Chris Jasper/LONDON

The mammoth size of the aerospace supply business to be formed by the merger of General Electric and Honeywell - especially when compared with competitor companies - has been revealed by newly-published performance figures for the US tier one companies. GE-Honeywell will have combined aerospace sales of $20.8 billion, based on last year's results, 60% more than nearest competitor United Technologies.

So large is the deal that the new company's aerospace division will have a turnover of the same order as the aerospace industry primes, ranking as the third largest aerospace manufacturer in the USA, behind Boeing and Lockheed Martin but well ahead of Raytheon and Northrop Grumman.

A merged UTC-Honeywell would have been even larger in the aerospace sector, making good sense of cash-rich GE's decision to move for the former AlliedSignal. Other tier one suppliers have made acquisitions of their own - TRW buying LucasVarity and BFGoodrich merging with Coltec, for example - but all will be dwarfed by the new GE, suggesting that further merger moves are likely.

UTC, like GE a diversified conglomerate, continues to look exposed in aerospace terms. Merger imperatives could lead it to look further down the US hierarchy or, with limited options, to Europe, perhaps reviving the possibility of a tie-up between Pratt & Whitney and Rolls-Royce. The UK company, with Thales and Snecma, both of France, continues to rank as a major supplier despite US consolidation.

Rockwell Collins is also a candidate for merger activity following its parent's decision to establish it as a stand-alone entity, while the primes on either side of the Atlantic also have significant supply activities which may be ripe for divestment. The GE-Honeywell deal has meanwhile been referred to the European Commission for anti-trust approval. The EC will decide by 6 March whether to launch a full inquiry. US anti-trust authorities are also considering the merger.

The US tier ones saw fourth quarter sales hold up well. UTC reported lower costs in P&W and synergies from Sundstrand integration, GE Aircraft Engines had a strong Q4 order book and TRW turnover was buoyed by missile sales, although profits were depressed by a change in programme mix. Honeywell's overall performance was under par but its aerospace business held up well.

Honeywell and Litton have both emerged for the latest round of their long-running billion-dollar litigation over laser-gyro navigation systems claiming some form of victory. The US Federal Court of Appeals rejected Litton's claims that Honeywell infringed its ring-laser-gyro patents, but remanded the company's claims of interference with contracts and business advantage for anew trial.

Source: Flight International