Industry Week in Review – June 22, 2018
Aerospace & Defense Update
On Monday, President Trump ordered the Pentagon to create a new Space Force with the signing of an executive order during a meeting of the National Space Council. The decision would realign the U.S. military by pulling various space functions into the additional sixth military branch. The U.S. space operations are currently carried out by the Air Force, Navy, and other branches. A new military service branch would need authorization from Congress, where the Space Force currently lacks substantial support. A congressionally-mandated report on the addition of a Space Force is expected in August, where the issue will likely be debated. In the interim, Pentagon officials will begin the process of the laying the groundwork for the future service branch.
Canadian plane-maker Bombardier believes its upgraded CRJ 900 regional jet should gain substantial market share in its competition with Brazil-based Embraer. Bombardier’s Commercial Aircraft President, Fred Cromer, is aiming to take control of at least half of the 76-seater market, of which Embraer’s E175 accounts for 80% of U.S. orders over the last five years. Bombardier has employed a new modernization and cost-reduction plan for its regional jets after Airbus bought a majority stake in Bombardier’s flagship CSeries jetliner program. The CRJ program was launched in the early 1990s and has a 30% share of the U.S. market over the last two years. However, Bombardier’s global market share has increased to 42% over the same time frame, and the Company recently secured a $1.0 billion order from Delta Air Lines for 20 CRJ 900s.
Government Technology Solutions
The Defense Information Systems Agency (“DISA”) on Monday awarded 14 companies a position on its $7.5 billion Systems Engineering, Technology, and Innovation (“SETI”) contract vehicle. SETI is an indefinite delivery, indefinite quantity (“IDIQ”) contract that aims to streamline the Department of Defense’s (“DoD”) process for ordering various IT engineering services. The contract has a five-year base period with a single five-year option. SETI is designed to provide the DoD with a more flexible alternative to the Encore III commodity IT services vehicle. SETI is split into two pools, an unrestricted competition pool and a small business pool. The 14 unrestricted awardees were selected from 35 proposals. The small business pool has not been awarded yet. While soliciting proposals, DISA released two statements describing the type of work to be done for those in the unrestricted pool. The first describes the creation of an internal personnel management system capable of managing aspects of the DoD’s Hire-to-Retire program. The second focused on improving the architecture of DISA’s mobile ecosystem.
New research by Symantec revealed that at least two different U.S.-based satellite companies, a contractor for the Department of Defense (“DoD”), and a private company selling geospatial imaging technology were targeted by a Chinese-linked hacking group in late 2017. The origin of the hacking operation coincides with the initial talks of the U.S.-China trade war. Symantec has said that they alerted the U.S. government about the attacks approximately four months ago, noting that they decided to notify the government because the hackers attempted to gain access that would allow them to physically control the satellites. The same hackers were also active prior to 2015, but had ceased activities following an agreement between former President Barack Obama and Chinese President Xi Jinping. While that agreement outlawed economic espionage, it left more conventional targets, such as defense contractors and federal agencies, unprotected. Symantec said that while they have monitored the group since 2013, this attack was more targeted and aggressive than in the past.
Big Movers
Bombardier (up 6.9%) – Share prices were up this week after the company secured a $1.0 billion order from Delta Air Lines for 20 CRJ 900s amid optimistic outlooks for future competition against rival Embraer.
Boeing (down 5.3%) – Share prices were down this week as a result of possible retaliation from foreign governments over international trade disputes.
Transactions
MAG Aerospace Corporation has acquired North American Surveillance Systems, Inc., a provider of integration of ISR systems onto fixed- and rotary-wing platforms and undertakes other aircraft modification and upgrades.
Cerberus Capital Management has agreed to acquire Worldwide Flight Services, a provider of aviation and aircraft ground support services such as cargo handling, technical contracting, and ramp and passenger services.
