Industry Week in Review – November 14, 2014
Aerospace & Defense Update
CFM International reached 100 hours of flight testing for its Leap 1C engine on the Boeing 747. The turbofan engine is designed for the Comac C919 narrowbody and features new, lighter weight pylons that improve performance and decrease operating costs. The engine is strategically positioned to fulfill the current demand to reduce component weight, increase reliability, and improve efficiency seen throughout the commercial aerospace industry. Through its joint venture with GE Aviation, CFM will continue testing with its integrated propulsion system. The engine is up for initial certification in 2015 and will be integrated into the Airbus A320neo and Boeing 737 Max with its Leap 1A and 1B variants. CFM has already collected orders for the Leap 1A variant from China’s Zhejiang Loong Airlines to supply nine A320neos.
The A-10 Warthog has a strong backing from Republicans to keep the fleet alive. In particular, Senator John McCain has vocalized his avid support for the fleet and will make it a priority item as he takes on his expected new role as Senate Armed Services Committee Chairman. Defense of the program follows the Air Force move to shut down three A-10 squadrons, which equates to about 72 aircraft. The aircraft continues to be a favorite among ground troops as its accuracy and power are unparalleled in comparison to any current aircraft. McCain cited a June friendly fire accident involving a B-1 bomber that killed five American troops as a major reason to keep the A-10 as the B-1 simply could not replace the close-air support. However, the A-10 fleet may lead to further delays of the F-35 as it withholds maintenance personnel that could have been allocated to the F-35 fleet.
Government Technology Solutions Update
The Department of Defense is expected to release an updated cloud policy to speed up the procurement process in the next week. Currently, all DoD cloud contracts are passed through the Defense Information Systems Agency (“DISA”). However, the new policy will decentralize cloud procurement and give individual agencies purchasing power for approved commercial cloud services. DISA will no longer be the only contracting office for DoD cloud contracts, but it will give input on cloud security to other agencies. With the faster procurement process, the DoD will be looking to increase the number of cloud contractors.
Veterans Affairs (“VA”) Secretary Bob McDonald announced the reorganization of the VA this week. The announced plan ensures Veteran needs are more easily met and VA employees are better equipped with the products and services to meet those needs. The VA will be establishing a new VA-wide customer service organization, a single regional framework, and a national Community Veteran Advisory Council. Additionally, the reorganization will realign the VA’s internal structure and processes in order to better leverage shared service frameworks. This announced restructuring is the largest the VA has undergone since its establishment.
KeyW Holding Corporation (Up 8.3%) – Shares were up this week after the Company announced that it has been awarded a $17 million prime contract with the Air Force Research Laboratory to develop and transition next generation ISR sensor systems.
Taser International, Inc. (Up 9.0%) – Shares were up this week after the Company announced multiple large quantity weapons orders, including a one from Virginia’s Langley Air Force Base, which bought 259 X26s Smart Weapons with 20 Taser cam recorders.
Exchange Income Corporation to acquire Provincial Aerospace Ltd., a provider of airborne and maritime surveillance solutions for industrial, military, and government markets. The deal is worth an estimated $246 million.
Harbert Private Equity Fund III, L.P. acquires Flight Display Systems Avionics Corp., a designer, developer, and light manufacturer of cabin electronics for business and commercial aircraft, including cabin management systems and in-flight entertainment solutions, and ruggedized special mission military monitors and other retrofit solutions requiring adherence to military specifications. Terms of the deal were not disclosed.
Fort Sill Apache Industries acquired Advanced Information Services Inc., a provider of consulting services for companies with product data management and enterprise document management software. Terms of the deal were not disclosed.