Emma Kelly/LONDON Guy Norris/LOS ANGELES

AlliedSignal and Honeywell must shed large parts of their avionics businesses as the price for US regulatory approval of their planned merger, although only in areas of product overlap.

While approving the merger in principle, the US Department of Justice says Honeywell must give up its traffic alert and collision avoidance system (TCAS) business. AlliedSignal must shed its search and surveillance weather radars activities, its space and navigation business, the Micro-Electro Mechanical Systems (MEMS) microSCIRAS technology, and Cheshire, Connecticut-based operations including inertial and sensor products. Together, these activities account for around $250 million in sales, only about 1% of 1999's projected combined revenues of $25 billion.

The new company, to be known as Honeywell, will have annual aerospace sales topping $10 billion, covering engines and equipment supply as well as avionics, which should contribute $7.5 billion - or 30% - of total turnover.

European Commission (EC) oversight is the only hurdle still facing the merger, with a decision expected this quarter. AlliedSignal and Honeywell say they have "a lot of confidence" that Brussels will approve the $14 billion deal.

The partners are already moving ahead with integration plans and 20 teams having been assigned to merger planning. The new company is also eyeing expansion, with AlliedSignal thought to be engaged in due diligence of in-flight entertainment (IFE) systems manufacturer Sony Trans Com (Flight International, 6-12 October).

• AlliedSignal Engines and Systems has begun a dramatic reduction of its supplier base as part of a wider restructuring of AlliedSignal Aerospace. The reduction, planned ahead of the Honeywell merger, should see the division's 3,750 suppliers reduced by 1,200 over the next three years.

Like Boeing, which announced similar moves last month, AlliedSignal wants closer links with key suppliers. Engines and Systems general manager Steve Loranger says it aims to "demand more, to consolidate our partnerships, and go with suppliers which are financially sound and internet capable".

AlliedSignal Aerospace is regrouping into four major units: Engines and Systems, Avionics and Lighting, Aerospace Services and Aircraft Landing Systems. Three marketing units have also been formed to oversee sales to the air transport/regional, business/general aviation, and the defence and space markets. Growth strategies will build on traditional engine and system services, developing new third party services and establishing a broad-based capability in systems integration.

Source: Flight International