Aerospace & Defense Update
Under mostly sunny skies and cool weather at Le Bourget, the Paris Air Show captured the aerospace/defense industry’s attention this past week. Order announcements came in much greater than pre-show predictions at 1,017 commitment orders and 206 option orders summing to ~$69.0 billion new business won. Day one was most active with 453 orders announced while day three had only 207 orders. These results surpassed the total orders and options at the Farnborough Air Show in 2014 by 13 aircraft. Airbus’s intake slightly outpaced Boeing’s. Airbus landed 531 orders for a value of ~$32.2 billion, while Boeing realized ~$27.5 billion from 371 orders. Bombardier initially had 100 orders on its new CSeries aircraft before languishing order flow for the rest of the show.
Textron debuted its light strike / ISR Scorpion jet at the Paris Air Show this past week. The powerful yet nimble jet is a one-of-a kind aircraft that may become the next big jet platform. The jet will provide a new capability set to the armed forces with its ability to get to trouble spots quickly while also maneuvering at lows speeds to engage ground targets on the move. The new jet would operate at a cost of under $3,000 per hour which is significantly less than traditional high-end fighter jets including the F-16. Textron currently does not have any known buyers but is drawing great interest from the Pentagon and overseas. If buyers are identified the jet could be fully built and delivered in 18 to 24 months. This interest exemplifies the bullish view towards military aircraft especially where new capabilities can be added.
Government Technology Solutions Update
On June 17th, the House Appropriations Committee approved a new $20.2 billion financial services and general government funding bill. Adhering to sequestration caps, the bill reduces overall included agency budgets by 6%. The Internal Revenue Service (“IRS”), the General Services Administration (“GSA”), the Federal Communications Commission (“FCC”), and the Office of Personnel Management (“OPM”) would face budget cuts in FY2016. However, the Small Business Administration would receive $853 million, only $8.0 million short of the President’s request. This would fund its entrepreneurial development and business loans program, a critical agency function, at a higher level than this government fiscal year. Notably, the bill also allocates $21.0 million to the OPM to allow them react to and protect against future cybersecurity threats. The bill will now go to the full House for a vote.
The GSA and the Federal Acquisition Service’s Integrated Technology Services office released a request for quotation (“RFQ”) of blanket purchase agreements (“BPA”) for Agile Delivery Services (“ADS I”) seeking technology vendors to supply agile development services. The BPAs will help enable GSA’s agile development team, 18F Consulting, keep pace with skyrocketing Federal demand for agile development services and marks the beginning of a marketplace for agile development services. Initially, only 18F will be able to award task orders on ADS I. However, if the contract vehicle proves successful at creating a competitive marketplace, the GSA anticipates opening the vehicle up to other agencies. The GSA estimates the value of the purchases over the five year life of the BPAs to be $25 million.
AirBoss of America Corp. (Up 8.8%) – Shares were up this week in response to the company’s plan to acquire Immediate Response Technologies, a provider of personal protection and safety products for Chemical-Biological-Radiological-Nuclear hazards.
SAIC (Up 5.2%) – Shares were up this week in response to SAIC winning three prime military contracts worth $3.2 billion. The contracts fall under the Tank and Automotive Command Strategic Service Solutions family of contracts.
Aequs Aerospace, LLC to acquire T&K Machine Inc., a manufacturer and supplier of machined parts and assemblies to the aerospace industry. The terms of the deal were not disclosed.
ManTech International acquired Knowledge Consulting Group, Inc., a provider of cyber security in both the public and private sectors focused on anticipating threats and implementing defensive countermeasures. Terms of the deal were not disclosed.