By Avascent Analytics team
WHITE PAPER – Power Play: What UTC’s Acquisition of Rockwell Collins Means for the Commercial Aerospace Industry
In agreeing to purchase Rockwell Collins for $30B, United Technologies Corporation has made the latest, and largest, move in a continuing industry march toward consolidation. The acquisition is a direct rebuttal to aircraft manufacturers’ growing encroachment on traditional supplier roles, and speaks to the headwinds that suppliers will face as they seek to remain relevant and profitable. As such, all players must reevaluate the strength of their positions, and chart a path forward that ensures their long-term success in a quickly evolving market. Click here to learn more.
A quick look at the biggest stories of the week
Saudi Arabia • UK • Philippines • India • Bahrain • Space
On October 16, Boeing was awarded a $240 million foreign military sales contract to upgrade Saudi Arabia’s fleet of E-3 aircraft. Boeing will upgrade the aircraft’s mission computing, navigation, communication, and IFF systems under the first phase of the Airborne Warning and Control System (AWACS) modernization program. The work is anticipated to be completed by the end of February 2019. Saudi Arabia’s E-3s recently acquired upgraded radar capabilities including a new radar computer, radar control maintenance panel, and software upgrades that were completed by Boeing in May 2017. Saudi Arabia’s AWACs aircraft were first delivered in 1986.
On October 18, BAE Systems announced a teaming agreement with British commercial ship manufacturer Cammell Laird to bid for the UK’s Type-31e program. Under the agreement Cammell Laird will act as the prime contractor for the manufacture and assembly of the vessels with BAE Systems providing support with design, engineering, and combat systems. The agreement will allow BAE Systems to bid for the Type-31e program without having to increase capacity at its own shipyards, which are currently committed to both the Type 26 and River Class Off-shore Patrol Vessels. According to the announcement, A&P Group, which has three shipyards in the UK, will also be involved in the program if the bid is successful. BAE and Cammell Laird will compete against Babcock to produce at least five ships at a cost of no more than £250 million ($325 million) per ship. The teaming agreement would see a commercial shipbuilder lead the build process as opposed to acting as a sub-contractor, which Cammel Laird has done in the past with the Queen Elizabeth-class aircraft carriers.
Filipino President Rodrigo Duterte addressed the country’s military at a groundbreaking ceremony of a new facility, as the Philippines continues fighting against ISIS-linked militants in the city of Marawi. Considering the rough terrain in the restive southern Philippines and frequent ambushes dismounted troops have faced, President Duterte has mentioned a desperate need for acquiring transport helicopters in the next two to three years. Since 2016, the Armed Forces of the Philippines (AFP) has expressed interest in expanding its helicopter inventory, but has shown no interest in any particular platform. Potential rotorcraft options include Russia’s Mi-17 or Mi-24 given the growing relationship between the two countries, or additional AW109 helicopters of which the Philippine Air Force acquired eight in 2013. A tight budget suggests that the AFP may only be able to spend about $30-$40 million for this acquisition over the next two to three years. Currently, the Philippine Navy is spending more than $116 million between 2017 and 2019 on two AW159 anti-submarine warfare helicopters, and hopes to acquire four more anti-submarine warfare helicopters in the early 2020s under the Second Horizon of the AFP’s broader modernization plan.
The Indian Air Force (IAF) has made a formal request to purchase two intelligence, surveillance, target acquisition, and reconnaissance aircraft from Raytheon, which will likely offer a version of the Sentinel R1 aircraft that already serves in the UK armed forces. The deal is expected to be completed via the Foreign Military Sales (FMS) process, although the value of the contract has not been publicly disclosed. The purchase will fill a gap for the IAF, which struggles with domain awareness and joint operations. Intelligence, surveillance, and reconnaissance capabilities have been a particular concern since tensions with China escalated this summer over a disputed border in the Himalayas.
On the second day of the Bahrain International Defense Exhibition and Conference, Bahrain announced that it had signed a $3.8 billion deal with Lockheed Martin to acquire F-16s for the Bahraini Air Force, and to upgrade Bahrain’s current fleet. The number of F-16s being acquired is unclear, but reported numbers have ranged from 16 to 19 units. The F-16s would be outfitted with the newest Block 70 configuration, originally conceived for the Indian MMRCA competition. According to Lockheed, the Block 70 includes APG-83 AESA, the new Modular Mission Computer, JHMCS II, and an internal Electronic Warfare System with integrated RWR and ECM. The deal comes almost exactly a year after a similar deal was placed on hold by the Obama Administration over human rights concerns in Bahrain, but has since been green-lighted under the Trump Administration.
For more information about this Weekly Wire, contact firstname.lastname@example.org.
Analytics Users: If you’d like to see the markets discussed in any of these articles in greater depth, please visit avascentanalytics.com.