Aerospace & Defense Update
Per various reports, the Canadian government will cancel its planned purchase of 18 F/A-18E/F Super Hornet Jets from Boeing worth an estimated $5.2 billion. The intended purchase was designed to bridge the interim between Canada’s aging CF-18 Hornet fleet and a new fighter. However, the Canadian government cancelled the order after Boeing lodged a legal complaint against Bombardier, a Canadian company, accusing it of using Canadian government subsidies to undercut its competition in the U.S. commercial aircraft market. In lieu of the new Boeing F-18 purchase, Canada plans to buy used F/A-18 Hornets from Australia. The Canadian government will likely have to invest in extending the lives of the Hornet airframes, which could benefit L3 Technologies as it has worked on the CF-18 previously. Additionally, the cancelled purchase could provide an opportunity for Lockheed’s F-35, the Eurofighter Typhoon, Saab Gripen E, or Dassualt Rafale to win Canada’s upcoming fighter jet competition.
On Thursday night, Congress passed a two-week Continuing Resolution (“CR”) to avert a government shutdown and keep the government funded through December 22nd while lawmakers attempt to pass a yearlong budget. Under the CR, funding remains at the GFY2017 levels and the military does not have any flexibility on how it can allocate its funding. In order to pass a budget, Democrats and Republicans must overcome stalled negotiations over spending caps, immigration issues, and increases in defense funding. President Trump met with Congressional leadership from the Senate and House on Thursday afternoon to restart negotiations for a budget deal. Reports from the meeting detailed that the leadership from both parties agreed on the need to eliminate the defense sequester to ensure the military has full support to deal with national security threats.
Government Technology Solutions
Military services are further emphasizing mobile projects, ranging from continuing education to logistics aimed at enhancing readiness. Implementation priorities of such mobile technologies vary by agency. For example, the Army is looking to establish wireless capabilities in the classroom to expand web-based training into the field. In the Marine Corps, the focus is on making logistics more mobile friendly by using wireless devices to update supply transactions, thus eliminating the need to log onto a desktop computer. The Air Force has detailed the grandest plans within the military, specifically targeting logistics investment, by emphasizing the need to refit its IT architecture and move applications into the commercial cloud. Additionally, six different Air Force groups, the mobile solutions company, Monkton, and Apple are collaborating to build a mobile app that connects with an integrated maintenance data system to track ongoing work instead of inputting work manually at the end of the workday.
Defense secretary Jim Mattis has nominated Rear Admiral Nancy Norton to be the next leader of the Defense Information Systems Agency (“DISA”) when current Director Lt. General Alan Lynn leaves his post. Norton will receive a promotion to Vice Admiral with the appointment and will also take over as commander of the Joint Forces Headquarters-Department of Defense Information Network at Fort Meade in Maryland. However, Norton’s appointment does not have a specified timeline. Her directorship will require Senate confirmation, and the Pentagon has yet to specify an end date to Lynn’s current term, which is expected to extend into 2018. A 30-year Navy veteran, Norton joined DISA in August as Vice Director and previously served as Director of both the Warfare Integration for Information Warfare and the Command, Control, Communications, and Cyber Directorate of the U.S. Pacific Command. DISA manages an $11 billion budget overseeing IT operations for the Department of Defense.
Boeing (up 5.4%) – Share prices were up this week after the company delivered two widebody jets to Middle Eastern airlines and won a 747 order.
AeroVironment (up 24.5%) – Share prices were up this week after the company beat earnings and reported 47% year-over-year revenue growth.
Kordsa, Inc. has agreed to acquire Textile Products, Inc. and Fabric Development, Inc., providers of textile manufacturing of specialty fabrics for aerospace, industrial, and marine industries. The combined deals are worth an estimated $100 million.
System One has acquired GAP Solutions, Inc., a provider of operations enhancing programs and consulting services to defense, homeland security, and civilian government agencies in the U.S. Terms of the deal were not disclosed.
TTM Technologies has agreed to acquire Anaren, Inc., a provider of high-frequency RF and microwave microelectronics, components, and assemblies for the space, defense, and telecommunications sectors. The deal is worth an estimated $775 million.