21 mai 2020 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité
Michael Bruno May 20, 2020
If you like the cadre of big aerospace and defense companies now, you are going to love them later. Among the major trends the novel coronavirus is expected to catalyze within aerospace and defense (A&D) manufacturing is that the big will get bigger by gobbling up others or taking back more work.
In the next few years, vertical integration should pick up momentum, according to several executives and consultants. After decades of OEMs, primes and top-tier companies outsourcing major work on their programs, many see the pendulum swinging back to bringing more of it in-house.
“We've already seen signs of more vertical integration coming through the industry and potentially where some of that could be accelerated as we work through the crisis,” says one advisor.
Boeing started this a few years ago as it insourced avionics and other niche segments. Major consolidation picked up last year with the mergers of Raytheon and United Technologies Corp. and L3 Technologies and Harris Corp. Now, whether it be protecting profits or securing supply, the reasons to own more of the work are burgeoning as industry is refashioned in the COVID-19 crisis.
For starters, aerospace suppliers are facing diminished economies of scale but a greater share of fixed-cost in production, with a likely loss in profitability and competitiveness, say Roland Berger advisors Robert Thomson and Manfred Hader. So-called organic top-line increases, through insourcing and acquisition of additional work packages, are possible but only to a limited degree. A fixed-cost reduction likewise is only feasible up to a certain level due to equipment and overhead structures. So consolidation is an important lever to consider.
Part and parcel to that will be the financial distress into which suppliers in Tier 2 and below fall—and the opportunity to roll them up.
Top CEOs are watching. Speaking May 13 to an investor conference, Honeywell International Chairman, CEO and President Darius Adamczyk cited an inflection point. “For a couple of years now, I've been talking about how it is a seller's market, not a buyer's market,” he told Goldman Sachs. “But that calculus may change in the second half of the year, and I think it could become a bit more of a buyer's market, and the valuations may be better and different. That's something that we want to partake in.”
Feeding the phenomenon could be a desire to bring supply closer to home, both for reliability and geopolitical reasons. Suppliers overseas once were revered for their low-cost footprint, but suddenly they are seen as vulnerable to pandemics, economic stress and global trade wars. In turn, consultants expect industry leaders to take another look at favoring local regions.
Even in the defense realm, which for now is considered safer during this downturn, there is talk of larger firms becoming even more powerful. “Large pure-plays should come through the pandemic relatively unscathed but may be looking at lower spending growth outlooks,” Capital Alpha Partners Managing Director Byron Callan noted May 13. “Mergers and acquisitions may thus be more important in delivering growth—even though it's not organic growth—in 2021-25.”
So where to look for vertical integration and consolidation from the top? Clues are already emerging, according to advisor presentations. First, look at niches where top suppliers already are prevalent—environmental and flight-control systems, landing gear, electrical power and interiors—and others where they are not there yet, including maintenance, repair and overhaul, logistics, aerostructures and engines.
Next, look at the supply base from the perspective of a top supplier. Who is distressed or drawing down credit lines? What revenue mix do certain potential targets have—e.g., commercial vs. defense, products vs. services or aging vs. next-generation platforms?
Finally, consider where the new nucleus of consolidation will be. Will more “super Tier 1s” such as Raytheon Technologies emerge, or will conglomeration occur among Tier 2 and 3 providers? The first would allow rationalization of capacity for detailed part production from Tier 1 to 3, for instance, with the super Tier 1s able to secure through-value-chain control and prevent subtier supplier failure, according to Roland Berger. The latter likely would be opportunistically driven rather than following any overarching industry logic.
For smaller suppliers, the questions are more concise, as one consultant says. Do you want to be a buyer, a seller or risk it as is? A simpler question, for sure, but no less difficult to answer.
28 mars 2023 | International, Aérospatial, C4ISR
Northrop Grumman has been chosen by the U.S. Army to participate in Increment 2 of the Future Tactical Unmanned Aircraft System (FTUAS) program.
2 octobre 2019 | International, Aérospatial
EVERETT, Wash., October 1, 2019 – The U.S. Air Force today awarded Boeing [NYSE: BA] a $2.6 billion contract for 15 KC-46A tanker aircraft, spares, support equipment, spare engines and wing air refueling pod kits. With this fifth production lot, Boeing now is on contract for 67 KC-46 tankers. Boeing received its first two production lots, for 7 and 12 aircraft, in August 2016. The third lot, for 15 aircraft, was awarded in January 2017; the fourth lot for 18 aircraft in September 2018. “We're honored to build the Air Force's next-generation tanker and appreciate the importance of this program for our nation,” said Jamie Burgess, Boeing KC-46A tanker vice president and program manager. “This has been a milestone year for KC-46 and a big reason for that is our great partnership with the Air Force. We expect to accomplish great things together in the years to come.” Boeing plans to build 179 of the 767-based refueling aircraft for the Air Force to replace its legacy tanker fleet. The company delivered the first tankers to the Air Force in January 2019. Boeing received its initial contract in 2011 to design and develop the Air Force's newest tanker aircraft. The KC-46A is a multirole tanker that can refuel allied and coalition military aircraft compatible with international aerial refueling procedures and can carry passengers, cargo and patients. Boeing is assembling KC-46 aircraft at its Everett, Wash., facility and recently started production of the first KC-46 for Japan. For more information on Defense, Space & Security, visit www.boeing.com. Follow us on Twitter: @BoeingDefense and @BoeingSpace. Caution Concerning Forward-Looking Statements Certain statements in this release may be "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "intends," "plans," "projects," "believes," "estimates," "anticipates," and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future plans, business prospects, financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these forward-looking statements. As a result, these statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement, except as required by federal securities laws. Specific factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, the effect of economic conditions in the United States and globally, general industry conditions as they may impact us or our customers, and our reliance on our commercial customers, our U.S. government customers, our suppliers and the worldwide market, as well as the other important factors disclosed previously and from time to time in our filings with the Securities and Exchange Commission. # # # Contact: Kym Vandlac Defense, Space & Security Office: +1 425-266-5365 Mobile: +1 425-210-7851 kymberly.y.vandlac@boeing.com https://boeing.mediaroom.com/2019-10-01-Boeing-Awarded-2-6-Billion-for-Fifth-KC-46A-Tanker-Production-Lot
15 septembre 2020 | International, Aérospatial
Steve Trimble Lockheed Martin F-35 deliveries postponed by the impact of the COVID-19 pandemic on the supply chain will not fully recover by the end of 2021, a company executive told Aerospace DAILY. In June, Lockheed announced that 18-24 F-35s in production Lot 12, which are scheduled for delivery in 2020, will be delayed, reducing the overall delivery target to 117 to 123 jets this year. Although Lockheed's final assembly plant in Fort Worth is now at full operations, the impact on the supply chain will drag out the recovery for another year, said Michelle Evans, executive vice president of Lockheed's Aeronautics business. “We're still looking somewhere between 15-20 aircraft that we will be behind by the end of the year,” Evans said in an interview. “It is going to take a while for the supply chain and, thus, Lockheed Martin to recover. So it will take us longer than next year. We'll probably be staring at two years to recover those jets.” Lockheed's supply chain is in recovery while the company continues negotiating separate deals with the F-35 Joint Program Office (JPO) for the next three years of airframe production and converting the annual sustainment contracts into a multiyear performance-based logistics (PBL) agreement. In October 2019, the JPO and Lockheed agree to an economic order quantity of 478 aircraft for lots 12-14, which are delivered from 2020 to 2022. The agreement includes a firm order from the U.S. government for Lot 12 aircraft, with priced options for Lots 13 and 14 resulting in an overall total of 291 F-35s. The international customers added orders for 187 aircraft under a related, three-year production order. A similar approach will be followed for the U.S. and international orders in Lots 15-17, which will include the first jets to receive upgraded Technical Refresh-3 hardware, Evans said. Separately, the JPO and Lockheed are continuing to negotiate a long-term PBL to sustain the F-35s, with an overall goal to reduce the cost per flight hour of the F-35A to $25,000 by 2025. Lockheed sees an opportunity to reduce sustainment costs by $18 billion or more over the term of the PBL, Evans said. Lockheed expects to make an initial investment of $1.5 billion in cost-saving projects once the deal is signed. https://aviationweek.com/shows-events/afa-air-space-cyber-conference/full-covid-19-recovery-f-35-deliveries-pushed-2022