Major airline exchange planned

Nine major airlines and three aircraft suppliers are coming together to start an industry exchange. The joint venture aims to streamline industry supply chain, saving costs in purchasing and managing parts.

Nine airlines and three aircraft suppliers expect to start a joint exchange late in the second quarter to streamline the industry supply chain.

Cordiem, the joint exchange of nine airlines and three aircraft suppliers, expects to begin operations late in the second quarter, its owners said Wednesday.

The participants in two exchanges, the airline initiative Airnewco and the suppliers' nascent exchange MyAircraft.com said in October they would combine forces to streamline the supply chain in their industry. Together, the nine airline members control $45 billion in purchasing power and the aircraft suppliers do about $13 billion in parts buying for the aircraft maintenance business.

It is the first exchange owned by both buyers and sellers in the same industry.

"One of the success factors you need is liquidity," said Mitch Baranowski, spokesman for Cordiem.

The members hope to achieve savings in spare parts, office supplies, fuel, catering and cabin supplies, and airport services. Cordiem plans to offer modules for supply chain management, procurement, engineering services and ancillary services in each of these five areas.

Airline officials say the real value of Cordiem lies in its promise to purchase and manage parts, and hope to save on inventory costs as a result. Aircraft parts are highly regulated and must be tracked from cradle to grave.

"Supply chain efficiency is at the core," said Cordiem Chairman Pat Wildenburg, who is also vice president of global sourcing and B2B e-business at Delta Air Lines.

Using Cordiem, the airlines hope to create continually updated databases that will show where specific parts are, how long they have been in use, and when they should be repaired or replaced. That information will then be shared by the company's accountants, purchasers and mechanics, as well as the airline's maintenance contractors and parts suppliers.

Companies that integrate their computer systems with Cordiem will gain the most, said Wildenburg. "The bottom line is you have to have the infrastructure inside your firewall," he said.

MyAircraft.com is a joint effort of Honeywell, United Technologies, BF Goodrich and software maker i2 Technologies. Airnewco is an initiative started by United Airlines that includes Air France, American Airlines, British Airways, Continental Airlines, Delta Air Lines, Iberia Airlines, SAirGroup, and United Parcel Service. Together, these companies have invested more than $100 million in Cordiem.

The main technology providers for Cordiem are i2, Ariba and IBM.

Cordiem has lined up an airline advisory council, consisting of 11 cargo, charter and commercial airlines, which will help develop the services for customers. These airlines include Aer Lingus, Airborne Express, Asiana, Aeromexico, Britannia, Finnair, LanChile, and South African Airways. They have $25 billion in annual revenues and most expect to be customers when Cordiem begins operations.

It also plans an advisory council for suppliers, but does not expect to announce any members for weeks, Baranowski said.

An interim executive team led by two co-CEOs, John Rau of American Airlines and Mike Dumais of United Technologies Corp., has begun organizing Cordiem and looking for a permanent chief executive officer. Each of the aviation industry members and the CEO has a seat on its 13-member board. i2 does not.

It was too soon to tell if the owners would take Cordiem public. "The immediate goal is to launch service offerings and drive value for customers and achieve profitability," Baranowski said.

The name "Cordiem" comes from "core," meaning the central or most important part, and "diem", the Latin word for day.

Cordiem isn't the only airline industry exchange. Aeroxchange operates a trading network backed by 13 international air carriers that include Air Canada, All Nippon Airways, Cathay Pacific Airways, Lufthansa and Northwest Airlines, as well as Federal Express. The exchange is powered by Oracle.