 4h 1h 3h 4h 2h 2h 3h CUSTOMER 30min Figure 29 VSM GREENJET Repair procedure for Motopumps MBA AEROSPACE 78

97 OPERATIONS PLAN ERP CUSTOMER DECOUPLING POINT RECEPTION/ WORK ORDER MRP NORMAL PROCESS CUSTOMER EVALUATION TIME&COST FORM 1 CUSTOMER EXCHANGE SHIPPING CUSTOMER CUSTOMER DECOUPLING POINT SUPPLIERS P-360 3h 2h 1h 30min 1h Figure 30 VSM GREENJET Exchange Service Procedures AEROSPACE MBA 79

98 OPERATIONS PLAN Comparison and Justification Lead Times market Vs GREENJET The next paragraphs will develop a deep analysis of the MRO procedures and flows that every company in the market has to follow. Of course, there are dozens of particularities, as many as companies in the sector, but the one that is explained below represents the major trend in the market (the repair procedure). The market procedures will be exposed at a first stage, following with the internal procedures of GREENJET (repair and exchange service). In a last point, a comparison between the market and GREENJET business model will be done in order to justify the superior performances of our company regarding the global lead time. It is important to mention that the processes explained below as much for the market as for GREENJET are only focused on the motor pump component. For the other components, the process that is followed is the same, but the lead time is different The market - Part Reception and Work Order Launched: 30 minutes In this stage the component enters into the work shop and a work order is launched by the ERP system. There are two kinds of receptions, the company can pick the component up in the customer site or the customer can send it to the MRO company. - Time and Cost requirements Evaluation: 4 hours In order to see if the lead time that the customer is requiring from its MRO supplier can be achieved, an evaluation has to be done. Usually in this stage, the Component manuals are studied to see if the manufacturing means are enough to carry out with the required delivery times. If not, a new offer can be sent to the customer or this can be the start of an exchange procedure. If the company does not have the updated manuals in stock, and is then forced to buy them in the manuals market, the lead time of this stage can be increased up to one or three more days. If the capabilities needed to repair the part are new, an increase in the company capabilities list has to be requested to the Civil Aviation Authorities. This practice can take more than one week in some cases. Nevertheless, these procedures are only available for highly experienced MRO service providers that have a long and demonstrating presence in the market. - First Testing: 4 Hours Here, the failure that the client reports is compared with the results of the first testing. This is done in order to check they are the same. - Process Engineering: 1 Hour Once the failure has been checked, the characteristics of the repairing process are defined. This is the task of the Process Engineering department that has to specify exactly which operations are going to be executed in the component and in which order they will be carried out. AEROSPACE MBA 80

99 OPERATIONS PLAN - Materials Checking: 1 Hour This one hour is real only if there are available stocks. If not, the suppliers can take one to three days to check their stocks. If they have the parts needed, and additional period of three or four days has to be taken into account. If they do not have stock, the periods can even last weeks. At this point, the manufacturing process starts. The component passes through a series of stages in the workshop until the final tests and quality verifications. Those steps are performed in different work benches, and are the following: - Disassembling: 4 Hours The component is disassembled and subdivided into its basic modules, taking care of the parts and modules of the component thanks to a visual examination Kanban system. - Repair: 4 Hours The repairs are performed following the engineering processes defined by the Process Engineering Department. Repairing equipments and stations are key elements here. - Assembling: 4 Hours Once all the elements are repaired, they are gathered though the assembling process. - Test: 8 hours This is the final test, in order to verify that the component works perfectly and has the quality that has been agreed with the client. It will last 8 hours due to it is necessary to check the function of the component as a whole. - Form One elaboration: 4 hours During this stage, not only the Form One is elaborated, but it is also necessary to prepare other kind of registers such as the carried out works, the tests results, the diagnosis of the part, the list of materials involved in its reparation, the signatures of the involved technicians and supervisors or the elaboration of the invoice. It will take around 4 hours. - Storage and Final Agreement with the customer: 30min The components will be stored until the client and the company both agree in the last details about when and how the client will get the product. - Shipping: 30min Once the component is ready to be returned to the client, the client collects it or the logistics person delivers the product to the client. By means of this process, the necessary time is around 35h GREENJET repair procedure In the following paragraphs, we will see how by restructuring the work flows and parallelizing some activities, the reduction in the global lead time is achieved. This is attained through different reductions of the lead times in the intermediate processes. - Time and Cost requirements Evaluation: 4h AEROSPACE MBA 81

100 OPERATIONS PLAN In this evaluation, GREENJET determines which service is going to offer to its clients depending on the lead time that is required and can be achieved. In this case, our company is composed by skilled professionals and it also gives service to one close variety of capacities. For this reason, we only have a few part numbers in a first stage, so the employees know perfectly how the technical manuals of each of one are. In addition, GREENJET has all the updated manuals needed for its operation. Once more, GREENJET small size and flexibility represent a huge competitive advantage. Consequently, GREENJET will last less time than the market process when achieving this stage. Anyhow the number of components to which it is wanted to give service might be enlarged, so this phase may be subject to an increase in its lead time. That is why, for practical reasons, this phase will definitely last four hours. New manuals will be needed and an order to increase the list of capacities should be placed to the Civil Aviation Authorities. In order to prepare the information required for this application one more day can be added to the process, but the acceptance and validation of the corresponding authorities can delay the process more than one week. - Part Reception and Work order Launching: 30min Once GREENJET has done the evaluation and determined which service is going to offer, the company collects the component or receives it from the client. Then, a work order is launched. It will take the same time that the market. This stage is going to be done after the Evaluation stage in order to reduce the global lead time. - First Testing& Process Engineering& Diagnosis of information & Material check: 4 hours and 30 min (lead time reduction) In this case, several stages exist that can be carried out in a parallel way in order to reduce global lead times and to give a quicker and higher response to the client. As in the market case, a first test is performed to compare if the failure that the client reports agrees with the failure that GREENJET detects. As it has been said, it will take 4 hours Secondly, the Process Engineering takes one hour to determine the solution. While testing is been carried out, engineers can develop which operations are needed in order to repair the component. GREENJET starts the engineering process before the test process ends, developing the engineering solution with the first approximation and failure information provided by the customer. As the test process goes by, the solution is more sharply. The whole process is possible because GREENJET has been executed, thanks to an external market study, that the failure that the customer reports is the same that the one reported by the MRO technicians in 98% of the cases. Before ending the Process Engineering stage, the materials checking can be started. Supposing that stocks are available, this will take one hour. If not, the process could be prolonged in the same way that the market does. Finally, a diagnosis of the failure is drawn up (1hour) parallel to the tests and the solution engineering. Collection all the obtained data until now has to be done, as much the listing of materials, the diagnosis of the component, the operations that are going to be AEROSPACE MBA 82

101 OPERATIONS PLAN carried out, etc. This allows saving a few hours in the elaboration of the forms at the last stage. By parallelizing those phases, thanks to GREENJET flexibility and size, the global lead time is reduced. - Disassembling: 4h The component is disassembled into its elements - Repair & Test & Information Collection and Form 1 filling: 4 Hours (lead time reduction) Repair will last the same hours as the market does, it is around 4hours. The repair is done according to the engineering process. Even so, depending on which equipment and stations GREENJET has, it will take longer. In agreement with the repair stage, the elements of the component are repaired. Intermediate testing is done in a parallel way of repair. This stage will last some 3 hours. By developing the quality through the manufacturing process intermediate testing is done. This will allow a decrease in the global time of the process by reducing the needed time for the final quality test. In addition, a third method is done parallel to the other two. Up to now, relevant information is collected, such as the materials and parts that employees use in order to repair the components, the result of the tests, the materials list, etc. This will last one hour. - Assembly & Test: 4 Hours (lead time reduction) Once the elements are repaired, all the basic elements are assembled into a single component. As in the previous stage, intermediate testing is done. The assembly process lasts four hours and the intermediate test two. This intermediate test will allow reducing lead time in the whole process, in the same way that the other one does. Thus, the technicians are now checking and verifying how the elements work in each sub stage of the assembly. - Final Test & Form one & Final Registers: 3 hours (lead time reduction) Once the manufacturing process is finished, a final test is carried out, but now, since some intermediate tests have been achieved, it will last only for three hours. In this stage, the execution of the process is checked in order to have a totally neat component. Form one and the needed registers can be done in parallel to the final test. In the market, the Form One is done once the final test is ended. Nevertheless, due to the intermediate tests, it is not needed to wait until the final test ends. In addition, there are also two stages where there is a collection of information and analysis. So, the required time for filling the form one and the corresponding registers is 2 hours. - Shipping: 30min The repair component is packaged and sent to the client or the client goes to GREENJET to pick it up. By means of this process, the necessary time is around 24.5h. Furthermore, through this process we would be able to reduce an average of 11 hours that is a 31% of the market lead time or one and a half days of work. AEROSPACE MBA 83

102 OPERATIONS PLAN At this point, the risk of having to store the repaired part has to be examined. In fact, the client might not be able to receive the part at the scheduled time. This can be caused by a delay in the internal operations or by any other reason outside GREENJET scope. Anyway, this process affects the company cost structure and normal procedure and forces to implement a final stock of outgoing parts. This also happens in the market procedures and there is no way out of this situation rather than having a warehouse for these parts. This fact will be extensively explained in the risk management plan (chapter 11) GREENJET exchange procedure The Exchange service is not currently provided by all MRO companies, it allows a reduction in the global Lead-Time and is only used in certain situations, as it supposes an increase in the operational risk and needs a stock of parts supporting the operation which are going to be exchanged and a proper network of brokers. This operation consequently supposes a considerable increase in the storage costs, but those are highly overtaken by a huge return on the investment. - Time and Cost requirements Evaluation: 3hours (lead time reduction) In this case, during the evaluation of time and cost process, we conclude that we are not able to repair the device given in a required time. At the same time, the cost and several variables should be measured: urgency of the order, current logistic capability and importance of the client are some examples. This process is performed exactly in the same manner as it is in the normal procedure and lasts for about three hours. - Reception, Work Order Launch, Form One Elaboration and Exchange: 2 hours At this point GREENJET is ready to provide a part identical to the one asked by the customer in terms of lead time and quality. This part will be exchanged in our inventory and in some cases we may have to resort to Just In Time suppliers. Once we receive the part from our customer, a Work Order is raised in order to have the traceability of the part in our system. At the same time, the EASA Form One is finished and signed. Now, the time required to complete the Form One results in two hours, because the part delivered is stored in our facilities and has already the fulfilled documentation. Once the documentation is closed, we finally end the process with the shipping of the exchanged part. The part provided by the customers will enter our normal procedure as a non priority part. This is going to go through our repairing stations in order to have it ready for a further Exchange. It would be repaired, but not shipped; remaining in our inventory. Regarding the inventory, in this process it becomes a key factor. It is mandatory to establish certain security thresholds and a pull of spare parts, to allow the company to provide this service with minimum costs or to have the appropriate contacts and capabilities to be able to resort to JIT suppliers. - Shipping: 30min At last, the shipping process is performed exactly in the same way as it is in the normal procedure and lasts, as a mean, thirty minutes. AEROSPACE MBA 84

103 OPERATIONS PLAN Final comparison and conclusions We will now see a brief comparison between the market and GREENJET, regarding the lead times of two of the main components that we repair: avionic displays and hydraulic motopumps. The following tables present a summary of the lead times reached in the market and in our process, followed by a percentage analysis of the lead time reduction. Table 21 Market Lead Times Market Moto Pump Displays Reception,Work Order & MRP 0,5 0,5 Time and Cost Evaluation 4,0 4,0 First Test 4,0 4,0 Process Engineering 1,0 2,0 Materials Checking 1,0 1,0 Dissasembly 4,0 2,0 Repair 4,0 8,0 Assembling 4,0 2,0 Final Test 8,0 16,0 Form1 4,0 4,0 Storage 0,5 0,5 Shipping 0,5 0,5 Total Lead Time (h) 35,5 44,5 Table 22 GREENJET Lead Times GreenJet Moto Pump MotoPump Displays Displays Time and Cost Evaluation 4,0 4,0 4,0 4,0 Reception,Work Order & MRP 0,5 0,5 0,5 0,5 First Test 4,0 4,0 Process Engineering 1,0 2,0 4,5 Materials Checking 1,0 1,0 4,5 Information & Diagnosis 1,0 1,0 Dissasembly 4,0 4,0 2,0 2,0 Repair 4,0 8,0 Test 3,0 4,0 6,0 8,0 Information & Diagnosis 1,0 1,0 Assembling 4,0 2,0 4,0 Test 2,0 2,0 Final Test 3,0 8,0 3,0 Form1 & Registers 2,0 2,0 2,0 8,0 Storage 0,0 0,0 0,0 0,0 Shipping 0,5 0,5 0,5 0,5 Total Lead Time (h) 24,5 29,5 Table 23 Summarize Lead Times reduction Market GreenJet LT Reduction Hours Days MotoPump 35,5 24,5 31% 11,0 1,4 Display 44,5 29,5 34% 15,0 1,9 As we have seen, GREENJET achieves to reduce the global lead time, basing its strengths on its lower size and its flexibility managing the information and material flows. This consequently allows GREENJET to beat the market in many steps of its normal procedure. But once the process flows, the Value Stream Mapping and the comparison between the market and GREENJET have been done, it is time to present the conclusions of it. In its culture, the customer is the most important value of GREENJET, and has his own perception of the lead time. What we want to explain here is that the customer won t see the internal procedures of GREENJET, because his vision comes from the exterior. His only concern is to receive a part with the compromised quality and in the compromised lead time. We will see now how, with the combination of our lean manufacturing procedures (like the VSM) and the excellence and flexibility in the management of its assets and its human resources leads to an improvement in the perceived delivery time of the customer. AEROSPACE MBA 85

104 OPERATIONS PLAN The previous explanations and diagrams serve to justify our internal processes, but in order to satisfy different clients at the same time, with the consequently different needs, we have to deal with the company flexibility and adaptation to change. This flexibility, regarding the operational side will be translated into the human resources management, planning the operations taking into account two work shifts. Having two technicians in the first one and other two in the second one, allows complying better with the customers requests regarding delivery times. Moreover, the cost of duplicating the available working time will not be very high (it will incur in some general administrative costs such as the energy) so it will be better to deploy 4 technicians over sixteen work hours than deploy them over eight hours. With procedures like the explained above, GREENJET is able to deliver the repaired components in a lead time that is 30% better than the average in the sector, to accept more work load from its customers when needed and to achieve component over deliveries in some specific cases (something that the client in this industry appreciates particularly). Let s put a simple example to see in a clear way these concerns. As it will have different clients and serve different kind of parts, GREENJET may be asked to repair four components, with the same reference, in four days. These four parts come from four different customers. Let s imagine that the total process time for one single part is four days. Taking advantage of our agile processes, and combining adequately our human resources, we may be able to repair two of them in two days (resorting to two work shifts) and other two in four days. In this case, we may have the possibility to over deliver two customers and meet the compromised lead times with the other two. This way of proceeding matches perfectly the customer needs in a market always shaped by the urgency of having the spare parts in the minimum possible time and so, completely prepared to accept over deliveries. The previous example illustrates perfectly how the process flexibility, seen as a competitive advantage presents a huge benefit for the final customer. As a conclusion, we have to say that the operational procedures implying the reduction of the process lead time and the flexibility of GREENJET, with its double shift working procedures, allow the company to deliver the best value proposition to the market: a reduction of the global response time to the customers at a similar price than its competitors. 5.5 Dimensions and requirements Installations The facilities must fulfill some requirement to guarantee the objectives of GREENJET: Location close to Barajas airport in order to reduce transport lead times. Space to host test and repair stations and allow an optimized flow and movement for the personnel and the materials and components. Space with adequate storage capabilities, reception and outbound logistics. Space for offices, the ERP system and other support functions. AEROSPACE MBA 86

105 OPERATIONS PLAN Security and HVAC installations for safe and comfortable operations. The premises at Alameda de Osuna, 7 km to the airport platform and within 12 minutes reach, ensure this location. The comparable competitors are located at further distances, some 24 km for Semasa Ingeniería and 22 km for AEG, with around half an hour to reach the airport in both cases Test and repair areas GREENJET will have separated testing and repair areas for each of the ATAs and capabilities offered, hydraulic and avionics. In the hydraulics area benches are to be located for reception, first inspections and manual testing activities. Up to 4 benches are planned. Racks for tooling and manufacturer manuals are located also there in order to optimize operation. An area of 50m 2 is estimated. For the test activities of autopumps and hydraulic components two universal stations are used, as well as an additional engine to supply torque and rotational speeds which will be described in Close to this equipment space for hydrants and necessary chemicals must be provided, as well as shelves for incoming and outgoing components at this stage. For that, additional 50m 2 are estimated. For the avionics activities, a separated area will be available. The testing performed here requires isolation from the more noisy conditions that are to be expected in the hydraulics. In this area three inspection and testing tables are going to be necessary, equipped with the means described in Additional space is needed for the installation of a Display Unit test and repair station. Additionally, space incoming and outgoing components, as well as racks for spares are taken into account. As in the hydraulics, a special security rack is placed in this isolated area for the components manufacturer manuals. Therefore, the total estimations for avionics are of additional 75m 2. This spaces account altogether for some 175m Warehouse As soon as a normal activity is reached, warehouse space will be necessary store materials in use and eventually prepare them for the operation. This additional space is planned for future increase in the operations and demand as well. In total, this storage capability is estimated to be 75m Reception and outbound logistics In this area the components coming from the clients are received and unpacked. The arrival can occur in two different ways, depending on the service. For customers sending the components via courier to GREENJET, only the unpacking area will be needed. This is estimated to have some 20m 2. For the components serviced directly by GREENJET and picked up at customers site, the use of the van will be necessary. For that, parking space is going to be reserved. With AEROSPACE MBA 87

106 OPERATIONS PLAN 40m 2 there is place for two vans, although at the start of operations only one will be necessary due to lower activity. For the outbound logistics a similar space to that on incoming components is reserved. Here the packaging processes take place. The estimation gives additional 30m 2. With some space for the trolley that will carry components among the operations areas, and from these to the logistics area, the estimations give 96m 2 regarding this chapter Office space Office space for the chief officers and staff must be provided. The following picture shows optimized office units for the existing functions: Figure 31 Office space units The CEO will need some more office space in order to host partners during negotiations and as part of his marketing and commercial functions. This is shown in Figure 31 a. The three chief officers in charge of the financial department, the procurement and the operations, closed offices are also planned, shown in Figure 31b. For the CEO s assistants to the commercial and marketing functions, common work space is planned, as well as for the call operator, these three units show also in Figure 31 c. For coordination meetings and further hosting needs, a common meeting room must be taken in consideration. This is depicted in Figure 31 d. The estimated square meters for these rooms are given in the following table, as well as an estimation of total offices space, that considers common spaces between offices: Total installation needs The following table shows the breakdown and totals of the main installations needed, as explained in the previous lines. The total space also considers some other spaces such as toilets and a resting room for the breaks that are introduced as a factor of the total installation needs. AEROSPACE MBA 88

107 OPERATIONS PLAN Table 24 Total space needs Type Area (m 2 ) Testing zones 175 Hydraulics 100 Avionics 75 Logistics zones 96 Reception 20 Parking 40 Delivery 30 Warehouse 75 Offices 97 CEO office 25 CFO office 18 CPO office 18 COO office 18 Work space 18 Common spaces 150 Corridors 70 Toilets 50 Meeting room 30 Total Personnel The personnel needs are further explained in the Human Resources Plan. However, the maximum planned number of employees estimated for the forecasts is presented here as a dimensioning variable: Table 25 Labour force estimations Labor Force FTE 16 Logistics Engineer 1 Quality Engineer 1 Techniciands 7 Production Engineer 1 COO 1 CPO 1 CFO 1 Marketing 1 Commercial 1 Director Equipment and means The means that are required for the inspection, testing and repair activities have to be acquired according to the procedures derive from the C.M.M. The engineering department is responsible of designing these procedures and update or modify them based on modifications or new issues of C.M.M. provided by the manufacturers and also on the learning process ongoing within GREENJET. AEROSPACE MBA 89

108 OPERATIONS PLAN Equipment for hydraulics The equipment for hydraulics consists in basic tooling at the benches, described in the repair manuals, and the universal hydraulic station. The universal SPRAGUE test station from Maney Aircraft is selected for this area. This station is the basic standard equipment for hydraulic components, where most of the parameters of these components regarding fluids can be measured. The C.M.M. establishes the basic maintenance procedures, but some additional means and tooling are needed in order to achieve enhanced robust and effective testing procedures which help reducing lead times and cost. For the dismantling, testing and repair operations of the hydraulic components benches are planned where part of the tooling can be also stored. Also an investment in standards for the normal operations is planned. The following table lists the equipment requirements mentioned and will be used in the financial plan: Table 26 Hydraulics equipment Hydraulics equipment Universal hydraulic station Tooling Benches Standards Equipment for avionics The testing benches are to be equipped with standard TEKTRONIX oscilloscope, power supply for DC/AC, frequency converter, multimeter and tooling each of them. Some special devices for optimized testing are likely to be developed by the engineering department as modifications in the manual recommend the introduction of optimized and new testing procedures. A frequency converter, from 50Hz to 400Hz used in aircraft equipment, is needed. Two additional laptops are used for the avionics activities, equipped with testing software and as well as access to the ERP to enhance the integration with the other company s functions in order to reduce the lead time. The Avionics equipment is planned to be upgraded after five years of operation due to the faster technological pace of this area. The following table summarizes these equipment requirements: AEROSPACE MBA 90

109 OPERATIONS PLAN Logistic equipment Avionics Equipment Testing benches: Oscilloscope Power Supply Multimeter Other Display repair station Frequency converter Laptops Racks Table 1 Avionics area equipment In order to cover the logistics needs, GREENJET considers the acquisition of the some basic items. One van in the range of 500 to 800 kg load capacity and 2,5 to 3 m 3 cargo volume. The main function is to enhance the movements of components between GREENJET and the customers, either the operators located at airport platform and the MRO Suppliers. Benches for the inbound and outbound logistics are also planned. With these items, the unpacking at reception of components and materials, as well as the packing for ready to deliver parts, can be easily performed. The inspection at reception is to be done in these benches as well. In order to help the movement of heavy components or several parts at a time along the facilities, the use of a trolley is also planned. The table presents the needs for logistics, which will be used for budgeting in the financial plan: ERP System Table 27 Logistics equipment required Logistics Equipment Cargo Van Benches Trolley Purpose of the ERP system is to integrate data from the key functions and provide analysis of these data in order to help managing these functions. Also the company s decision making is supported by the data coming from the ERP. In order to cover these requirements, different modules are available in the market that can be integrated and tailored to company s needs. The customization includes the linkages among the modules as well as the access management to these modules. The different access depends on the use done by the employees while performing the different the processes. AEROSPACE MBA 91

110 OPERATIONS PLAN Modules A Financial and management module integrates data from the cash management, receivables and payable accounts, linked to billing, invoicing data and information on performance in terms of time and expenses of the orders. Another module manages dataflow regarding production. By means of this module the work orders are issued, along with the management of the routes and bills of materials. Also engineering data regarding update of maintenance procedures is managed in this module. The documentation linked to the maintenance processes such as the form one certificates is stored through this module for traceability purposes. A third main module integrates purchasing and supply management features, including a database of suppliers with key data about their performance, such as prices and delivery times. The inventory management is also performed by means of this module as well as the purchase orders management and tracking. It has been mentioned that the information flow between areas such as procurement, financial and engineering is a key factor to ensure agile operations and delivery times. Therefore the integration and linkages between the modules supporting these functions is as important as the modules themselves. Robust interfaces must ensure this data flow and are part of the customization of the system. This ERP is also planned for upgrading after five years of operation due to the technological change, as was the case with the avionics equipment Access The access to the system must be different depending on the module and use of the system. The CEO will have overall access to every module to monitor the data from every function. With this information this person will control the activities and will be able to take decisions with reduced response time. The chief officers must be granted with full access to the modules attached to their areas of responsibility, and must have also the possibility to get information to other areas data. For instance, the procurement manager will make use of data from the production module regarding bills of materials. The engineers in the operations relate to the ERP in two different ways. On one hand they are users of the production and inventory modules, as they are operating responsible of the stations and components maintenance activities. As such, the issuing of the Work Orders for the technicians shall be done by means of the production module, along with the management of the information on the materials related to these orders. On the other hand they must monitor the functioning of the system itself, proposing modifications that enhance the system, reporting to the COO, and eventually participating in the development and implementation of these modifications in collaboration with the ERP provider. Finally, technicians in the production will have access to the production module, where they get the WO and will introduce the data corresponding to the procedures steps AEROSPACE MBA 92

111 OPERATIONS PLAN (activities and steps performed and verified, materials used, P/N involved, WO, tracking of documentation). AEROSPACE MBA 93

112 IMPLEMENTATION 6 Implementation 6.1 Introduction In order to define how GREENJET is going to start its operating activities, an Implementation Plan has to be developed. Some bureaucratic procedures must be completed before starting the operations in order to fulfill all the necessary requirements that a MRO company must accomplish. 6.2 Implementation plan An implementation Plan has been developed for two years. Each year is also divided into months, in order to explain more deeply what happens in each of them Sales - Market analysis: The marketing responsible and the CEO will be dedicated to develop the marketing activities that we have designed in the Marketing Plan, studying the market niche, analyzing who the potential targets would be and doing a general analysis in order to know the competitive advantages and where our company could fit better. - Pilot contract at Iberia Maintenance: It will start in the fourth month up to the twelfth. With the aim of being able to operate from the first months of implantation of the company, the technicians will work in the facilities of Iberia Maintenance. GREENJET will sign a pilot contract at Iberia facilities, establishing a partner relationship. The target is to reduce the workload of Iberia Maintenance, so that their technicians can develop other tasks and at the same time GREENJET can make profits, offering to them the same price that the competition with a greater response time. GREENJET will take advantage of the current policy of Iberia Maintenance by covering the gaps in ATAs 24,29,31 and Pilot contract with Iberia at GREENJET facilities: It will last around 5 months. During this period of time, GREENJET s workers will be at GREENJET s facilities. However, since Part 145 license is not acquired at this time, GREENJET will only provide its services to Iberia airline. People, who are skilled to sign Form One from Iberia, will verify the repair processes that are done in our facilities. Even so, up to everything is settled down, it would be possible that a few technicians work at Iberia Maintenance facilities. AEROSPACE MBA 94

113 IMPLEMENTATION - Normal contract with Iberia and other airlines: Once GREENJET has acquired its Part 145 certificate, the company is fully able to provide its repair and exchange services on a normal basis, just as a completely authorized MRO center. As of this moment, we will have qualified personnel to sign the Form One and service to components that comes from airplanes of different airlines that operate in Madrid Quality - EN 9100, Part -145: In order to be able to launch a MRO company it is necessary to ask for two types of certificates, those are IN 9100 and Part 145 that are explained in the Quality episode. Supposing that Part 145 is obtained in about months, it is assumed that around month number 14 GREENJET can operate as an independent MRO centre Procurement - Leasing offices and materials: As noted above, GREENJET technicians will be placed in Iberia Maintenance facilities during the pilot contract. However, at the beginning of GREENJET operations, employees such as CEO and rest of managers will also need to be located somewhere. This will be done at GREENJET final place, through leasing some offices and materials during these specific months. - Rental facilities: During the month 8 GREENJET will start renting its own facilities. Thus, in the month 11, GREENJET will be able to start working at its facilities. - Licence CMM: The repair process needs to be done following instructions according to mannuals of provided capabilities. Taking into account that the technicians will start working at GREENJET during the eleventh month, it would be necessary to acquire the mannuals previously. - Acquisition of repair means: They are all the equipment necessary for the repair process. They will be acquired before the eleventh month and will be paid by divided form Engineering - Process flow definition: During this period, GREENJET will recruit human resources, the operative of GREENJET is being defined, services that are going to be offered, work specification, etc. - Value added process: It is a process of continuous improvement, which applies a Lean methodology always looking for reduction of times, identifying waste, applying kaizen, etc. AEROSPACE MBA 95

114 IMPLEMENTATION Year 1 Year 2 Master Plan Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Procurement Leasing offices and materials License CMM Rental facilities Acquisition repair means Quality EN 9100 Part 145 Engineering Process flow definition Value added processes Market analysis Sales Pilot contract at Iberia Maintenance Pilot contract with Iberia at Greenjet Normal contract with Iberia and others Production 2 Technicians in Iberia facilities Technicians at Iberia and at Greenjet facilities Technicians in Greenjet facilities Figure 32 GREENJET s implementation diagram AEROSPACE MBA 96

115 HUMAN RESOURCES PLAN 7 Human Resources Plan 7.1 Introduction As a service company, it is very important to focus the attention not only in customers but also in employees. Therefore, our labor force is considered to be one of the most valuable assets of GREENJET. Human resources policy will be developed starting from this premise. In this section we will describe the organization of the company and the profiles of the people that will be employed at GREENJET will also be analyzed. The company will be presented divided in the main department, and within this department, each position will be shown. For any occupation it will be given its description in order to match the best candidate. Eventually, an approximate salary for each position will also be introduced. Taking into account that GREENJET will initiate the process of getting certified as a 145 Part Organization, it will begin its operations at its own facilities in late 2010 since it will take the company around 14 months to attain this license. During these 14 months time, only the management and few other employees will be engaged. The rest of the scheduled technicians planned for the start of the operations will join the company gradually as GREENJET is providing its services. Until the beginning of operations, the monthly wages will be given only by a fixed part, without any variable parts or bonuses. However, once GREENJET is starting to run, the salaries will be composed by a combination of fixed and variable parts. Incentives based on productivity constitute a key element that will help GREENJET to reinforce its employees commitment to the company and to fulfill the pre-set objectives. 7.2 Management The structure of the management of GREENJET will be given by the chief executive officer and three subordinate managers, each of whom has specific functional responsibilities: chief financial officer, chief procurement officer and chief operating officer. AEROSPACE MBA 97

116 HUMAN RESOURCES PLAN Figure 33 Organization Chart of GREENJET s Managers The CEO will be responsible for: Total management of the company Strategy Sales Marketing Customer relationships Customer support service New markets Public relations and communication As the CEO will be in control of supervising the commercial relations of the organization, Marketing, Customer relationships and Customer service included, there will be the following people working along with him in these tasks, in an organization that could be understood as commercial department: 1 Key account manager 1 Marketing assistant 1 Call-centre operator The CFO will be in charge of the following aspects: Financial resources management Expenses and costs Human Resources The CPO will be responsible for the following activities: AEROSPACE MBA 98

117 HUMAN RESOURCES PLAN Purchasing Availability of parts and equipment Supply chain management Relationships with suppliers Logistics Finally, the COO will supervise the subsequent sides of the company: Operations Machinery and tool maintenance Quality Due to the limited dimension of GREENJET, the areas that are not managed by the chief executives will be subcontracted to other more specialized organizations. The outsourced activities are: Personnel selection Personnel vocational training Payroll Labor relations Health & Care Lawyers Informatics assistance Website design, development and maintenance Cleaning service 7.3 Departments Commercial department As indicated above, the CEO will also be the Head of a department with marketing and sales duties involved and that can be understood as a commercial division. The organization of this department is as follows: AEROSPACE MBA 99

118 HUMAN RESOURCES PLAN Figure 34 Organization Chart of GREENJET s Commercial Department CEO The chief executive officer (CEO) will be the administrator in charge of total management of the company and head of the commercial department. The CEO could either be: An engineer (better if aerospace engineer), or An economist If engineer, it would be more appropriate if he also holds an Aerospace MBA, in order to possess the financial base and analytical skills required to facilitate business outside the company. In the case of an economist, excellent world knowledge of the aeronautic sector is needed. It is a requisite that he has spent his professional life working in the aircraft maintenance sector. A CEO with great knowledge and large experience in the MRO industry are key factors for the success of GREENJET s activities. Furthermore, since he will be the head of the commercial department, he must have experience in this area. The ideal candidate has been working in sales for at least four years and then switched to the marketing or strategy related fields, in which he must have a large experience (over five years). On the other hand, since he will also be in control of the public relations of GREENJET and its new markets through presence at MRO industry fairs and conferences, exceptional communication skills are needed. Fluent English and Spanish languages in a business environment are essential; other European languages are a plus. In order to align the company, both internally and externally, with its strategic vision, the CEO must have also strong leadership and negotiations skills while dealing with possible signatures of contracts with clients or guiding employees and other executive officers towards a central objective. AEROSPACE MBA 100

119 HUMAN RESOURCES PLAN The CEO will be someone willing to travel up to 100% of the time. The salary will be per year as fixed salary (3.215 each month, 14 months a year), that could be increased up to 30% more if the objectives set at the beginning of each year are fulfilled. The real cost for GREENJET of the CEO, taking into consideration social security costs which in Spain amount to 35% of the total salary, will be between and Travel expenses are not considered in these calculations Key account manager A brilliant management of relationships with its customers is crucial to GREENJET. It is tremendously important for a sector like the MRO industry to focus on the key accounts that are held by customers who produce most profit or have the potential to do so. Development of these customer relations and customer retention constitute a huge significance in the success of a company like GREENJET. In order to place particular emphasis on determining which accounts are the most relevant at any one time and analyzing the needs of these particular clients, GREENJET will need one Key Account Manager. The objective will be an increase in sales through implementation of procedures to ensure that they receive premium customer service and to raise customer satisfaction. Moreover, on top of maintaining the business with existing clients, the Key Account Manager will be in charge of developing the market to expand GREENJET s customer network with the guidelines of its strategy. In the hierarchy of the company, the Key Account Manager depends directly on the sales director (the CEO). The person in this position must hold a degree in engineering or a business related degree with an interest for technical matters. In order to establish relationships with new customers and keep strong relations with already acquired customers, the Key Account Manager must have relevant commercial experience in selling products or services in the aircraft maintenance sector during at least 2 years. A high degree of travelling will be needed for this position since the Key Account Manager will be directly in contact with people and clients from all over the world. He must speak fluent English and Spanish. Any other European language would be a plus. Key Account Managers must be very successful in dealing with people, thus, expertise in negotiation, presentation and communication skills is needed. Accuracy in the information provided and rapidity to provide answers and solutions while dealing with customers and potential clients is essential. Finally, he must have the ability to work independently as well as in international teams being result-oriented and eager to achieve long-term results. The salary of the Key Account Manager will be per year in 14 monthly payments. Additionally, if the objectives are met, each year he will receive an added amount up to 20% of the total salary. Therefore, the total cost for GREENJET, including social security, ranges from to per year. Travel expenses are not considered in these calculations Customer support The MRO business requires a 24 hours/day customer service. In this sense, at least five people will be necessary to cover these needs. However, given the reduced dimension of GREENJET at the beginning and until our market share requires a 24 hours per day customer AEROSPACE MBA 101

120 HUMAN RESOURCES PLAN service, GREENJET will provide only 8 hours/day customer service, from 8 a.m. to 5 p.m., not providing this service on weekends. Therefore, only one customer support employee will be needed at the beginning. Figure 35 Times zones potential clients of GREENJET Call centre operators will receive telephone calls from clients enquiring about GREENJET s maintenance service and status of their equipment or components being repaired. They will also receive work orders which will be forwarded to the operations department for a further and in depth analysis. As a client s first contact with GREENJET, call centre operators will receive requests for appointment with the Key Account Manager. Call centre operators will wear headsets and use computers to input or call up GREENJET customer s details on databases or find information. They may word process letters to confirm agreements made by phone. They mainly deal with customers but may be given time away from the phone to complete paperwork. On taking a call, the call centre operator has to find out what the callers want in order to provide them the appropriate information. Listening and asking the right questions is key in this occupation. People working in this department, depending on the CEO and Key Account Manager requests, will manage the direct mailing channel. They will interest potential clients in GREENJET s services by communicating promotions or proposals for sales. They might arrange for the Key Account Manager visit to the customers. Call centre operators will also get in touch with clients that have been provided with GREENJET s services, in order to have a feedback, and obtain valuable information to better enhance quality of the services and foster customer relationship. Call centre operators will need to be able to listen to people and speak clearly in a friendly way and professional manner. They will also need to be patient and ask the right questions to find out what the customer needs. As they will be directly in contact with clients from all over the world, they must speak fluent English and Spanish. Any other European language is not mandatory but will give added value to the commercial department. Excellent communication skills are required, every telephone caller is a AEROSPACE MBA 102

121 HUMAN RESOURCES PLAN customer for GREENJET, so it is vital that call centre operators are focused on customer care and finding solutions. They must be able to develop a detailed knowledge of the information in a rapid way in order to provide answers to the problems exposed. These employees will be disposed to work during nightshift and during weekends or holidays, always at a later stage when more staff will be hired. They must also be able to work under pressure as telephone calls might be coming in all the time. Good IT skills are also needed. The education level requested is a technical high school diploma or a bachelor in engineering. No previous experience is needed since they will be trained in GREENJET s services and procedure of working. The salary of each call centre operator will be /year in 14 monthly payments. No variable part is considered for this position. Taking into consideration social security costs, the real cost for GREENJET of each of these employees will be /year Marketing assistant The Marketing Assistant will support the commercial department in all of its daily activities. Reporting to the CEO and working along with him and the Key Account Manager, he will play a key role within the marketing activities. He will contribute to the creation of GREENJET s marketing plan by collecting data which will be used on a later stage to make decisions about pricing, distribution, advertising, etc. More specifically, the duties of the Marketing Assistant enclose the following: - Help identify new services to launch or improvement of the current ones. He will also assist in the preparation of information to be delivered to agencies for advertising campaigns. The Marketing Assistants may be called upon to arrange interviews with the CEO, write press releases and monitor coverage of GREENJET s services in the media. - Keep track of GREENJET business activities: analysis of sales by type of client, studies of the results achieved, etc. Market research through data examination (sales statistics and trends) is therefore an essential task in the daily job of the Marketing Assistant. - Evaluate how the company is performing compared to competitors. The Marketing Assistant s academic background should include a Bachelor degree in Economics or Business Administration. Postgraduate education in marketing techniques is an advantage. The ideal candidate should have obtained some working experience in marketing within the aeronautics sector but this is not mandatory. Since he will be in contact with an international environment on a daily basis, a high level of English language is requested. Fluent English and Spanish are, therefore, compulsory. Any other European language should be an asset. He must also be familiar with specific software for data analysis along with quantitative and qualitative marketing techniques. On the other hand, key attributes that the Marketing Assistant must possess are excellent written and verbal communication skills, being a good team player, planning and analytical ability, and interest and enthusiasm for marketing in the aeronautic sector. The salary for this position will be /year in 14 monthly payments. A variable part, up to 10% of the total salary, is considered if the objectives are fulfilled every year. AEROSPACE MBA 103

122 HUMAN RESOURCES PLAN Taking into consideration social security costs, the real cost of the Marketing Assistant will be ranging from to /year Financial department The Chief Financial Officer will oversee the financial operations and strategic planning within GREENJET. Only the CFO himself will constitute the Financial Department. He will directly report to the Chief Executive Officer. As stated above, he will be in charge of managing GREENJET s financial resources. He will exercise leadership in terms of directing the financial activities of GREENJET. Specifically, this includes budget creation and administration, investment strategies and risk management. The CFO will be focused on long-term objectives but also on day-to-day operations. This requires a high proficiency in managing routine daily operations that may impact the financial stability of GREENJET, such as the allocation of materials, spending controls, and billing and collection practices. In this sense, he will be asked for developing procedures and policies to facilitate the management of these duties. The Chief Financial Officer will also take an active role in hiring and training support personnel, as well the utilization of human resources. The recruitment process for new employees will be externalized to some specialized companies. Thus, the CFO will only manage the salaries policy, and will be a supervisor of the recruiting process, in which he will be involved just at the end, when a contract must be signed with the future employees. As a Human resources manager, the CFO will also be responsible for the training of new staff, which will averagely last one month, and will be subcontracted to specialized companies too. The Chief Financial Officer must be a professionally qualified accountant. Therefore, a degree in Economics or Corporate Finance is needed. Postgraduate education in Business Administration would be desirable. Large experience (over 5 years) in the aeronautics sector, working as an accountant or financial officer, is also a must. Along with directly reporting to the CEO, the CFO will also closely work with the Operations and Procurement Officers. As a result, he will need to attend frequent meetings to effectively coordinate activities which require the presence and commitment of several positions. Therefore, excellent interpersonal and communication skills are needed as well as an outstanding command of English and Spanish languages. The salary of the CFO will be /year distributed on 14 monthly payments. If the objectives are fulfilled at the end of the year, a 20% amount of the total salary will be added. This means that taking into consideration both variable parts and social security costs, the total costs of the CFO for GREENJET will be ranging from to /year Supply chain department The Supply Chain Department will be integrated by the Chief Procurement Officer and a logistics engineer under his supervision. The following chart visually shows how this department looks like: AEROSPACE MBA 104

123 HUMAN RESOURCES PLAN Figure 36 Organization Chart of GREENJET s Supply Chain Department CPO The chief procurement officer (CPO) will be the administrator of the supply chain management of GREENJET. Procurement s role is highly significant in GREENJET s potential success and overall performance. An efficient and effective management of the procurement activities is vital in providing a better lead time than competitors while reducing costs. In this sense, this procurement position and the person who will occupy it will be of strategic importance to GREENJET. The CPO will report directly to the CEO. The Chief Procurement Officer will be responsible for managing the purchases of supplies, equipment, raw materials and products necessary to proceed to the repair of components or to get new ones to deliver to the customer on time. The CPO will be in control of managing excellent supplier relationships while exceeding customer expectations. His responsibilities will include administration and control over all matters pertaining to procurement on contracts. The scope of this position includes sourcing, prequalification of suppliers, bidding, bid clarification and evaluation, negotiations, recommendations for award, pre-award meetings, document formulation and awards. The CPO will work along with the CEO in the preparation and implementation of formalized purchasing policies and procedures governing GREENJET practices and assuring that contractual documents comply with applicable regulations. The academic background required for the CPO could be Business Administration, Economics or Industrial Engineering. Postgraduate education in Supply Chain Management is desirable. Large experience (over 5 years) in supply chain or procurement management positions in the aeronautics sector is needed since he will need to provide outstanding contacts and access to exchange pools and suppliers of components. A strong purchasing and contracts background is also needed. Excellent interpersonal and communication skills are basic along with fluent Spanish and English languages. Outstanding abilities regarding negotiation and leadership are also required. On the other side, the CPO will be someone willing to travel frequently in order to visit GREENJET suppliers and its facilities. The salary will be per year as fixed salary (2.575 each month, 14 months a year), that could be increased up to 20% more if the objectives set at the beginning of each year are met. The real cost for GREENJET of the CPO, AEROSPACE MBA 105

124 HUMAN RESOURCES PLAN taking into consideration social security costs, will be between and Travel expenses are not considered in these calculations Logistics engineer Starting with ordering materials and spare parts, the Logistics Engineer will oversee these materials are turned into a finished and repaired component ready to be shipped and delivered to the customer. Logistics engineering will also be a central part of GREENJET s activities in order to speed up the maintenance and reparation of components, and shipping without detracting from the quality of the component. This will be translated into a better performance in terms of lead time compared to competitors. The duties of the Logistics Engineer will enclose planning, organizing and executing activities for delivering the component to the customer at the right time. He will support every stage of the maintenance and reparation of components acting as a link between procurement and production control. In this sense, the Logistics Engineer will work closely with both his immediate supervisor (CPO) and the Operations department. Therefore, the Logistic Engineer will be in charge of considering tradeoffs in component/systems design, repair capability, spares inventory, demand history, storage, reception and distribution points, and transportation methods regarding shipping and delivery. The Logistics Engineer s academic background should include a Bachelor Degree in Engineering or Business Administration. Postgraduate education in Supply Chain Management or Logistics is an asset. The ideal candidate should have obtained at least 3 years work experience in similar positions. Experience in the aeronautics sector is an advantage but it is not required. Good command of English and Spanish languages is also needed. On the other hand, excellent analytical skills and financial base are needed since he will need to work with complex mathematical models considering elements such as Mean Time Between Failures (MTBF), Mean Time to Failure (MTTF), Mean Time to Repair (MTTR), statistical distributions of repaired components and queuing theories needed to prioritize and make decisions on whether a specific component is urgent or not. Other attributes that the Logistics Engineer must possess are easiness to work in teams, planning and organizing abilities and being a target-oriented person with the capacity of making quick decisions. The salary for this position will be /year in 14 monthly payments. A variable part, up to 10% of the total salary, is considered if the objectives are fulfilled every year. Taking into consideration social security costs, the real cost of the Logistics Engineer will be ranging from to /year Operations department The Chief Operating officer will be the Head of a department composed by both engineers and operators. The organization of this operations department is as follows: AEROSPACE MBA 106

125 HUMAN RESOURCES PLAN Figure 37 Organization Chart of GREENJET s Operations Department COO The chief operating officer (COO) will be responsible for managing the daily activities and operations of GREENJET. This position, along with the Chief Procurement Officer one, is of vital importance to GREENJET since it will be the person in charge of turning GREENJET s strategies into action. He will have three engineers under his supervision (production control, plant and quality engineers). He will directly report to the CEO. The COO will be responsible for the planning, delivery and quality of all services provided by GREENJET, and the management of all resources necessary to ensure that these repair services are planned and administrated to the highest standards, always accomplishing the negotiated specifications regarding lead time. He will organize effectively and efficiently the development, design, operation and improvement of the required systems to deliver the components and equipment to the final client. In exercising general management of GREENJET s operations, his duties include assisting both CEO and CFO in the process of preparing an annual budget in order to give limited resources the most productive use, developing personnel policies and procedures to cascade the organization strategy to the lower ranking staff, and preparing plans for the achievement of GREENJET s specific objectives as well as monitoring its fulfillment. The education background of the COO should include a Bachelor in Industrial Engineering complemented with a MBA. A minimum of 7 years experience as a COO is also needed. Ability to analyze financial data and decisiveness and outstanding business judgment are also required. As he will be the head of a department, he will need to own strong organizational skills including the ability to coordinate prioritize and manage multiple projects. Exceptional oral and written communication skills (English and Spanish languages are a must) with strong attention to detail are also required. AEROSPACE MBA 107

126 HUMAN RESOURCES PLAN The salary of the COO will be per year as fixed salary, in 14 monthly payments, that could be increased up to 20% more if the objectives are accomplished. The total cost of the CPO, taking into consideration social security costs, will be between and /year Plant engineer The person in this position will plan, direct and coordinate activities dealing with the design, construction, modification, performance and maintenance of equipment and machinery of GREENJET s facilities. His duties and tasks include working out standards and policies for installation, modification, quality control, testing, inspection and maintenance of machinery and equipment, according to engineering principles and safety regulations. He will be in charge of inspecting plant and machinery to make sure optimum performance occurs, and preparing contracts and specifications for the acquisition of new facilities or equipment. Testing installed machines and equipment to make sure there is compliance with requirements and specifications is also part of his tasks. The academic background of the Plant Engineer should be related to a degree in Mechanical, Chemical or Industrial Engineering. As he will also be in charge of managing issues dealing with Health and Safety at work, postgraduate education in this field is also required. A minimum professional experience of 3 years is needed. The Plant Engineer should be someone interested in technical and engineering activities willing to adhere to safety requirements, and able to identify, analyze and solve problems. The salary for this position will be /year in 14 monthly payments. A variable part, up to 10% of the total salary, is considered if the objectives beginning each year are accomplished. Taking into consideration social security costs, the real cost of the Plant Engineer will be ranging from to /year Quality engineer Given the rigorous legislation in quality aspects that applies to the aeronautic industry generally, and more specifically to the MRO industry, a Quality Engineer is indispensable in GREENJET s personnel needs. The person in this position will plan, coordinate, and execute Quality Assurance and Control functions to ensure ongoing compliance with regulatory, customer, and company requirements. Areas of involvement include suppliers, internal repair and maintenance, and customers. More specifically, his duties enclose implementing and enforcing quality requirements, working with suppliers, customers, and regulatory representatives regarding quality requirements. Demonstration of initiative to proactively identify quality-related deficiencies, proposal of improvement options, and implementation of resolutions while tracking its progress are also part of his tasks. Three or more years experience as a Quality Engineer or Quality Manager in a company operating in the aeronautic sector is required. He should have experience with quality standards such as ISO The academic background should include a Bachelor in Industrial or Mechanical Engineering as well as postgraduate education in Quality systems; aeronautics concentration should be ideal. The Quality Engineer must have excellent AEROSPACE MBA 108

127 HUMAN RESOURCES PLAN interpersonal, communication and technical writing skills, and be highly organized. He also must be able to work independently and effectively manage the project. The salary of the Quality Engineer will be per year in 14 monthly payments. Additionally, if the objectives are fulfilled, each year he will receive an added amount up to 10% of the total salary. Therefore, the total cost for GREENJET, including social security costs, ranges from to per year Production control engineer The Production Control Engineer will plan, design, setup, modify, optimize and monitor the process of repairing components and equipment which GREENJET is carrying out. He should work with the aim to produce and deliver high quality components efficiently in the most effective methods. By utilizing knowledge of product design, materials and parts, fabrication processes, tooling and production equipment capabilities, assembly methods and quality control standards, he will develop and improve effective methods to repair GREENJET s clients components. His duty is also analyzing and planning work force utilization, production times, space requirements, workflow, and lay-out design to maximize efficiency according to the actual needs of production. As he will be continuously working with other supportive areas such as Quality, Plant Engineering or Logistics, and having people under his supervision, the Production Control Engineer should be someone with excellent leadership, teamwork and interpersonal communication skills. A bachelor in Industrial or Manufacturing Engineering is required. Personal attributes such as self-confidence, capacity of self-starting and analysis, ability to work under pressure, being results driven and flexibility are vital for this position. The salary will be /year (14 months a year) that could be increased up to 10% more if the objectives set at the beginning of each year are accomplished. The real cost for GREENJET of the Production Control Engineer will be between and Technicians The MRO services offered to clients will be developed and performed by GREENJET s technicians. Altough GREENJET will begin its operations by providing MRO services in some specific devices (batteries, displays and pumps), technicians should be able to fix any type of mechanical or electrical component should it be broken, always in the field of aeronautics. By utilizing the repair stations, technicians will provide maintenance, modifications, refurbishment and repairs to components and equipment of GREENJET s clients. A vocational training diploma in avionics or aeromechanical maintenance will suffice for education requirements. However, some experience (at least 2 years) in a MRO solutions provider and adequate certification in EASA Part 66 are needed. Technicians must be great team players always willing to cooperate with other counterparts. They also must be able to work in different shifts and demonstrate a strong safety attitude. Since some manuals are only presented in English language, basic knowledge of Aeronautical English is required. With regard to their salary, technicians will earn /year in 14 monthly payments. Taking into consideration social security costs and a variable part of up to 15% of AEROSPACE MBA 109

128 HUMAN RESOURCES PLAN total salary, the total cost for GREENJET from each of these technicians varies from to /year Warehouse operator The person occupying this position will be covering all activities in GREENJET related to the transfer and storage of goods. As a result, he will be working closely with both Logistics and Production Control Engineers. His duties include accepting parts and components and checking the delivery on the basis of the accompanying documentation, packing and transporting repaired components to GREENJET s clients if necessary, and carrying out stock takes and stock maintenance measures. A vocational school diploma in industrial maintenance is needed for this position; no previous work experience in the field is required. Warehouse operator must be someone with organization skills and ability to make quick decisions. His salary will be divided in 14 payments within a year. No variable part is considered for this position. In this sense, taking into account social security costs, the total cost for GREENJET will be /year. 7.4 Workforce planning Since it will take around one year and a half for GREENJET to get certified as a 145 Part Organization, only a few employees will be engaged at the very beginning aiming to start operating the company. The number of employees described in the above profiles will change throughout the years and it will only reach its full capacity once GREENJET achieves sufficient expertise in providing its capabilities. In the kickoff of GREENJET, only management positions including CEO and his Marketing Assistant, CPO, COO and CFO will participate in the process of building up the company. After the pilot contract at Iberia Maintenance and once GREENJET facilities are available and fully ready to operate, GREENJET will hire two more employees: - A Quality Engineer also in charge of production control processes until another engineer is appointed for this specific purpose. - A Warehouse operator simultaneously in control of facilities and inventory until other employees are hired for these positions. A full evolution of the workforce planning is described in the following chart: AEROSPACE MBA 110

129 HUMAN RESOURCES PLAN Table 28 Workforce planning month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 month 1 month 2 month 3 Labor Force FTE Warehouse operator Logistics Engineer Quality Engineer Plant Engineer Technicians Production Engineer COO CPO CFO Call Operator Marketing Commercial Director AEROSPACE MBA 111

130 HUMAN RESOURCES PLAN 7.5 Policies Remuneration The guiding principle is that the remuneration and the other terms of employment for all GREENJET s workforce shall be competitive in order to ensure that GREENJET can attract and retain competent employees. All employees will have an indefinite contract. In order to motivate them, a performance-related pay system will be implemented. Salaries will consist of a fixed part and a variable part depending on the objectives accomplishment. Concerning fixed salaries, these wages should be competitive and based on the individual responsibilities and performance. The principal terms of variable salary and incentive schemes, including the relation between fixed and variable components of the remuneration and the linkage between performance and remuneration are applied to each position. Some employees may receive variable salaries in addition to fixed salaries. The variable salary may amount to a maximum of 30% of the fixed annual salary as in the case of the CEO. The variable salary may be based on the performance of the entire GREENJET company or the performance of the departments where the workforce is employed. The performance will be related to the fulfillment of various improvement targets such as reduction of lead time or the attainment of certain financial objectives. Such targets will be set by the Management Board and may relate to operating income or cash flow. A summary regarding this issue for the end of the first year is displayed in the following chart: Tabla 29 Annual salary for each employee Position Number of people Annual Salary Incentives Real Cost (+35% SS) Total Cost (SS+Incentives) CEO CPO COO CFO Marketing assistant Quality engineer Warehouse operator Technicians The gross salary will be increased each year according to the real CPI of the abovementioned year. Concerning working hours, those of technicians will be eight hours per day (40 hours weekly), adapting to mission requirements and customer s needs. This means they need to be flexible to adapt to different work shifts. For both managers and supportive positions, the working hours will be from 8 to 5; however, flexibility is also required. On the other side, all the personnel will enjoy one annual paid vacation of 21 effective days, according to compensated yearly calendar. The vacation period will be fixed between the months of July and August, so that they cover the maximum number of complete weeks on a continuous way. Any individual request of change of the vacation period will be studied AEROSPACE MBA 112

131 HUMAN RESOURCES PLAN by the direction of the center, being granted or not on the basis of the needs of the requested period Performance evaluation Performance evaluation is a necessary and beneficial process that will provide annual feedback to GREENJET employees about their job effectiveness and career guidance. GREENJET is committed to pursue a totally fair and balanced assessment of its employees performance. Supervisors and department heads will evaluate their subordinates in the following areas: Accomplishments Knowledge, quantity and quality of work Service and relationships Dependability Adaptability and flexibility Decision making and problem solving In addition to this, it is also important the 360-degree assessment, in which the participant completes a self-assessment and also collects feedback from supervisors, subordinates and customers. GREENJET aims to assess the ability of its workforce in order to make the best use of its talent in the present job Trade unions Whenever a company is composed by more than 5 employees, workers will be represented by a minimum number of shop steward, as stated by the Spanish Law. According to the Article 62 of the Worker Bylaw, it is stated that the minimum number of shop steward in a company would be: Table 30 Minimum number of stewards depending on number of employees Number of employees Number of shop stewards from 6 to 30 1 from 31 to 49 3 The amount of hours that must be spent by every shop steward to represent other employees should be, on a monthly basis, as follows: AEROSPACE MBA 113

132 HUMAN RESOURCES PLAN Table 31 Time spent for representation depending on number of employees Number of employees Time spent for representation (monthly, per shop steward) From 6 to hours From 31 to hours From 50 to hours From 101 to hours Since GREENJET s labor force capacity is in the range from 6 to 30 employees, the spent time for representation is only 15 hours per month. Therefore, another person for dealing with this purpose is not required. AEROSPACE MBA 114

133 QUALITY MANAGEMENT SYSTEM 8 Quality Management System 8.1 Introduction The old Quality concept has been long forgotten. From the control inspection of finished goods, there has been an evolution to a Quality Management System, focus not only on the fulfillment of the requirements, avoiding the non conformities before they appear, but looking forward to a constant improvement. This System concerns all stages and it must be considered as a strategic decision. The QMS is intended to achieve the commitment of all to a common goal of continuous improvement. In the aeronautical sector, which is highly regulated, the QMS needs to comply with regulatory authorities requirements. Civil (and military, although they do not concern us) authorities require an updated Quality System which ensures that every product or service is performed according the requirements and is able to operate safely. The International Aerospace Quality Group (IAQG) developed in 1997 a series of international regulations based in the ISO9000, AS/EN 9100, to cover all the requirements that are specific to the QMS in the aeronautical sector. So it is compulsory to develop a QMS which complies with these regulations to compete in the aeronautical sector, the way to probe that those requirements are fulfilled is through certification. 8.2 Certification Certification is a formal manifestation emitted by a recognized authority, stating that process, a product, an organization or a single person fulfils a series of established requirements. There are two types of certifications: External and Internal External regulation Those are the requirements set by an organization not related to the company. These publications are made by a regulatory body. In Spain there are two different authorities who are able to issue Airworthiness Certificates, EASA-AESA (Civil Market) and DGAM (MoD, Military). Both of them issue the regulation which must be fulfilled by any Company in their sector. Although there has been an approach from the Military regulation to the civil one, in order to unify different criteria, they have still to be addressed separately. GREENJET will only perform its activity in the civil market. AEROSPACE MBA 115

134 QUALITY MANAGEMENT SYSTEM EASA The current standard is based on Regulation (EC) nº216/2008 which defines the functions and responsibilities of the EASA. This Regulation has two main dispositions: - Regulation (EC) nº1702/2003, regarding the airworthiness certification and fulfillment of the environmental requirement of the aircrafts and related products and the certification of the design and production bodies. - Regulation (EC) nº2042/2003, regarding the maintenance of the airworthiness of the aircrafts and related products and concerning the approval of the organizations and staff. Both are structured in Parts and Subparts, which are also divided in two sections: - Requirements to fulfill by the applicant (AMC, Acceptable Means of Compliance) - Procedures to be followed by the National Authorities (GM, Guidance Material) Regulation (EC) nº1702/2003 (new Aircrafts). Certification Specifications (CS) o CS-25 Big Aircrafts (FAR 25 FAA) o CS-34 Engine Emissions (FAR 34 FAA) Regulation (EC) nº2042/2003 (Aircrafts Maintenance). Annexes o Annex I. Part M. Maintenance and airworthiness requirements o Annex II. Part 145.Maintenance Organization Approval. (MOA) o Annex III. Part 66. Maintenance Licenses requirements. (AMT) A B1 B2 C o Annex IV. Part 147. Organization Training Approval. This is the aeronautical regulation related to design, manufacturing and maintenance. AENA (Aeropuertos Españoles y Navegación Aérea), belonging to Ministerio de Fomento, is responsible of the air traffic management and its regulation. It contribute to the development of the air traffic in Spain and guarantees the security, efficiency and economy of the air traffic, offering a quality of service in accordance with the customer demand and users, within the frame of the general transport policy of the government. Particularly in our case, we are going to be certified in Part 145, Maintenance Operations Approval and Part 66, Maintenance Licenses requirement, Aircrafts Maintenance Technicians. EASA Part-145 AEROSPACE MBA 116

135 QUALITY MANAGEMENT SYSTEM To obtain approval to become an aeronautical repair station, the company must write, submit and keep updated a Maintenance Organization Exposition, which must include a documented set of procedures. The organization must also have a compliance matrix that shows how they meet the Part-145 requirements. Once the Company is created, the Part-145 certification takes from 12 to 18 months to be obtained. EASA Part-66 The aircraft maintenance personnel have to comply with Part-66. There are three levels of certifications. - Category A License. Line Maintenance Mechanic: It allows the holder to issue certificates of release to service following minor scheduled line maintenance and simple defect rectification within the limits of tasks specifically endorsed on the authorization. These privileges are restricted to the work that the license holder has personally performed in a Part-145 company. - Category B1(Mechanical) or B2(Avionics): Line Maintenance Technician. B1 license allows the holder to issue certificates of release to service following maintenance including aircraft structure, power plant and mechanical and electrical systems. Replacement of avionics units, requiring simple functional test to prove serviceability, are also included. Category B1 automatically includes the appropriate A subcategory. B2 License permits the holder to issue certificates of release to service following maintenance on avionic and electrical systems. - Category C (Base Maintenance Engineer). It allows the holder to issue certificates of release to service following base maintenance on aircraft. The privilege apply to the entire aircraft in a Part-145 organization FAA To become a Certified Repair Station under the Federal Aviation Administration is also a future objective of GREENJET. This would allow us to operate with North American manufacturers and, therefore, to be able to provide services to a wider variety of customers. The process usually takes longer than the EASA certification, even though its requirements and costs are similar ISO ISO 9000 is a group of modern standards for Quality Management Systems, maintained by the International Organization for Standardization and administered by accreditation and certifications. In Spain, this organism is he Spanish Association for Normalization (AENOR). There are three main standards inside ISO 9000: - ISO 9000:2005, Quality management systems Fundamentals and vocabulary. This document contains the basis of the standard, acting as an introduction fort he other series. It is a guidance document, and not used for certification. - ISO 9001:2000, Quality management systems. Requirements. Oriented to certification, it provides requirements that the company needs to fulfil i fit is to AEROSPACE MBA 117

136 QUALITY MANAGEMENT SYSTEM achieve customer satisfaction through consistent products and services that meet customer expectations. It includes a requirement for continuous revision and improvement of the QMS. - ISO 9004:2000, Quality management systems. Guideline for performance improvements. This is also a guidance document, it advises on good practices to enhance the QMS. Regarding the quality regulation by the International Organization for Standardization and based on their ISO regulations, the family EN9100:2003 set de regulation for the aeronautical sector. This regulation has its origin in ISO9001 mainly, which provides standards and guideline to de assurance of the quality, certified by third parties. The EN 9001 is based in eight principles, which are shared by the EN9100: Focus on customer. Organizations depend on their customers, so they must understand their needs and satisfy or exceed their requirements and expectations. Leadership. Leaders must create and maintain an adequate internal behaviour oriented to involve all workers in the fulfilment of the objectives. Staff participation. The workers are the essence of the organization, they are the utterly applicants of the quality system. They must acquire a true sense of commitment to it. Focus on processes. Activities and resources must be managed as a process to obtain better results. Focus on management systems. To identify, understand and manage the interrelated processes as a system, it contributes to the efficiency of the company. Continuous improvement. It must be always a permanent objective. Facts to make decisions. Efficient decisions are based in data analysis and information. Mutually profitable relations with providers. The company and its suppliers and interdependent. In this business it is a key factor. EN9100 is created in 2003 and adding the specific requirements to 9001 related to the aeronautical sector. Under the cover of IAQG (International Aviation Quality Group), it has a Process oriented approach. Some of the requirements included in ISO 9001 are: Set of procedures to cover all key processes in the business Monitoring processes to ensure their efficiency. Keeping adequate records. Checking the outputs for defects and apply adequate corrective actions if necessary. Reviewing individual processes and the quality system. AEROSPACE MBA 118

137 QUALITY MANAGEMENT SYSTEM Facilitate continuous improvement. Therefore, EN9100 is a family of regulations concerning: EN9100: Quality Systems Management requisites EN9101: Quality Systems Management evaluation. EN9102: Quality Systems. Inspection EN9103: Key Features Variations Management EN9110: Quality Systems. Quality Assurance of Maintenance Organizations EN9111: Quality Systems. Quality Evaluation of Maintenance Organizations. EN9120: Quality Systems. Quality Model of Storage EN9121: Quality Systems. Quality Evaluation of Storage EN9131: Quality Management Systems: Non Conformities Documentation Others Related to the aeronautical sector Those are regulations which are mandatory but they are not issued by any official organization but by Companies or private organizations, and they are usually linked to a contract (either subcontracting or joint venture). Due to the increase in the international standardization of procedures, systems, methods and certifications, this kind of agreement are decreasing nowadays. Non related to the aeronautical sector but mandatory Within the national and autonomic framework of the industrial activities, these regulations are applicable, Labor (Ley del Estatuto de los Trabajadores) Environmental (Environmental Regulation & ISO14000) Fiscal Regulation (Agencia Tributaria) Internal quality management The internal quality management is the collection of procedures, regulations and specifications which set the requirements for the activity of the company, regarding all aspects: industrial, financing, legal, managerial, human resources, etc. This is documented in the General Quality Manual of the company. This Manual defines the company management to fulfil all the external requirements. AEROSPACE MBA 119

138 QUALITY MANAGEMENT SYSTEM General quality manual The General Quality Manual involves all the organizations and products, and it is accepted worldwide. It has a structure linked to the guideline from the quality management system which rules the company (EN9100). Within the manual the following chapters are described: Company Policy Declaration Organization and Responsibilities (Organization Chart) Industrial Processes Human Resources Management Environmental Management All of them are fulfilling a point in the EN9100 regulation, which is mentioned in each chapter/section. It also provides an Annex with all the cross references between the requirements of the EN9100 and how the company fulfills them. The General Quality Manual requires the approval from EASA to its Certification under Part 21 or Part Memories of design, production and maintenance Depending on which Certification the company needs, it must issue a Memory according to their approval by Civil Aviation. Those are the following: DOM. Design Organization Memory POM. Production Organization Memory MOM. Maintenance Organization Memory. In our case we must have a Maintenance Organization Memory (MOM), base for the MOA (Maintenance Organization Approval) Contract and quality plan The document which establishes the relation between the customer and the company is the contract. Therefore, this is the first reference document to be fulfilled. The contract can set particular requirements in addition to the existing ones. This is more usual in international contracts mainly due to requirements of the authorities of the country and the application of the contracting company. How the company fulfills the requirements of the contract is documented in the Quality Plan. This is based on the General Quality Manual and adapted to each contract ISO certification The ISO is a standard for environmental management systems that is applicable to any business, regardless of size, location or income. The aim of the standard is to reduce AEROSPACE MBA 120

139 QUALITY MANAGEMENT SYSTEM the environmental footprint of a business and to decrease the pollution and waste a business produces. The most recent version of ISO was released in 2004 by the International Organization for Standardization (ISO) which has representation from committees all over the world. The major objective of the ISO series of norms is "to promote more effective and efficient environmental management in organizations and to provide useful and usable tools - ones that are cost effective, system-based, flexible and reflect the best organizations and the best organizational practices available for gathering, interpreting and communicating environmentally relevant information". The intended end result is the improvement of environmental performance. It offers source of guidance for introducing and adopting environmental management systems based on the best universal practices, in the same way that the ISO 9000 series on quality management systems, which is now widely applied, represents a tool for technology transfer of the best available quality management practices. The ISO environmental management standards exist to help organizations minimize how their operations negatively affect the environment. In structure it is similar to ISO 9000 quality management and both can be implemented side by side. In order for an organization to be awarded an ISO certificate they must be externally audited by an audit body that has been accredited by an accreditation body, AENOR in Spain. The implementation is not mandatory and it does not fix limits in the emissions or measurement of emissions. Our company will be certified with this standard that assures the management of the organization in a sustainable manner without environmental risk or lower impact. The environmental management helps us minimize how our operations negatively affects the environment, cause adverse changes to air, water or land, comply with applicable laws, regulations and other environmentally oriented requirements, and continually improvement. 8.3 Internal regulation system The internal regulation system aims to establish the procedures to fulfil the external requirements and organize the management of the company. The documentation must cover each one of the company aspects, grouping them in collections: Organization Production (Systems, Process) Financing (Management and Control) Engineering (Design, Production) Quality Human Resources AEROSPACE MBA 121

140 QUALITY MANAGEMENT SYSTEM The documentation must be also univocally identified as the different revisions of it, traced by a revision registry. The system must be closed. There are crossed references between the different regulations, belonging to the same area or not. There cannot be references to cancelled regulations or similar, which would make loose the system consistency. When doing crossed references, the referenced regulation must only be addressed by its identification. Each collection must have its owner, who is responsible of issue it and its maintenance, keeping the collection updated an available to be consulted. There are three different profiles, issuer, approver and consulter. 8.4 Quality summary According to everything explained above, our company needs to certify is Quality System according to ISO-9001, which shall be done trough the Spanish Normalisation Association, and to certify as well is maintenance centre, for which it will require Part-145 certification of approved maintenance centre, issued by the General Directorate of Civil Aviation (DCAG), which is he national organisation responsible for regulation to ensure safety in aeronautical operations. Our company will not be certified in Part-21. GREENJET will be a MRO company, it is not mandatory to obtain this certification to perform our activity. Part 21 would certify our Design and Production capabilities, which our company does not need. Regarding the POA certification, it allows any company to obtain the Part-145 certification, but that does not mean that it is necessary. Certification authorities permit to obtain Part 145 without any previous certification. So, due to this and the difficult of the obtaining, GREENJET will be certified in Part Health and safety As part of GREENJET policy, a safe workplace for employees is mandatory. GREENJET is committed to maintain safe and healthy working conditions for its employees, monitoring, evaluating (incidence rate and severity) and applying measures, periodically. The reference legal framework is given by the Law of prevention of labour risk (31/1995) and the Royal decrete (39/1997), on the regulation of the services of prevention and other legislation as for prevention of labour risks. GREENJET maintains a commitment towards sustainable development through the involvement and contribution of all workers, a continuous optimization and effective management systems in all areas of Health and Security. By doing this, GREENJET goes beyond the fulfilment of the legal requirements. GREENJET develops its industrial process evaluating their risk on Health and Safety, evaluating them during the operational activities, promoting improvements and solutions and providing information about the protection of Health and Safety. The Health and Safety policy would be reviewed periodically. AEROSPACE MBA 122

141 QUALITY MANAGEMENT SYSTEM The DCAG is responsible for issue Part-145 certification and of performing periodic inspections to ensure the normal behaviour of licence prorogations. The cost associated to the certification is constant along the life of the company, which it is about per year.. AEROSPACE MBA 123

142 LEGAL PLAN 9 Legal Plan 9.1 Legislation Our company will be GREENJET Llc. (GREENJET S.L.) The company will be established in Alameda de Osuna, Madrid, Spain. The Corporate Tax, regarding this location is the Spanish one, will be a 30%. The main aspects are described as follows: Table 32 Legal characteristics of GREENJET company Type of Society S.L.(Sociedad Limitada) Llc (Limited Liability Co.) Minimum Capital 3005,06 Initial Capital Fiscal Personality Liabilities with thirds parties and Social Security Number of associates Capital divided in Fiscal Policy Employer Regime Total Amount Own Limited to the company s wealth -1 person S.L.U. -2 or more S.L. Participations Corporate Taxes: -30% of the first % of the rest of benefits VAT: -Declarations in a quarterly basis General Regime of the Social Security employees AEROSPACE MBA 124

143 LEGAL PLAN Our company will be a medium-size company located in Spain. The breakdown structure of the company consists of five members. The bylaws of our company are detailed bellow V.A.T The standard rate is 16%, while the reduced rate is raised from 7% to 8% and applies to most supplies of goods and services. There is a reduced rate of 7% applicable to certain supplies of goods and services. Effective July 1, 2010, the General State Budget Law increases the standard rare from 16% to 18%. There is also a "super-reduced rate" of 4% that applies, for instance, to essential food items, books, newspapers and magazines, or certain government-subsidized housing. Certain transactions are exempt from VAT (for example, financial and insurance transactions, medical services or educational services) Bylaws General resolutions - Section 1.- Name. The Limited Liability Company is registered under the name GREENJET S.L. as a Sociedad Limitada, operating under the Spanish law. These bylaws will drive its operation and development, but any fact not overseen by this document will be solved according Chapter XII of the Spanish law 2/1995 (23 rd march). - Section 2.- Objective. Mission: To provide services in an agile and effective way decreasing lead time through flexibility and specialization. Vision: To consolidate in the medium term as a Spanish company located in Alameda de Osuna, near Barajas airport (Madrid) to provide MRO services, being focus on avionics and hydraulic capabilities (ATA s 24,29,31,34). - Section 3.- Duration. The company is constituted for an undefined period of time and will begin its corporate operations the day of the granting of the deed of incorporation. - Section 4.- Social Domicile. The company has its domicile in Alameda de Osuna, Madrid. The administration board will be able to create, delete, and move branches, agencies or offices anywhere in the Spanish territory or abroad, and to change the registered office within the same municipality of residence Social capital shares - Section 5.- Social Capital. The social capital of the society is set on Euros. This capital is divided into social shares, all of them equal, cumulative and indivisible, of 1,75 Euros nominal value each, numbered consecutively from the unit. AEROSPACE MBA 125

144 LEGAL PLAN - Section 6- Transmissions: Voluntary. All voluntary transfer of shares will be free if it is in favour of other partners, or familiars up to first degree of consanguinity. Other transmissions are subject to what is specified by the general law. Mortis Causa. Any transfer of shares mortis causa, either by inheritance or bequest in favour of another partner or spouse, ancestor or descendant of the deceased partner will be free. Apart from these cases, in other transfer of shares by mortis causa, the surviving partners -in default the company-, will enjoy a preferential right to purchase the deceased partner shares at the fair value they had the day the partner died. The price will be paid in cash and this right must be executed within a maximum of three months after the notification to the company of the inheritance acquisition. If there is not an agreement about the fair value of the shares or about which should be the evaluation method, the shares will be valued as specified in Article 100 and followings of the Limited Liability Companies Act. After the specified period and if this right has not been put into practice, the hereditary acquisition will be consolidated Common rules - The acquisition, by any title, of social shares, must be communicated, by certified mail to the administration board, including the name or corporate name, nationality and address of the purchaser. - The shares transmission system, shall be the one prevailing on the date that the member gives notice to the company about his transmission purpose or, where applicable, the date of death of the partner or of the judicial or administrative award. - The transmission of shares, which do not comply with the provisions of these bylaws, will not produce any effect to the company. Social structure - Section 7. General Meeting Call. The general meetings will be convened by telematic communication addressed to the address that the partners had provided for this purpose to the administration board. Adoption of agreements. - Social arrangements will be taken by a majority of the valid votes cast, representing at least a third of the votes corresponding to the shares, not taking into account blank votes. However, as an exception: - The favorable vote of half of the shares will be required for the agreements regarding the increase or reduction of the social capital, or any other will to modify these bylaws, for which no qualified majority is required as shown in the following paragraph. - The favorable vote of two thirds of the shares will be required to increase the social capital over the limit established by article 135 of the Limited Liability Companies act, AEROSPACE MBA 126

145 LEGAL PLAN to address the transformation, merger or division of the company, the suppression of preemptive rights in capital increases or the exclusion of a partner. - Section 8.- Administration Board: Organization. The administration of the society may be entrusted to a single judge or a multimember body, whose number must not exceed five administrators. Corresponds to the general meeting, the power to choose any of the ways of organizing the company. Administrators must be partners Administrators will perform their duties indefinitely, unless the general meeting determines their appointment for a specific period. - Section 9.- Power of attorney. If there is a sole manager, the power of attorney will correspond to him. if there is joint and several administrators, the power of attorney will correspond each one of them. If there is co-administrators, the power of attorney will correspond and will be executed jointly by any two of them. Section 10.- Powers. The board of administrators is in charge of the management and social administration, and of the full representation of the company in any trial or administrative event. Therefore, with the exception of the acts within the competence of the general meeting, the power of representation of the administrators shall be understood as the greatest extent in recruiting in general and to perform any kind of acts and transactions regarding the purpose of the company Accounting year - Section 11.- Fiscal year. The fiscal year begins January 1 st and ends December 31 st of each year. The first fiscal year will start the day of issue of the deed of incorporation and will end on December 31 st of this same year. - Section 12.- Annual accounts: The administrators board, in a maximum period of three months from the last fiscal year, will present the annual accounts according to the content legally established. On the form, content, description, rules of evaluation, verification, review, partners information, approval, implementation of results and deposit accounts in the commercial register, it shall be as provided by the applicable law Operations and liquidation - Section 13.- Continuing operations as a limited liability company. The company may continue its corporate operations as a general limited Liability Company with the requirements explained on Article 144 of its governing act. AEROSPACE MBA 127

146 LEGAL PLAN - Section 14.- Dissolution and liquidation. The company will be dissolved for the reasons established by the law. The whole process of dissolution and liquidation will be governed by specific regulations and in default by the general rules. Once the dissolution has been determined and the liquidation period has started, the actual managers will stop their duties and will now on be converted into liquidators, unless the general meeting may appoint other liquidators (no more than five) Complementary resolutions - Section 15. Any question that might arise between members, or between them and the society, because of social relations, and without prejudice to the rules of procedure that are legally applicable, will be solved by the first instance tribunal of administrative litigation of Seville Steps The steps to establish the company are the following: Certificate of clearance for use of the name of the new company. This step should precede all others, to ensure that the proposed name can in fact be used. Execution of the public deed of incorporation in the presence of a Spanish notary public. Evidence of the identity of the founder shareholders. The notary public will require the persons who appear before him for this purpose to exhibit: evidence of their identity Bank documents must be delivered to the acting notary public as evidence of payment. Account created Assignment of a tax identification number to the new Company (NIF or CIF) Payment of transfer tax (see below). A special form must be filed within a maximum period of 30 days from the act of incorporation. Once the above steps have been completed, the company s Public deed of incorporation is filed at the Mercantile Register for its formal registration. Registration of the company for the purpose for IAE (Business activity tax). Registration of the company for VAT purposes. Opening license. AEROSPACE MBA 128

147 LEGAL PLAN Registration of the company for Spanish Social Insurance. Compliance with certain procedural formalities at the local office of the Ministry of Labour and Social Affairs. As a general rule, incorporation takes between six and eight weeks although this period may be considerably longer if a NIF must be obtained for any of the foreign directors. Cost associated: It has to be presented the Declaración Censal (Modelo 036) and the Register of the company for the purpose of IAE (Business Activity Tax) Transfer Tax: 1% Fee Notary Public: 0,6% Local Mercantil Register: 0,13% AEROSPACE MBA 129

148 FINANCIAL PLAN 10 Financial Plan 10.1 Introduction The objective of the financial plan is to help GREENJET meet its strategic objectives by providing the necessary funding for the operations Scenarios considered The assumptions regarding the economical environment are critical to the performance of the company throughout the planned years of operation. Deviations from the forecast may result in a worse cash position in the short term affecting the daily activity, as well as jeopardizing the long-term operations if financial resources are not available in the forecasted conditions. The evolution of certain parameters is uncertain due to the current situation, even in short term. This situation makes us analyse the evolution of those parameters with care, taking into account that this is not following the normal evolution of previous years. The GDP growth, interest rates, pricing trends, unemployment rates, etc are particularly different as expected. By considering this, we set out our economical assumption to develop our Financial Plan Macro environment Some macro economical parameters affect the results and performance of any business and GREENJET is no exception. The following assumptions are made for our company Fiscal The fiscal policy affecting GREENJET is that of Spain, where the operation is based. The income taxes are set by the central Government and applied by the Comunidad de Madrid. The Corporate Taxes are detailed above in the Legal Plan. Other tax applicable to the company is the VAT, which is set by government as well, in line with European legislation Economic Besides the taxation, other macroeconomic parameter affects the operations modifying the prices GREENJET has to pay for materials and services, the salaries and especially for the financing resources. AEROSPACE MBA 130

149 FINANCIAL PLAN In the Euro zone all are affected by the strength of the Euro, which allow us to develop our business within Europe, but it makes us more difficult to trade with internationals partners. Also, we are currently in economic recession and the public deficit reaches 6% of GDP. A low level inflation and the rate of interest in 1%. We are basing our business in a non common situation, so in the Financial Plan is not considered to maintain, that provide us a more realistic performance forecast. Even though the projections says that this figures are going to keep as they are for 2010, around 0,75% Rate of interest, a inflation of 1%, the unemployment around 9%, remember this is the forecast for Europe, a public deficit of 5% of GDP and an expected Economic recession of -3%. But our company will be located in Spain, and its economic situation can vary from the European one. Spain is currently in a worse economical situation than the European average, mainly its unemployment rate, reaching 20%, among others factors, as the inflation, house pricing, black money, the falls of the types of interest, etc, are stopping them to come back to a sustainable economic growth. The current economic forecast set Spain in a disadvantage position, an economic growth of -3%, difficulties due to a low inflation (0,5%), non sustainable retirement policy, an unemployment rate out of scale a the public sector deficit increasing (8% of GDP). Considering this we have set our forecast expecting an evolution on the key factors as follows: Salaries increases: 3,5% Interest rates for borrowings and cash investment: 5% Micro Taking into account the particular characteristic of the sector, and comparing these features to the competitors. The aim of GREENJET is to set a collecting and payment period of 90 days, which we consider reasonable and realistic given the performance of the current competitors in the MRO sector. By doing this, we set the basis for a deep Financial Plan analysis over which the company is going to establish and grow Investment analysis The deployment of GREENJET operations needs some important investments. The main ones have already been specified in the operation plan: universal repair stations (avionics and hydraulics), logistics and ERP System. Even so, there are others regarding the personnel working at GREENJET and other general expenses. AEROSPACE MBA 131

150 FINANCIAL PLAN Premises The premises at Alameda de Osuna will be used within a long term rental contract. The area needed for the activities of GREENJET was described in the operations plan and established in 593 m 2. In this area facility of 600m 2 can be rented which would satisfy GREENJET s needs. The rents of industrial premises in this area of Madrid lay under 100 /m 2 a year, which is a conservative assumption as baseline for the calculation of the rental expenses Equipment This chapter presents the principal investments in assets that must be done to support GREENJET s activities. All the assets needed are presented together with the estimated sum of the investment along with both maintenance, cost and amortization. Table 33 Cost and maintenance for Avionics Avionics Equipment Cost Maintenance Amortisation Testing benches Oscilloscope Power Supply Multimeter Other Display repair station Frequency converter Laptops Racks Total Table 34 Cost and maintenance for Hydraulics Hydraulics Equipment Cost ( ) Maintenance Amortisation Universal hydraulic station Tooling Benches Standards Total AEROSPACE MBA 132

151 FINANCIAL PLAN Table 35 Cost and maintenance for Logistics Logistics Equipment Cost ( ) Amortisation Cargo Van Benches Trolley Total Table 36 Cost and maintenance for ERP ERP Equipment Cost ( ) Maintenance Amortisation ERP modules Total The maintenance cost represents 4% of the price cost for the avionics and hydraulics repair stations and a 10% for the ERP system due to extra costs of updating services. Amortization and depreciation are calculated according to a lineal formula taking into account a ten-years period, the typical life cycle in the aeronautical industry. The amortization and depreciation period that have been chosen to each investment is shown in the following chart: Table 37 Amortization investment Amortisation for equipment : 10 years Amortisation for Logistics: 10 years Amortisation for MRP: 10 years Personnel Personal cost is broken down in the Human Resources Plan. The following chart shows the salaries of each employee for a ten-years forecast. Table 38 Personnel salaries Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Salaries Logistics Engineer Quality Engineer Technicians COO CPO CFO Marketing Director AEROSPACE MBA 133

152 FINANCIAL PLAN Other costs They consist of ERP maintenance, offices maintenance, CMM, certifications (ISO 9001, PART-145) and others (phones, electricity). Table 39 General costs year-1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 General Expenses ERP Maintenance Offices Maintenance CMM certifications Expenses (phone..) As it is mentioned before, the ERP maintenance is considered the 10% of its price cost. With regard to the offices maintenance, this cost is really similar to the ERP maintenance so the same assumption is considered. The percentage taken into account is a conservative figure. Mannuals and certifications costs are stablished according to different sources. It is the common cost for the competitors. Finally, other expenses such as electricity, phones, etc are considered the 10% of the salary of the people due to they will depend on how many people will make use of them Subsidies and subventions According to the previous data, GREENJET will start its activity in In order to the company grows, an external money has to be borrowed. Getting this capital can be done by different ways. In the case of susidies and subventions, the corresponding information is detailed below Subventions It is an advance lending of money that has to be later reimbursed. The source of the capital is the Ministerio de Educación y Ciencia and it will lend the money to the Comunidad de Madrid. In this case, GREENJET can reduce the capital needed for initial investments. One kind of subvention that GREENJET could ask for is an aid to the investment to which it is only possible to be chosen if the project is located in the Community of Madrid. The aid to which could be chosen with a ceiling would be: - Aid for projects that include infrastructure destined to R+D activities: GREENJET can choose the program INNPLANTA of the Ministry of Science and Innovation. Aid in the form of credit to 0%, 15 years with 3 of deficiency. An aid in the form of credit between the 50-60% of the financiable budget could be obtained Subsidies GREENJET will rely on subsidies as well. It is foreseeable that the company will get support through governmental organizations. This is because GREENJET it is a starting AEROSPACE MBA 134

153 FINANCIAL PLAN company, so as other new companies, it will get support to start its activities and it will bring about an enrichement economy in terms of locally, nationally and european. All in all, GREENJET could apply to different subsidies Regarding to the Community of Madrid - Subsidy for the promotion of the innovation in the aerospace sector of the community of Madrid. The target consists of fomenting the technological innovation in the aerospace sector of the community of Madrid. One of the beneficiaries of this type of aid is companies that develop or are going to develop to projects and activities in the scope of the community of Madrid related to the repair and aeronautical and space maintenance. Among the actions qualifying for funding, they emphasise those projects of engineering development directed to the acquisition, combination, configuration and existing use of knowledge and techniques or designs of products, new processes or services, modified, or improved. The quantity of the aid will be at the most for the assembly of the project of In no case those projects will be subsidy object whose expenses qualifying for funding are inferiors to The period of accomplishment of projects will be of the 1 of January to 31 December of the Innoempresa program, of support to the innovation of the SMEs of the Community of Madrid Support to projects presented/displayed by groups of companies whose activity comprises of the chain of value of a product, through the joint implantation of projects destined to improve processes and products of tie companies by the value chain. Regarding to Europe - ERDF (European regional development fund). It finances direct aid to investments in companies, in particular PYMEs to create sustainable jobs. It groups its objectives and endowments ( M jointly) in order to reinforce competitiveness and regional attractiveness. - PIE (Plan of Enterprise Innovation) It is a program of aid that supports projects of investigation and develpment, as much of processes as of products and/or services, the creation of PYMEs and units of tie business to activities related to the new technologies and the hiring of external services that impel the innovation of the PYMEs by means of the introduction or the use of new technologies. - PMIC (Marco Program for Innovation and Competitiveness) It is another program that destines its budget to provide financial tools (innovative PYME s and fast growth) This program destines its budget of M to provide financial tools. - FEI AEROSPACE MBA 135

154 FINANCIAL PLAN It depicts direct investments from the European Investment Fund. FEI is based on venture capital tools for the promotion of PYME s and warranty tools for the financing institutions, to guarantee the consession of credits to the PYME s. Funds can vary between 10 and 35% of total capital, but the exact amount of investment of the EIF will be defined according to size and other characteristics of each. Regarding to Spanish Governmental Organizations - FIT Programme: Subsidies and loans free interest fo technological develpment activities as part of the National plan of R+D+I. Ministry of Industry, Tourism and Commerce. - Avanza Plan: Subsidies that help to incorporate IT systems that imply innovation. Ministry of Industry, Tourism and Commerce. - Aids to technological development, innovation projects. Centre for the Industrial Technologic Develpment (CDTI) and for programmes developed specially for the aeronautical sector. - Programme that supports innovation in SMB s (PYME s). Innoempresa (explained above) GREENJET funding strategy Throughout the first year of implementation of the company (2010), there are two key moments in which specific investment is required. Several funding approaches will be taking into account depending on profitability and interest to GREENJET. First month An ERP system is needed to be financed at the very beginning. The cost of this system amounts up to The ERP financing will be done mixing the following alternatives: - -A short term loan from bank. The total amount will be with a monthly repayment. The interest rate will be 5% being the duration of 1 year. - -Partners capital contribution. The total amount will be divided among the five partners. Eleventh month Universal repair stations (avionics and hydraulics) will be acquired to start operating at GREENJET facilities. The cost of the stations will be Financing will be done also through different alternatives: - -Subvention (Aid for projects that includes infrastructure destined to R&D activities), credit at 0% interest rate, being the duration of 15 years with 3 of deficiency. The total amount will be being the repayment postponed until year Long term bank loan, total amount of The duration will be 10 years with an interest rate of 5% being yearly repayment. AEROSPACE MBA 136

155 FINANCIAL PLAN - -Investors: total amount asked to investors equals A return on investment will be offered at 8-9% at the beginning of the fifth year. - -Proyecto de Desarrollo Tecnológico de la industria auxiliar PDTIA of CDTI: for 10 years, 0% interest rate and 33% not refundable. Additionally, two upgrade actions are planned for the fifth year of operations. One for the Avionics equipment worth and another for the ERP system for the same amount. However, the cash generation in that year allows for the use of own resources Sales The estimation of the income from operations in GREENJET is derived from the commercial plan. This plan foresees an agreement to be signed with Iberia for a list of components to be serviced of Ibera aircraft and other partners of the Oneworld alliance. These components belong to ATA chapters in which Iberia and Iberia Maintenance want to free capabilities in order to reallocate them in other areas of components and aircraft maintenance. These Chapters cover avionics and hydraulics components. The number of components is estimated as follows. The average operation of the Airbus A320 family is estimated to be FH per year. This assumption is valid for the partners of the Oneworld alliance that are regular airliners. For them, this amount of FH per year can be assumed to be distributed equally along the year in a monthly basis. GREENJET will service the contracted components for the Iberia fleet and partners with an estimation of 90 aircraft of the A320 family. From these a/c only a limited number of p/n will be repaired GREENJET estimates from the mean time between unscheduled removal, the times that a component goes to workshp per year. This information is collected about all the components aboard the A320 family as well as the number of items mounted per a/c. With this information a calculation of the incoming components per month can be done. This is shown in the following table: Table 40 Price list for components services Components ATA Equipment MTBUR (FH) Quantity per a/c Rep. Price ( ) Exchg. Price ( ) 24 Battery Disp.Unit Hyd.Pump Accum Transf. Rectifier Elec.Pump AOA Sensor W.Rad CU This components represent a share of 5% of the total serviceable components aboard the A320 family. This share is the target for the first years of operation. An increase in the flight hours is expected as well as in the number of a/c serviced. However, a different AEROSPACE MBA 137

156 FINANCIAL PLAN secenario of lower number of components serviced has been considered in this financial plan. As it was explained in the marketing plan, the Exchange prices are very linked to the acquisition price offered by the suppliers, then a mark-up is applied to the customer as showed in the corresponding price structure. The prices for the In-House repair are determined from estimations coming from sources in the MRO sector. These prices are ranked in a bracket around 60% to 70% below those of Exchange. With these data of the components the following table is calculated, which shows the sales per component. Table 41 GREENJET s sales Amounts in Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Sales In house totals Exchange totals Bat. In house Exchange Disp. In house Exchange Hyd.Pump In house Exchange Accum. In house Exchange TR In house Exchange ElePump In house Exchange AOA In house Exchange WRCU In house Exchange Statements The financial statements provided by GREENJET show two forecasts. A forecast of ten years and a tracking of the first twelve months. The latter is to be found in the annexes. The yearly forecast is set with a timespan of ten years of operation in order to be in line with the standard cycles of activity in the aerospace industry. The other type of forecast calculated of every statement reflects the twelft first months of the implantation, a critical phase for GREENJET, as it is within this time span where the largest investments in equipment take place and the level of sales is limited. In this period the cash position of the company has to be controlled on a monthly basis Balance sheet The forecast for ten years of operation is shown in the next chart AEROSPACE MBA 138

157 FINANCIAL PLAN Table 42 GREENJET Balance Sheet Amounts in Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Assets Current Assets Cash Accounts receivable Fixed Assets Tangible Fixed Assets Net value Equipment VAT to compensate Liabilities and Equity Current liabilities ST Borrowings Accounts Payable VAT payable LT Liabilities ERP Payment Subvention LT Borrowings Equity Shareholders equity Retained Earnings Net Earnings Accumulated profit/loss AEROSPACE MBA 139

158 FINANCIAL PLAN After having established the company, the structure of GREENJET is that of a company with a considerable weight of capital, that permits the management and shareholders to keep control of the company s strategy. It is also a company whose working capital is mainly composed of receivables. This fact poses a certain risk that GREENJET fails to collect this money in time to pay its own purchases and obligations Income statement The ten years of operations presented in Table 43 next chart shows a break even already in year two. Therefore from 2011 on GREENJET will pay taxes on profits. With the company in full operation, this statement to be found in the annexes, reflects the costs structure, where it is to be seen that GREENJET has relative large fixed costs and is paying an important amount of the income in salaries. This situation was to be expected in a company that is building an industrial structure that supports its long term strategy. AEROSPACE MBA 140

159 FINANCIAL PLAN Table 43 Income Statement of GREENJET Amounts in Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Income Increase to prev.year 10% 10% 10% 10% 10% 8% 8% 8% In house Exchange Costs Materials In House Materials Exchange Facilities rental Operational costs Pieces movement Purchases Maint.rep.means Marketing Salaries General Expenses ERP Maintenance Offices Maintenance CMM certifications Expenses (phone..) EBITDA DA Avionics Hydraulics ERP logistics EBIT Interest ST Interest LT EBT Taxes EAT AEROSPACE MBA 141

160 FINANCIAL PLAN The revenues in these years can be broken down, along with the costs, in the two main activities that GREENJET is offering: Table 44 GREENJET s profitability Profitability % sales 58% 58% 58% 58% 58% 58% 58% 58% 58% 58% In House EBT/Sales 6% 10% 13% 13% 16% 17% 17% 19% 19% 18% % margin 4% 6% 9% 9% 12% 12% 12% 14% 14% 13% % sales 42% 42% 42% 42% 42% 42% 42% 42% 42% 42% Exchange EBT/Sales 11% 12% 12% 13% 13% 13% 13% 13% 14% 14% % margin 12% 13% 14% 15% 15% 15% 15% 16% 16% 16% Figure 38 GREENJET s margin Figure 39 GREENJET s EBT AEROSPACE MBA 142

161 FINANCIAL PLAN Cash flows The forecast for the first ten years of activity is shown in the Table 45: AEROSPACE MBA 143

162 FINANCIAL PLAN Table 45 GREENJET Cash Flow Amounts in Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Operating Cashflows Cash inflows Collection from sales Cash outflows Operation expenses Salaries Payments to supp VAT Income taxes Financial Cashflows Inflows Stocks Subvention Borrowings ST Borrowings LT Outflows Dividends Borrowings payment ST Borrowings payment LT Interests of borrowings ST Interest of Borrowings LT Subvention Investment Investments outflows CAPEX Net of cash movements Cash Balance AEROSPACE MBA 144

163 FINANCIAL PLAN This statement reflects that the only source of operating inflows is the sales. The outflows, where the payments of suppliers are becoming more important, grow slower, that lead us to a progressive increase of cash balance. In terms of an industrial activity of this kind. Regarding the evolution of the cash flows of the company, GREENJET is going to start paying dividends in the fourth year. The following table shows the net present value of the company. Table 46 Value of GREENJET company Present Value Amounts in Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 of Perpetuity Free Cash Flows Discount factor 1,00 0,93 0,86 0,79 0,74 0,68 0,63 0,58 0,54 0,50 0,46 Discount rate 8% Present Value Free Cash Flows Net Present Value Internal Rate of Return 18% 10.6 Analysis Service profitability As explained, the business activity of GREENJET is going to be divided in two services, exchange and In-House repairs. The margin obtained in the Exchange operations is higher than that of the In-House repairs. It also has a higher risk associated, which comes from the suppliers. GREENJET is going to depend on them. The In-House repair is going to be more important in terms of economics results. It also requires a bigger workforce. It has less risk as it only relays on our repair process, so we minimize the dependency of any external factor Ratio analysis Table showing the main ratios in the ten years of operation. Table 47 GREENJET s ratios Ratios of Greenjet Profitability Return on Investment ROI (%) -8,0% -0,1% 4,1% 8,4% 9,3% 14,0% 15,4% 15,9% 18,9% 19,3% 18,6% Return on Equity ROE (%) -31,4% -0,6% 17,7% 30,2% 29,0% 38,2% 38,3% 36,4% 39,4% 37,5% 34,9% Operations Return on Assets ROA (%) -8,0% -0,1% 4,1% 8,4% 9,3% 14,0% 15,4% 15,9% 18,9% 19,3% 18,6% Working Capital Liquidity Current Ratio (%) FCC Cash ratio 1,08 0,02 0,29 0,54 0,49 0,67 0,78 0,90 1,05 1,17 1,30 Solvency (%) -8% 9% 12% 17% 20% 26% 28% 30% 36% 39% 39% Table 48 SEMASA s ratios AEROSPACE MBA 145

164 FINANCIAL PLAN Ratios of Semasa Profitability Return on Investment ROI (%) 30,74 6,64 4,86 11,60 4,47 9,55 9,14 Return on Equity ROE (%) 55,85 16,49 6,38 15,38 22,60 15,27 12,03 Operations Return on Assets ROA (%) 16,9 2,8 1,4 2,8 3,6 2,6 1,8 Working Capital Table 49 AEG s ratios Ratios of AEG Profitability Return on Investment ROI (%) 7,78 6,39 0,76-0,92-4,05-2,74 2,20-5,14 Return on Equity ROE (%) 12,94 11,28-1,10-8,56-14,96-10,91 7,74-5,75 Operations Return on Assets ROA (%) 3,7 4,4-0,4-2,8-5,5-4,2 0,6-1 Working Capital AEG. From this ratios some conclusions can be drafted: As a bench mark we show the ratios of our main competitors which are Semasa and Regarding operation and profitability ratios, there are initial poor rates due to the losses but it is followed by a recovery starting the third year, which is the year when we achieve the break even point. The growing trend lasts until the year nineth but is not as sharply as the previous years Sensitivity analysis Given the potential risks detected in the statements with the financial strategy and cost structure, alternative scenarios have been considered in order to assess the impact of variations in these areas. The key indicators and ratios are compared to those of the baseline scenario in order to analyze how would have been the performance of GREENJET in these cases. Sales not matching the forecasted numbers In the first scenario we can observe the sensitivity regarding the sales volume. The financial statements for this scenario are presented in the Annexes in Alternative scenarios. AEROSPACE MBA 146

165 FINANCIAL PLAN Figure 40 Sales vs Break even If a drop of 20% in sales takes place, GREENJET would go to bankruptcy in the second year. One possible action to take is to reduce fixed costs. We considered a reduction of one blue collar in the headcount to reduce the salaries expenses with the lower production. Then, it would be needed to ask for a new loan (90.000, 5% interest, 5 years) and to reduce general costs (i.e. phone expenses to 50%). By doing this GREENJET would have an 8% IRR and a value of M, clearly less than in the baseline and in worse situation in the long term, with less manpower and more leverage. Short term financing along the years of operation The case foresees an increase of the cost of debt, reaching 8% in ST and 7,5% in LT, taking into account also a higher inflation (4%) and an expected return to the shareholders of 13%. In this scenario GREENJET would have a 10% IRR and a value of M. The main statements are also presented in the Annexes Alternative scenarios. Summarizing, in one hand, due to the structure of the company, GREENJET is less sensible to a change in the financial environment. In the other hand, there is a higher dependency to the sales volume. AEROSPACE MBA 147

166 RISK MANAGEMENT PLAN 11 Risk management plan 11.1 Introduction The Risk Management Plan describes the process of Risk Management at all levels of responsibility. It is a structured approaches that: Identifies risks Asses risks, quantifying their probability and impact Provides actions plans Monitors and controls Risk is defined as a potential occurrence that would be detrimental to the program in terms of Cost, Planning or Quality/Performance Risk approach Principles The Risk Management Plan (RMP) is an iterative method that will be used during the whole life cycle of MRO companies. It mainly consists of the following elements: Risk identification Risk assessment Risk response Risk monitoring and reporting Below shows the common diagram that a MRO company follows AEROSPACE MBA 148

167 RISK MANAGEMENT PLAN PROJECT OBJECTIVES -TIME -COST -QUALITY List of risks ASSESMENT: Priorization and allocation of risks ACTION PLANNING: -Prevention -Mitigation -Contingency IDENTIFICATION of risk Agreed Action Plans MONITORING & CONTROL: -Risk Status -Action progress Figure 41 Risk Management Process Risk identification It is the process of understanding what uncertainties the project faces and which ones require greater management attention and mitigation resources. The list of risks registers risks defined as accurately as possible. It also includes a risk description, the cause that carries out the risk and the possible consequences Risk categorisation It is used to allow risks analysis to be carried out at a corporate level. The risks that GREENJET has as an MRO company are listed in the next chart. The chart is useful as a framework to draw some of the forecasted risks already identified. The list will be alive during the whole life cycle of the GREENJET Company. AEROSPACE MBA 149

168 RESOURCES-PEOPLE PROCESS DESIGN AND WORKFLOW BUSINESS PLAN RISK MANAGEMENT PLAN Table 50 Analysis GREENJET s risks TYPE CAUSE EFFECT/RISK CONSEQUENCE -Unavailability/ shortage necessary technology to the identification errors -Lack of technical knowledge -Failure in the process -Lack/shortage of manuals, technical documentation 1.Failure not detected during testing/not repaired properly and it is returned to the client -Lack of credibility on the part of the company -Damage to the image of the company -Breach of targets - Bad determination of the processes by the department of process engineering -Lack or low know how of technicians -Problems in the logistics (the client does not collect the repair component or GREENJET cannot deliver the component to the client) 2.Lack of quality in repairing procedure 3.Increase of time of the storage of repaired components (last stage before shipping&delivery) -Cost overrun -Loss of clients -Cost overrun -Overloaded warehouse -Unsynchronized information -Actions overextended, a suitable concurrence of the processes does not exist 4.Activities executed in a parallel way -Delays in delivery -Loss of quality processes -Overrun -Higher competition in the market (better labor conditions offered to the employees) 5.Loss of key employees, CPO, COO, to competitors -Loss of knowhow, contacts -Reduction of the efficiency of the process -Failure in the business procedure -New procedures -New processes -Not well trained people 6.Insuficient skills in labor force -Loss of learning -Loss of efficiency -Delays in deliveries -Not fulfillment of AEROSPACE MBA 150

169 RESOURCES-MATERIALS, EQUIPMENT, ASSETS BUSINESS PLAN RISK MANAGEMENT PLAN initial objectives -Over cost due to training investment -decrease learning curve -Starting company, few employees, means more risk of absenteeism -Lack of motivation, commitment -Feeling of awkwardness -Low staff morale leading to poor performance and/or resignations -Change in the procedures -No investment in the renovation or purchase of new machinery 7. Employee absenteeism by disease or other causes 8. Labor dispute, strikes in MRO industry 9. Obsolescence of repair and testing equipment Not sufficient technical integration/tools/jigs -cost overrun -necessity to resort to subcontracts -bad influence in terms of lead time requirements -failure of delivery -cost overrun -necessity to resort to subcontracts -bad influence in terms of lead time requirements -failure of delivery -the company is out of the market -Supplier problems (supplier does not have enough skills in order to fulfill requirements/the supplier has problems for operating) -Logistic problems -Shortage of equipment maintenance 10. Supplier of components and materials fails to deliver on time 11. Failure in means of transport -Not lead time requirements fulfilled -Cost overrun -Loss of contracts -Stock distortion -Penalties -Loss of image - Client/Company does not receive components, so no AEROSPACE MBA 151

170 RISK MANAGEMENT PLAN work -Cost overrun -timescales not met -Misuse of materials -Manufacturer does not want to provide to GREENJET the manuals -High prices - Network of contacts is not well established, consolidated -Starting company -Misuse of equipment -Shortage of equipment maintenance 12. Unavailability, scarce, loss of manuals 13. Pool of brokers difficult to contact 14. Damages/failures/ loss equipment -Loss of efficiency in the process -Failure in the business procedure -Impossibility to operate -Longer lead time than what was predicted -Delays -Cancellation of contracts -Loss in the cost of sales -Difficulty in offering exchange service -Impossibility to operate -Longer lead time -Brokers do not deliver on time the new components -Problems in logistics -Bad network of brokers -Bad forecast of new components 15.Stockout of new components necessary in order to give exchange service -Impossibility of exchange service -Overrun AEROSPACE MBA 152

171 ORGANIZATIONAL STRUCTURE EXTERNAL ENVIRONMENT/CONDITIONS IT SYSTEMS, INFORMATION BUSINESS PLAN RISK MANAGEMENT PLAN -Not well defined the procedures from the engineering department -Means of security not well implemented 16.IT requirements wrongly specified to implement Loss of key and irrecoverable data -Quality cost -Cost overrun -Delays in delivering -Misuse of data -Lack of communication among employees -Bad economic situation -Sudden change in economics and/or department 17. Limited financial muscle -Less profits - The company loses competitiveness in the market Increase interests type -Increase financial expenses -Limited expansion in the market -Crisis in airlines sector 18.Lower operations/activity in airlines/reduction in fleet -Volume of market is not reached -Shortage, deficiency of income -Losses -Less workload -Not attractive offer for investor -Impossibility of acquiring subsidies from regional government 19. Funding and/or liquidity issues -Loss of profits -The company loses competitiveness in the market -Sudden change in economics and /or market -Limited expansion in the market - Not met the necessary conditions to certify the company -Shortage of contacts, not appropriate network FAA/EASA 20. Bureaucracy, problems, delays in the obtaining of certifications Regulatory requirements not met -Delay in the business opening -Account results affected -Overrun -Product not suitable for 21. Inaccurate demand -The predicted sales AEROSPACE MBA 153

172 customers (there is a change in terms of market necessity, nowadays we are good at lead time reduction, in the future the goal can change and we cannot offer reduction cost) -World economic crisis -Not alligned objectives between clients-greenjet (lack of understanding), GREENJET is not able to fulfill the clients requirement forecast, figures not matched Market opportunity not detected 22. Insolvent alliance between clients and GREENJET when doing the initial negotiation RISK MANAGEMENT PLAN are not fulfilled -need of redefinition of the business -Loss of contracts -Business cannot be extended -Not possibility to reach a specific position in the market -Employers had not worked properly selling Greejet s service during the first year of opening the company -High competitiviness in the market -Low brand recognition 23. Scarce of contracts between GREENJET and clients in order to offer its service -GREENJET is out of the market Risk assessment The next step in the risk management process of every project is the assessment, this means the determination of quantitative or qualitative value of risk related to a specific situation or a recognized threat. In the case of GREENJET, this risk assessment will be done through a qualitative technique which takes into account two indicators: probability of occurrence for the risk to materialize, and impact of the risk over the principle objectives of GREENJET activities in terms of cost, performance and schedule. We will use a qualitative method to assess the risks due to the fact that several scenarios with very different impacts exist which would reduce the meaning of whatever value would be assessed for the risk. Some impacts also have a strong impact on the GREENJET s corporate image or on the quality of customer relationship. As commented before, since these risks are difficult to quantify, we will use a qualitative approach. The following chart represents a general overview of how to evaluate and determine the potential areas of risk impact with regards to cost, performance and quality, and their associated severity: AEROSPACE MBA 154

173 RISK MANAGEMENT PLAN Table 51 General overview of how to evaluate the areas of risk impact Once the probability of occurrence and the impact of the potential risks that GREENJET may face are evaluated, it is time to prioritize the identified risks using a Project Risk Index (PRI). The axes of the following matrix that helps to calculate the PRI are: Probability: Nearly certain, likely, probable and unlikely. Impact: Critical, high, medium and low. Table 52 General chart of how to calculate risk index AEROSPACE MBA 155

174 RISK MANAGEMENT PLAN Applying this technique to previously GREENJET s identified risks; the matrix with the number associated to each risk looks as follows: Table 53 Probability vs impact GREENJET PROBABILITY IMPACT VERY HIGH HIGH MEDIUM LOW CRITICAL 1,15 6,12,19,23 21,22 HIGH 4,7,10 5,13 3,14,17,20 9,18 MEDIUM 2,11 8,16 LOW In the case of GREENJET, the risks placed in the cells with high and critical impact will be the only ones to which resources will be invested and some response actions will be applied Risk response strategies In order to potential GREENJET s risks be controlled, a treatment plan should be part of GREENJET s risk management plan. Generally speaking, the four strategies an organization can follow to respond to a particular risk are: Avoiding Risk Risks are often inherent to any business and therefore it is extremely difficult to avoid all of them. However, in some cases, these risks are so harmful having a huge impact on the core business that the unique alternative is to avoid them. GREENJET will avoid some of its potential risks by identifying them by competitors past project experience and documentation of these experiences. Analyzing what risks may occur upfront at GREENJET business initiation will clarify the response planning to avoid them. Transferring Risk Often, an identified risk can be transferred to a third party. It does not mean that this specific risk will go away from GREENJET, however, transference of risk controls will be set up by creating teams or outside sources to handle the risk. In this sense, the impact of a risk AEROSPACE MBA 156

175 RISK MANAGEMENT PLAN can be limited or completely reduced by transferring the potential losses or liabilities to third parties. Mitigating Risk Mitigating a risk is a control process that allows companies to stop a risk before it starts or bring it to an acceptable level. GREENJET will identify potential threats as soon as possible so appropriate actions to keep the risk from triggering can be carried out. GREENJET will set contingency plans that will deal with the risk when it arises. Accepting Risk Accepting risks is a must for risk response planning in any project. The risk as well as the related impact is accepted by the respective management board of GREENJET. The decision to accept a particular risk should be made based on a sound analysis and the policy will be to accept the fewer number of risks as possible. It will be crucial for GREENJET to monitor the accepted risks and regularly re-assess those, especially when the decision basis has changed. The following chart shows what strategy and actions will be implemented to each of the risks with high or critical impact. As indicated above, these risks will be the only ones with some amount of resources invested. Table 54 Strategies and actions considered for each risk RISK STRATEGY ACTIONS 1. Failure not detected during testing/not repaired properly and it is returned to the client. AVOID - Equipment and technology updates to the latest versions available in the market. - Benchmarking of best practices in the MRO industry. - Process of continuous improvement within the process; Kaizen events (LEAN). 3. Increase of time of the storage of repaired components 4. Activities executed in a parallel way AVOID & MITIGATE AVOID&MITIGATE - Aim of reaching a balanced repair line avoiding intermediate bottlenecks in the process. - Improvement on the logistics side by signing agreements of reception and delivery with customers. -Increase coordination among departments, carrying out some meetings -Establish a realistic and clear structure of lead time AEROSPACE MBA 157

176 RISK MANAGEMENT PLAN -Invest resources in effective planning of workload 5. Loss of key employees, CPO, COO, to competitors. MITIGATE & ACCEPT - Provision of attractive job conditions through competitive salaries and career development. - Contact with recruitment agencies; possibility of hiring new qualified employees as soon as possible. 6. Insufficient skills in labor force. AVOID - Special focus on high skilled people during the recruitment process. - Investment in training courses for employees. 7. Employee absenteeism by disease or other causes. MITIGATE & ACCEPT - Application to learning curves in order to achieve multitasking qualified employees. - Operations standardization. 10. Supplier of components and materials fails to deliver on time. AVOID & TRANSFER - Penalties application when supplier fails to deliver on time. - Cooperation agreements. 12. Unavailability, scarce, loss of manuals. MITIGATE & TRANSFER - Negotiation with clients; reception of component to repair along with its technical documentation. - Partnership agreements with manufacturers. 13. Pool of brokers difficult to contact. AVOID - Resort to MRO and aeronautics fairs. - Investment in branding. -Contracts negotiation of mutual cooperation with brokers. 14. Damages/failures/loss equipment. AVOID & MITIGATE -Investment in preventive maintenance. - Total Productive Maintenance. - Technical courses provision in terms of utilization of equipment. AEROSPACE MBA 158

177 RISK MANAGEMENT PLAN 15. Stockout of new components necessary in order to give exchange service AVOID - Access to a major pool of brokers -Contracts negotiation of mutual cooperation between brokers and GREENJET -Good logistics -Invest in branding 17. Limited financial muscle. MITIGATE & ACCEPT - Monitor budget and forecasts. - Business diversification. 19. Funding and/or liquidity issues. AVOID & MITIGATE - Branding investment; attractiveness for investors. - Monitor budget and forecasts. -Increase in capabilities; market expansion. 20. Bureaucracy, problems, delays in the obtaining of certifications. 23. Scarce of contracts between GREENJET and clients in order to offer its service AVOID AVOID - Internal audits to assure fulfillment of steps required to get certification. - Take advantage of consolidated network of contacts offered by managers at the beginning of the process. -Make sure that employees and employers are high skilled professionals selling GREENJET s services in order to reach the target properly -Invest in branding: lead time leader -Network of employers and employees. CEO and CPO have good contacts -Offer attractive and competitive contracts Risk monitoring and reporting The main purpose of risks monitoring and reporting is to identify, asses, and plan for newly emerging risks, systematically review and update risk data based in the risk register, track and control risks response actions and their effects. In the case of GREENJET, it is a MRO company which is focused on offering repair products with a high response. Nowadays, the market is demanding the obtaining of components repaired under a reduced period of time. So risks will be affected by lead time AEROSPACE MBA 159

178 RISK MANAGEMENT PLAN factor. GREENJET can compete against other companies offering products with a high response. However, in the future, the main factors that will determine the risks in a MRO process would be different, such as costs, quality, etc. Furthermore, these factors will have to be monitorized. AEROSPACE MBA 160

179 FUTURE PERSPECTIVES 12 Future perspectives Figure 42 Different possibilities for GREENJET to grow There are several ways for GREENJET to keep growing once it is established in the Spanish MRO market. In this section we are showing a first approach to what could be the path to follow as a growing company. Regarding the strategic decision to be taken the company could choose, as said before, different options that are going to characterize it. Focus on price, which can be oriented to reduce the cost of the services provided and to start differentiating ourselves within the sector by decreasing our prices. Increase the number of part numbers, for instance, partnerships with components manufacturers can be established. By doing this, GREENJET would have access to a bigger number and a wider variety of components. Therefore, the company would expand its presence in the market as it is covering more fields. Increase the number of aircrafts. To provide services to different aircrafts families and manufacturers would increase the market share of the company. This also can be achieved by establishing partnership contracts with airlines or alliances, adapting our target to the fleet of the partner. These options could be adopted as a unique strategy decision or as a combination of several of them. The aim is not to forget the next step of a start up company in sector characterized by its competitiveness and constant innovation. AEROSPACE MBA 161