Rockwell Expands and Diversifies with B/E Aerospace Buy

by Richard Pettibone, Aerospace & Defense Companies Analyst, Forecast International.

With commercial aviation production continuing apace, Rockwell Collins decided it wanted a bigger slice of the pie and expanded its operations with the $8.3 billion purchase of cabin interiors specialist B/E Aerospace.   As a result, Rockwell is now an $8 billion company, employing some 30,000 people and commanding a diverse content base on a variety of commercial and business aircraft.       The purchase is a departure for Rockwell, in that adding B/E doesn’t result in much synergy with existing operations.  Rockwell’s product offerings focus on the “smart” aspects of aircraft – avionics, cabin electronics, simulation, and information management, while B/E Aerospace specializes in more prosaic elements – seating, lighting, galleys, and lavatories.

Unlike past acquisitions, this one expands Rockwell Collins into adjacent, yet familiar product markets. The operation, now rebranded as Rockwell Collins Interior Systems, diversifies the company’s customer mix and geographic footprint. According to reports, the addition of B/E doubles – and in some cases triples – Rockwell’s content on various jetliners.   Longer term, Rockwell will likely expand this unit’s aftermarket focus with interiors-related MRO.

The assimilation is not without its challenges.  Aircraft interiors have had a notoriously difficult time of late in matching demand to the increased production rates of Airbus and Boeing.  Further, the limited synergy could be a negative.  While Rockwell espouses the idea of an interconnected “smart” airline cabin, it remains to be seen whether the demand is there.

Previous acquisitions for the company have concentrated on its original core markets of electronic systems. Here the firm has moved decisively into the connectivity and aviation information markets.  As the company puts it, “We are in the midst of aviation’s information age, where the delivery of the right information at the right time is more critical than ever.”

In pursuit of this information management goal, the company has expanded its presence in the connectivity market, a sector experiencing steady growth. The need to be connected, both in the cabin and in the cockpit, has become critical in business aviation.  As personal electronic devices such as smartphones and tablets proliferate, customers expect to be connected to the Internet at all times, whether on the ground or in the air.

In 2015, Rockwell Collins added a wireless-distribution specialist to its portfolio – Pacific Avionics.  This company focuses on the wireless distribution of digital media throughout an aircraft.  Of note is Pacific Avionics’ technology, which can reportedly stream video to more than 250 passengers simultaneously. The Pacific Avionics purchase built on Rockwell’s 2013 acquisition of ARINC.  Whereas Pacific added the in-aircraft element, allowing passengers to connect with content via their personal devices, ARINC provided the off-aircraft part of the equation.

In addition to its air-ground digital VHF communications network, ARINC provides flight support services for business aviation and airport communications and information packages.  These offerings complement two earlier acquisitions: Air Routing International and Computing Technologies for Aviation.  As the complexity of managing flights for small aircraft has grown, the market for flight support services has likewise entered a boom period.

Rockwell Collins’ key offering in the information management market is Ascend Flight Information Solutions.  Ascend services can be tailored to the individual needs of business aircraft operators, and include flight planning and filing; weather updates; fuel services and concierge services; automatic data transfer of navigation, terrain, graphical weather, and other flight deck databases; maintenance diagnostics; and cabin system subscription management for television and other information and entertainment sources.

The critical mass of all these acquisitions now allows Rockwell Collins to address the full spectrum of flight connectivity needs, from trip initiation through closeout.

All told, Rockwell Collins appears well resourced to manage and grow in the current aviation market.  The company has been quick to respond to the needs of its customers.  It should find additional opportunities going forward, thanks to its broader offerings.

The Defense & Aerospace Companies series focuses on worldwide aerospace and defense prime contractors and subcontractors. Concise reports provide data on individual corporations regarding recent mergers, restructurings, and joint ventures, along with a Strategic Outlook that examines the company’s strengths, weaknesses, and opportunities. Also included in each report are financial and industrial segment data, snapshot coverage of major programs, and recent U.S. Department of Defense contract awards.

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