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Airline exchanges join forces

Two major US airline exchanges decided to join forces in creating one marketplace instead of having to fight it out. It does not mean that there will not be competition, though other contenders are already lining up in the wings.
Written by Mel Duvall, Contributor

Rather than battle it out for market share, two competing exchanges in the giant aerospace arena have decided to join forces.

The backers of MyAircraft.com, an online exchange led by aerospace manufacturers BFGoodrich, Honeywell, United Technologies and supply chain software developer i2 Technologies, have forged an agreement with nine major airlines which were looking to build their own procurement exchange.

The airline exchange, which had been known as AirNewco, will now be combined with MyAircraft.com to create a digital exchange that will be designed to sell everything from from jet fuel to spare parts, catered meals and general supplies. The new venture will be based in the Washington, D.C., area, and go live during the first quarter of 2001.

"The business case behind this agreement was overwhelming," said Pat Wildenburg, co-chair of the steering committee for AirNewco, and acting vice president of corporate purchasing for Delta Air Lines. "We believe that in four or five years from now, an opportunity like this will bring savings of $40 [million] to $50 million to an airline like ours - and we think we're being conservative."

The merger was hammered out before General Electric made a surprise bid for Honeywell, and it is unclear how that will affect the exchange. However, participants noted that with nine major airlines, such as Air France, American Airlines, British Airways and Delta, agreeing to take part, it has already reached a critical mass.

It does not mean there will not be competition in the aerospace exchange race. Two other competing exchanges are still proceeding. One, called Exostar, is backed by aircraft manufacturers BAE Systems, Boeing, Lockheed Martin and Raytheon, and the other, an as-yet unnamed exchange, is being backed by 13 international air carriers, including Japan Airlines, Lufthansa, NorthwestAirlines and cargo carrier FedEx.

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