Economy

One Proven Way to Beat Giant Competitors

Air Start took on big rivals by making fast order fulfillment central to its model, and won

Written by John Lorinc

Robert Wills likes to cite a statistic that explains pretty much all you need to know about the aviation industry’s spare parts business. When a commercial plane can’t fly because of a malfunctioning component, like a fuel pump, the airline can expect to lose something in the order of $300,000 a day.

Yes, a day.

“It’s, like, super urgent,” says Wills, founder and CEO of Air Start, which is based in Mississauga, Ont.

So for the firms that source and supply parts to stranded planes at airports around the world, the significance of the time-equals-money equation couldn’t be clearer: the ones that work the fastest, win. It’s not complicated.

Except, as Wills knows, the business of getting the parts to the planes is something of a logistical minuet that involves finding the component, some of which can run to $250,000, loading it on a commercial flight, dealing with customs, and finally getting the part into the hands of the mechanics at the other end. “We ship 24/7,” he says. “When an airline sends us an order, they’re in huge trouble.”

His 14-year-old company—which has revenues between $11 million and $20 million range and only 15 employees—supplies parts to about 150 airlines all over the world, from large international carriers like Air Canada and Delta to smaller regional ones, like Air Mozambique. About 90% of the firm’s revenues are from exports.

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Unlike a previous generation of large replacement parts suppliers, Air Start has mastered what Wills calls the “exchange model,” which involves leasing a part to a customer, for a short period and lower cost, while the original is being repaired.

Wills is completely at home in this world: he worked for years as a bush pilot in northern Canada and later flew for Fed Ex. In the early 2000s, he heard through the pilot grapevine that Nortel, then in the throes of its first financial crisis, was getting rid of all its corporate jets. The company, as it turned out, needed to dispose of a warehouse of spare parts their auditors felt were obsolete.

On what he admits was a lark, Wills called up Nortel and offered to buy the entire inventory—wheels, brakes, motors, etc. —at the cut-rate price of $30,000. The next day, he’d lined up a buyer: a Dulles, Virginia, outfit called United Express that was willing to pay $350,000 in cash to take it off his hands.

Wills continued to source parts for United, and gradually built up a small stable of airline customers. He quickly came to understand a critically important aspect of the fluid market for airplane parts, which is that rapid response matters more than in most service businesses.

He bought a Blackberry and at the time Wills was one of the few people in his circle to have one. Leaving it on the bed stand at night, he mastered the art of answering a 2 a.m. customer call without sounding groggy. At aviation trade shows, Wills cultivated a reputation for being highly responsive, and moving on a customer’s order the moment it came over the transom.

Wills also began to travel constantly, identifying airlines by the types of planes they flew, then making sales calls in person. He stressed the speed of delivery. “It only takes one order for people to say, ‘that was an amazing experience,’” Wills says. “That’s how word of mouth spreads.”

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On one such excursion, a Boeing contact told Wills that the aviation giant expected Africa to emerge as a major growth market. With few rail and highway corridors, intra-continental air travel will expand quickly, and airline industry watchers expect to see the emergence of more local carriers that can run shuttle flights within Africa (at present, travellers within Africa often have to fly back to a European hub airport simply to get from one African city to another).

Wills cold-called carriers such as Ethiopian Airlines. He also made his small contingent of employees start their shifts at 3 a.m., so they could process African orders in real time. “We could get parts to African customers three to four days before any else even responded to an RFQ.” Today, Africa accounts for almost a fifth of Air Start’s sales.

Air Start also has customers in Asia, Russia, the Middle East and other significant trade regions. The company’s base of operations, and its main warehouse facility, is located close to Lester B. Pearson International, in Toronto.

But to further hone Air Start’s service promise, Wills has established warehouses full of selected high-demand inventory at airports in New York, London and Johannesburg, with a fourth planned for Dubai. These depots are managed by third-party shipping giants like DHL, and are located strategically: they can get a part to a waiting customer within a few hours, so the airline with the disabled aircraft doesn’t have to idle for a day or more as the part flies across the Atlantic.

Interestingly, Wills points out that Air Start has never tried to maximize its return on these deals; he admits the company leaves “a lot on the table” because the point of differentiation is service quality. “The cost of the commodity is almost irrelevant. It’s the speed [that matters].”

Wills, incidentally, has some savvy advice for entrepreneurs who want to wade into a market dominated by giant companies, as he did over a dozen years ago. “If you try to do it all at once, it will be impossible.” Instead, Wills says, David-like entrepreneurs who decide to take on lumbering corporate Goliaths should focus on finding small opportunities and then “executing them to perfection.”

“You have to be able to play at all levels, from the data entry clerk to the CEO,” he observes. “And you deliver exactly what they’re asking for.”

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Originally appeared on PROFITguide.com