Aerospace & Defense Update
On Tuesday, Boeing announced the formation of a joint venture (“JV”) with Adient, the auto parts business divested by Johnson Controls in 2016. The JV will create seats for commercial aircraft, providing an alternative to the traditional commercial aircraft supply chain players such as Rockwell Collins and Safran. Per Boeing, the JV is in response to delays in aircraft seat production as well as restraints on capacity for its key suppliers. Boeing has been making efforts to vertically integrate its business and develop in-house capabilities such as aviation electronics, specialty manufacturing, and engine components, making the company less dependent on those historical key suppliers. The commercial aircraft supply chain has undergone large-scale changes such as Boeing and Airbus breaking into the higher-margin aftermarket services business, and continued industry consolidation through transformational deals including the acquisitions of Orbital ATK and Rockwell Collins.
Emirates Airlines has purchased 36 Airbus A380 superjumbos, providing a key lifeline to the fledgling program that was at risk of shutting down production. The 36 double decker jets were purchased for an estimated $16 billion in a deal that was originally going to be signed at the Dubai Air Show until Emirates Airlines walked away from the deal over concerns about Airbus’ commitment to the program. This agreement will ensure that Airbus continues production of the A380 for the next 10 years per Airbus’ Chief Sales Officer, John Leahy. Overall, this brings Emirates Airlines’ total A380 commitment to 178 planes, of which 101 are currently in operation.
Government Technology Solutions
The Office of Financial Innovation and Transformation (“FIT”) at Treasury’s Fiscal Service, led by John Hill, FIT assistant commissioner, is working on a pilot program using blockchain technology to track agency-owned physical assets, such as computers and phones. Hill is hoping that the pilot will familiarize his office with the transformational blockchain technology and how it could improve their operations. Currently, FIT’s asset management process involves manual, via spreadsheet or even pen-and-paper, reconciliation of physical asset inventory. Throughout the government, there are upwards of thousands of employees that are tasked with reconciling inventory lists with physical assets each quarter, so incorporating technology enhancements would provide significant efficiencies, savings, and improved accuracy. The pilot program is testing whether blockchain technology can make the process more efficient, transparent, and provide real-time assessments of critical assets. The project began in September 2017 and is scheduled to run through February 2018, when Hill will examine the efficiency of blockchain technology in replacing manual efforts and its associated costs.
On Thursday, the Senate voted 65-34 to approve a six-year extension of Section 702 of the Foreign Intelligence Surveillance Act (“FISA”). The Intelligence Community (“IC”) considers Section 702 to be its key national security surveillance tool as it allows the National Security Agency (“NSA”) to collect emails, phone records, and other communications of foreign targets located outside of the U.S. without a warrant. With the program’s statutory authority set to expire on January 19, the extension faced resistance from several senators who argued Section 702 allows U.S. agencies to incidentally monitor U.S. citizens through their communications with non-U.S. citizens outside of the country. The House also passed the bill last week with a 256-164 vote and President Trump signed the measure into law Friday.
Rolls Royce (up 4.9%) – Share prices were up this week after the company announced it is considering the sale of its commercial marine business.
Fluor (up 5.9%) – Share prices were up this week after the company signed a contract with Royal Dutch Shell plc for the engineering, procurement, and fabrication of Shell’s Penguins floating production storage and offloading vessel in the North Sea.
APCT Holdings has acquired Cartel Electronics, Inc., a provider of prototype and quick turn rigid printed circuit boards for commercial and military applications. Terms of the deal were not disclosed.
George Industries, LLC has acquired Numerical Precision, a provider of close-tolerance, high reliability components for satellites, aircraft and other aerospace and defense programs. Terms of the deal were not disclosed.
Goff Capital, Inc. has acquired Omega Research, Inc., a provider of engineering and testing serving the metal finishing and processing for aircraft and aerospace related plating processes. Terms of the deal were not disclosed.