Boeing has set up a new in-house unit called Boeing Avionics to pursue the development and production of avionics and electronics systems. It’s a reversal of a strategy of outsourcing avionics controls that began with the 787 Dreamliner.

Share story

Boeing, on a new drive to boost substantially its income from aftermarket services, is actively reversing its yearslong course of extensive outsourcing.

In the latest sign of a new approach, Boeing announced internally Monday it is setting up an in-house unit called Boeing Avionics to “pursue the development and production of avionics and electronics systems.”

Avionics are the core electronics used to manage aircraft systems including flight controls, communications, navigation, sensors and warning systems, and flight-deck displays.

In a company memo to employees, Boeing Chief Executive Dennis Muilenburg referred to the move as a “strategy to build targeted vertical capability.”

That’s business-speak for a company doing more of the work itself rather than handing it off to outsiders, and a term that must worry current systems suppliers such as Rockwell Collins and Honeywell — which may get less avionics work on Boeing’s next new airplane.

Setting up Boeing Avionics is tantamount to an admission that Boeing made a mistake 14 years ago as the 787 Dreamliner program was launched.

That’s when Boeing dissolved an in-house organization created in the 1980s called Boeing Commercial Electronics (BCE), dispersing 1,200 engineers in Everett who designed electronic controls for all its airliners and selling off a plant in Irving, Texas, where another 1,200 people built the hardware.

The move, part of a broad handoff of control to airplane-systems suppliers, was intended to cut Boeing’s costs.

Dwight Schaeffer, a former senior manager at BCE, said Boeing tried on the 787 to cut the one-time cost of developing its new airplane by outsourcing work to “get someone else to pay for it.”

The result was “a disaster,” he said.

Schaeffer and other former BCE managers traced some of the early systems problems on Boeing’s 787 — including the overheated batteries that grounded the fleet worldwide in 2013 — to a loss of control of systems design and the disbanding of BCE.

But for future airplanes, Boeing is now hungrily eyeing the profits made by its systems suppliers, who collect money long after an airplane leaves Boeing’s factory by maintaining and updating the avionics throughout the jet’s service life.

The launch of Boeing Avionics signals the jet maker wants a bigger piece of that aftermarket pie.

It’s one more step toward Muilenburg’s stated goal of growing the company’s overall services business from $14 billion today to $50 billion within five to 10 years.

According to the internal Boeing announcement, the new avionics unit will develop systems for all of Boeing, not just the commercial side.

It will “focus on avionics systems such as those designed for navigation, flight controls, information systems and other core avionics” and will develop such systems for future airplanes, targeted for entry into service in the next decade.

So look for more in-house avionics on the so-called middle-of-the-market airplane, already referred to by many in the industry as the 797, that Boeing is expected to launch within a year for entry into service in 2024.

Ironically, although Boeing shut down BCE to supposedly save costs, on Monday Muilenburg touted the cost savings that may be possible from the new Boeing Avionics.

“Our new enterprise avionics team will take advantage of our depth of knowledge as the original equipment manufacturer in leading commercial aviation, defense, space and security systems,” he said. “We can further drive cost down and value up for our customers, in all phases of a product’s life cycle.”

Boeing said it has 120 employees in the enterprise avionics organization, with plans to go up to around 600 when the team is fully staffed in 2019.

Of course, that’s just a portion of the capability Boeing discarded in 2003.

The new organization is led by Allan Brown, a vice president who previously was program director for the Missile Defense National Team. He reports to Boeing’s chief technology officer, Greg Hyslop.

Schaeffer said he’ll “wait and see” if the announcement of the new avionics unit represents a smart and substantive shift.

He wonders if Boeing will go further in its strategy reversal and begin again to build electronics hardware too, either by setting up or acquiring a plant.

He cautioned that the new Chicago-based avionics unit can succeed only if it forms close partnerships with Boeing’s product-design teams, such as the engineers who will design the 797.

He recalled that toward the end of BCE’s run, some Boeing organizations treated his organization like an external supplier, insisting that it needed to compete with outsiders to bring down costs.

He said Boeing Avionics instead needs to develop products that leverage its main advantage in being inside Boeing — its ability to work with designers to produce innovation.