Industry Week in Review – March 21, 2014
The U.S. credit rating was affirmed at the top-notch triple-A level with a stable outlook this week by Fitch Ratings. This affirmation negates the “rating watch negative” the firm placed on the country’s ratings back in October. Additionally, the firm said it does not expect any developments in the near-term that would lead to a U.S. rating downgrade and suspects that the debt limit will be suspended or raised again in March 2015. If ratings had been cut by Fitch, it could have prompted big institutional investors to sell Treasury bonds, since investment rules constrain some institutions to only invest in securities rated triple-A by at least two major rating firms.
As Airbus and Boeing raise production to all-new levels in response to record numbers of orders, officials from both manufacturers this week have said that the global air transport industry is now much more resistant to current potential market fluctuations and possible threat of a “market bubble” threatening the companies’ combined backlog of more than 10,000 aircraft. Among the factors supporting the optimism, officials stated the market is looking better in 2014 with expected traffic growth of 6% throughout the year, as well as revenue passenger kilometers and freight traffic showing early signs of climbing beyond 2013 levels. In addition, both Boeing and Airbus also report signs of a continued recovery in the cargo market and airlines becoming more profitable, led by continued operational improvements in the U.S. and positivity within the leasing and secondary markets. Boeing finished 2013 with a record order backlog of 5,100 aircraft valued at nearly $400 billion and expects to deliver up to 725 aircraft this year. Airbus currently holds an order backlog of 5,560 and plans to deliver 630 aircraft this year.
On the government contracting front, the SBA, in a recent decision, held that unless the Contracting Officer expressly requires recertification, a company’s size for an 8(a) set-aside task order is governed by that company’s size status for the underlying GWAC. Therefore, size recertification is not required for individual task orders within a specific GWAC.
Big Movers
Mercury Systems, Inc. (Up 16.0%) – Shares were up this week as it was speculated that the Company is entertaining offers for a potential sale.
Relevant Transactions
Precision Castparts Corporation to acquire Aerospace Dynamics International, a provider of machined parts and assemblies to the commercial and military aerospace industries. Precision Castparts will pay $625 million for the acquisition.
Lockheed Martin Corporation acquired BEONTRA AG, a German provider of integrated planning and demand forecasting tools for airports around the world. Terms of the deal were not disclosed.
Carlyle Group’s Landmark Aviation acquired Midlantic Jet Aviation, Inc. and Midlantic Jet Charters, Inc., a provider of fixed base operations and charter services in the northeast United States. Terms of the deal were not disclosed.
