One of the biggest mergers in recent aerospace history – UTC Aerospace Systems (UTAS) and Rockwell Collins – will not have quite crossed the line by the time the Farnborough air show starts, but Dave Gitlin, who heads UTAS and is set to become number two at Collins Aerospace Systems, is “champing at the bit” to launch the combined business into the industry. “We have been working very closely with Kelly [Ortberg, current Rockwell Collins chief executive and the designate to take on that role at CAS] and his team, so we can hit the ground running,” he says. “We have a plan in place on how we are going to work with our customers on day one. We’re ready and we’re excited.”
In March, Boeing dropped its objection – one of the final potential obstacles to the $30 billion deal – after negotiating new cost-reduction agreements with the two companies. The relationship with UTAS had been dealt a blow when Boeing dropped Goodrich – acquired by United Technologies in 2011 – as its landing gear supplier on the 777X on cost grounds, and handed the contract to small Canadian player Heroux-Devtek. UTAS has since fought its way back into Boeing’s affections, securing more contracts on the revised 777. The new arrangements will also allow UTAS to negotiate for work on Seattle’s upcoming New Mid-Market Airplane that could enter service in the mid-2020s.
UTAS and Rockwell Collins are two of the biggest first-tier suppliers in the industry. Charlotte-based UTAS – whose parent company also owns Pratt & Whitney and formed in 2015 from the merger of the former Goodrich and Hamilton Sundstrand units – produces a wide range of components, from nacelles to ejection seats, and landing gear to laser warning systems. Rockwell Collins, based in Cedar Rapids with revenues of around $8.3 billion, is, with Honeywell, one of the two big suppliers of cockpit avionics, communication equipment and cabin entertainment systems. Although UTAS and Rockwell Collins both compete in business aircraft interiors, their product portfolios are largely complementary.
The big incentive for the merger was Rockwell Collins’ suite of technologies at a time when big data, passenger connectivity and cockpit innovation are advancing apace. Just before its offer for Rockwell Collins, United Technologies had divested Sikorsky, a $7.5 billion sales business, to Lockheed Martin for a figure just $1.5 billion greater than that sum. The price it offered for Rockwell Collins – $30 billion – valued the avionics and interiors company at three-and-a-half times its annual revenues. That suggests United Technologies believes it can extract a lot more return from both Rockwell Collins’ existing product line, and the synergies offered by the marriage with UTAS.
One of the keys to that is “the connected aircraft” – a push to link the aircraft, its flightcrew and passengers with the ground in real time, whether that is giving a traveller access to movies and social media on the internet, providing pilots with instant updates on weather conditions or upcoming traffic, or recording, transmitting and interpreting data on every aspect of the aircraft’s performance as it flies. “Data and digital is where there is the potential for the most disruptive change in our industry,” says Gitlin. “So it is perfect timing as we come together with Rockwell Collins.”
On that theme, at Farnborough UTAS will announce the opening of its Intelligent Aircraft Technologies Lab in Rockford, Illinois. The company says the initiative is “dedicated to the accelerated development of more intelligent and connected aircraft systems, ultimately optimising airline operational efficiency, while providing new insights for the design and manufacturer of highly reliable products”. One of its aims will be to “demonstrate the secure and efficient movement of data from components and systems across and airline’s network to enable intelligent connected aircraft fleets”.
The lab will develop health monitoring solutions and early warning systems, initially for generators, air compressors, fans, and motor controllers – but UTAS plans to “quickly expand” into other components. Data, says Mauro Atalla, vice president of engineering and technology, sensors & integrated systems, is “the transformative force for higher levels of operational efficiency and innovative product designs”. He adds: “With technology we have developed over the past several years, we are able to access thousands of parameters from fleets of new and older aircraft. With our new lab to advance our capabilities, we are on the pathway to a truly connected, intelligent aircraft for our customers.”
Gitlin points to a concrete example of how big data has helped one customer, Alaska Airlines, reduce costs by millions of dollars a year by adjusting trajectories and take-off and descent patterns, based on detailed analysis of aircraft performance. “Just by doing that, they saved a million gallons of fuel a year,” he says. In another example, UTAS has been working with a “major airline” to assess vibratory and thermal trends on a generator to detect any upcoming failures. By using machine learning and statistical analysis in this way to identify looming failures in components before they happen, carriers can vastly reduce delays and cancellations, he adds. “It’s all about understanding our own equipment to keep our products on wing for longer.”
Once the Rockwell Collins deal goes through, UTAS can enhance that offering by using its communications know-how to consolidate all that data in a single device and disseminating it during the flight, says Gitlin. Under the merger plans, the rest of the Rockwell Collins portfolio will be brought together with UTAS’s product line-up under six new business units, based on “product areas that create natural P&Ls [profit and loss units]” rather than market sectors. Synergies will come by “working together on the supply chain and MRO support”, he says.
While UTAS has taken flak for not adjusting prices quickly enough under pressure from aircraft manufacturers – the loss of the 777X landing gear being the most significant warning shot – Gitlin says negotiating with OEMs to reduce costs “is nothing new”. He adds: “We are working hard with Boeing and others on solutions. They are under pressure from their airline customers and we expect to have more strategic discussions on how we grow our businesses together. We are aligning technology roadmaps, understanding their future programmes, and finding the right win-wins. We know we have to be competitive to win business, but technology differentiation matters too, and we are making the right investments to have the lowest cost, highest performance products on the market.”
As the currently-branded UTAS goes into the Farnborough air show, Gitlin says he is “more positive about this industry and where we are positioned than I have ever been”. He adds: “Airlines are up, defence budgets are increasing. We have a watch on fuel prices, but all the macro indicators are very strong. We are well positioned to benefit from all the trends. Aircraft are becoming more electric, and we have a world-leading electric systems business. They are becoming more autonomous, and we have the best portfolio there of any systems supplier. I am extremely excited about how we can be at the heart of these macro trends and really capitalise on them.”