Aerospace & Defense Update
Airbus and Boeing had a modest showing at this year’s Farnborough Air Show with a combined $62 billion in deals, especially in comparison to last year’s historic $116 billion in orders. The Farnborough Air Show is typically a high point for aircraft orders and the commercial-aviation industry as a whole. During the air show, Airbus outpaced Boeing, with $35 billion in orders, bringing its YTD total orders to 380 aircraft. Boeing, on the other hand, secured $27 billion in orders at the Air Show, increasing its total orders to 321 aircraft for the year. Although Airbus received more orders than Boeing, it announced plans to slash production of its A380 jumbo jet from 27 aircraft in 2015 to just 12 aircraft per year starting in 2018. The highly ambitious project is turning out to be too costly for Airbus and may generate a loss after breaking even last year. However, both Airbus and Boeing are looking to have a strong second half of the year in order to attain their year-end sales goals of 650 orders and 740 orders, respectively.
Lockheed Martin, along with its subcontractors for the F-35, Northrop Grumman and BAE, announced at the Farnborough Air Show new initiatives designed to significantly cut procurement and sustainment costs for the F-35 by billions of dollars. One of the initiatives will include a $170 million investment to expand the two-year-old “Blueprint for Affordability” program, which is anticipated to decrease the unit cost of the F-35A to $85 million by 2019 and save more than $4 billion over the lifecycle of the program. Additionally, the three companies are also creating a “sustainment cost reduction initiative” with a $250 million investment designed to cut operations and maintenance costs by 10% from 2018 through 2022. This initiative is expected to lead to over $1 billion in savings over five years.
Government Technology Solutions Update
The Centers for Medicaid and Medicare Services’ (“CMS”) $25 billion Strategic Partners Acquisition Readiness Contract (“SPARC”) is again making headlines, as a new set of four companies has joined the fight over the heavily disputed vehicle. LRA-ISI Joint Venture, SGT Inc., SparkSoft Corp., and Syneren Technologies Corp. are the latest companies to protest the contract award; in total there are 19 companies that have filed a protest. All four of the new protestors are small businesses. Originally awarded to 81 companies, 54 of which are small businesses, the CMS contract has an expected period of performance of ten years. The Government Accountability Office (“GAO”) is expected to reach a decision on the protests by mid-October of this year.
According to a report from Govini, a Big Data and analytics firm, the departments of Veterans Affairs (“VA”) and Health and Human Services (“HHS”) are investing heavily in new health IT and technology services. The report adds that despite the Federal government’s recent budget sequestration, the fiscal year 2017 budget outlook for the two agencies is strong. 63% of HHS’ IT and professional services spending is driven by CMS, while the Transformation Twenty-One Total Technology (“T4”) contract vehicle is driving investment for the VA. The continued investment in technology geared toward systems modernization, networks, and cybersecurity infrastructure on behalf of both agencies is a reflection of the growing concern over cyber-attacks on Federal agencies.
Airbus Group SE (Up 7.6%) – Shares were up this week after Airbus outpaced Boeing and secured $35 billion aircraft orders at the Farnborough Air Show.
Booz Allen Hamilton, Inc. (Up 9.2%) – Shares were up this week after the company announced that it had been awarded an unmanned aerial system demonstration contract worth $41 million.
AE Industrial Partners, LLC has acquired Moeller Manufacturing Company, LLC, a provider of precision machined turbine engine components for the gas turbine aircraft engine and power generation industries. Terms of the deal were not disclosed.
AGC AeroComposites, Inc. has acquired North Coast Composites, a provider of advanced composites for the aerospace industry. Terms of the deal were not disclosed.
AGC AeroComposites, Inc. has acquired North Coast Tool and Mold Corp., a provider of molds and tools for the aerospace industry, including resin transfer molds, lay-up molds, compression molds, and plastic injection molds. Terms of the deal were not disclosed.
Gooch & Housego has acquired Alfalight, Inc., a provider of high reliability, laser based, electro-optic systems for defense and security applications. The deal is worth an estimated $1 million.
Gooch & Housego has acquired Kent Periscopes Ltd., a provider of periscopes, vehicle sights and related equipment for land based Armored Fighting Vehicles (“AFVs”). The deal is worth an estimated $12 million.
Halvik Corporation has acquired SP Systems, Inc., a provider of scientific research, engineering data analysis, real-time satellite data processing, and algorithm development solutions to support the Federal government. Terms of the deal were not disclosed.
HNA Aviation Group Co. to acquire an 80% stake in SR Technics Ltd., a provider of integrated airline solutions, including maintenance on aircraft, engines, and components.
MB Aerospace has acquired Vac-Aero, Poland, a provider of protective and performance enhancing coatings for aero-engine and industrial gas turbine components. Terms of the deal were not disclosed.
Rolls Royce Holdings plc to acquire a 53% stake in Industria de Turbo Propulsores S.A., a provider of engineering, research and development, manufacturing and casting, assembly, and testing of aeronautical engines and gas turbines. The deal is worth an estimated $795 million.
Thales Alenia Space, a joint venture of Thales S.A. and Finmeccanica SpA, to acquire RUAG Holding AG’s Opto-Electronics and Instruments Product Unit, a provider of scientific satellite instruments and equipment for optical communications in space. Terms of the deal were not disclosed.
Xator Corporation has acquired Paragon Communications Solutions, Inc., a provider of tactical communications security, networking, and electronic countermeasures solutions. Terms of the deal were not disclosed.