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[Music]
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BE Aerospace is the largest cabin
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interior supplier to commercial
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airliners and to business jet aircraft.
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We're also the largest global
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distributor of aerospace fasteners and
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consumables. Primarily a commercial
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presence, but about 10% of our sales
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involve uh the military space.
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Well, let me speak more specifically to
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commercial aerospace, which is our
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space. It was a particularly challenging
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year. Uh traffic was down an
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unprecedented level. Yields were down
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20% and uh most of the industry or at
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least the customer base experienced
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devastating losses. For be aerospace, I
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think we responded to that challenge.
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Although we had uh declining sales, we
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were able to uh maintain our operating
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margins through uh integration synergies
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of our consumables business and uh uh
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continued efforts in our supply chain
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and our lean initiatives and
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efficiencies in our business. And so
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while we have not uh yet reported our
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2009 results, uh our our results through
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uh 9 months ended September 2009 were
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were quite encouraging.
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Our products are bought by industry
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because they either increase airline
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traffic or yields or reduce operating
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costs. And our consumables business is
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about logistics. We uh for OEMs or
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airframe manufacturers or MRO's uh
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manage their parts logistics. We supply
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for instance many of our customers uh
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bin management programs where we're
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stocking their consumables. Uh we're
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doing value added kitting services that
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reduce those customers costs and allow
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them to focus on the key aspects of
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their business. Uh in our commercial
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interiors businesses uh we continue to
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uh introduce new products that improve
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the airlines topline because of
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increased yields or or load factors or
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reduce operating expenses for instance
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with reduced weight or or reduced uh
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cost of ownership.
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With oil having hit $150 a barrel last
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year and being a high level of concern
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throughout the industry, weight savings
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are uh particularly uh front burner at
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the moment. So in in all of our product
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segments, we are focusing on reducing
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weight and there's uh strong uh customer
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interest for for weight efficiencies.
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Well, the industry is changing. uh we
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have strong and leading market shares in
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all of our maj major product lines and
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our challenge is to maintain those and
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in fact to try to grow those. We're
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doing that by a continued commitment to
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strong product development, maintaining
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high levels of customer intimacy through
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our account management strategies, field
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service commitment, uh execution of our
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existing programs, and as new airframes
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are introduced such as the 787 or the
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A350, uh we are expanding our commitment
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and our emphasis on SF uh contracts and
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systems work. And so, uh, recently we've
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been, uh, won major awards for the A350
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and 787 and for many of the new business
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jet platforms that that we think will
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position us very favorably, uh, longer
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term on those growth platforms.
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Well, I think it's difficult to be
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precise when you're talking a short-term
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period like that. We're coming off of an
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unprecedented downturn and I think uh
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our expectation is that we'll start to
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see a gradual recovery in traffic and
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capacity over the next couple of years.
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But I think longer term the outlook for
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our industry is particularly strong. Uh
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air traffic has a close correlation with
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economic growth. So as long as you
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believe that long-term there's going to
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be economic growth, there will certainly
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be an increase in air traffic. We
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believe that we're very well positioned
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at B Aerospace to participate uh in that
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traffic growth and in the growth of the
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industry.
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I think what's unique about our country,
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our our our our company, what's unique
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about B aerospace is our product
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leadership, our market share leadership
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in in the product segments that we
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operate with consumables. We are the
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largest global uh man distributor of
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aerospace fasteners and hardware.
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uh working with virtually all of the the
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MRO's uh airframers and many of the
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subcontractors that use distribution in
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their in their business model within the
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interiors business. We are the leading
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seat supplier for all classes of
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aircraft seating. A leading supplier of
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interior systems products such as ovens
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and beverage makers, galley equipment
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and oxygen systems, lighting systems,
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all sorts of products that that go into
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the interior. Our job is to customize
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aircraft. Airlines come to us to
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configure those aircraft to customize
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them to make them work for their unique
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purposes. So it's really the interiors
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that we produce that align an airplane
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for a particular root structure, for a
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particular service, for a particular
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brand. And the airlines use those
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interiors to differentiate themselves
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from each other and to establish their
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brand identity. That's what we help them
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do.
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Well, sure. Let's just look at trip 7s.
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Boeing makes trip 7s and at the start of
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the production line essentially they're
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identical to each other. They don't
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really change until they get into the
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interiors installation. Let's look at
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Continental. It's a twoclass carrier
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that's recently now introducing liflat
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business class seats replacing older
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seats that were not li flat. So, uh, the
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service strategy for Continental is to
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put liflat business class beds in, but
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to do it in a way that doesn't have a
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density disadvantage. What we've done
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with Continental is to align the seats
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and to nest them on an angled V-shape
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arrangement that allows Continental to
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offer its passengers complete liflat
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horizontal beds, but with a density
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configuration that's affordable both to
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Continental and to the passenger.
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Perhaps the next plane coming down the
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line might be Air France. Air France has
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a different strategy. Air France is a
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three-class provider and it's not the
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traditional threeclass. It's not coach
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and business class in first. With Air
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France, it's coach and premium economy
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and business class. So Air France might
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have a similar kind of business class
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seat that Continental would, but they've
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decided to segment their coach market
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differently. And so whereas Continental
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would have a nine a breast coach in trip
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7, Air France would have a 10 a breast
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coach designed for the the tourist
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market. Perhaps it's the family member
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going on vacation. Um and in premium
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economy an eight breast seat that's
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designed for a traveler who will pay a
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little bit more at at and and then still
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for business classes. Six of breast
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business class seats. two different
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airplanes start off identical but very
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different service strategies and branded
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strategies and I think that dynamic
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plays through uh the industry
