Aerospace & Defense Update
Boeing CEO, Dennis Muilenburg announced this past week that Boeing will begin shifting a portion of its manufacturing work to China and other overseas markets. This move is a part of Boeing’s reshaping effort which hopes to increase the profitability of its core commercial jetliners and increase defense exports, while cutting costs. While cost trimming and increasing automation will come at the expense of jobs, Boeing continues to have strong incentives to boost U.S. employment, as President Trump has pledged tax and regulatory changes in retrun. Additionally, Muilenburg stated that overseas facilities will not directly affect U.S. jobs. Instead, the new plants are expected to contribute to sales of 6,800 jets in the next 20 years.
The Air Force predicts it will not accept the first KC-46 tanker until late spring of 2018, at least 6 months later than planned, as the program faces new schedule risk due to FAA approval delays. Without the FAA airworthiness certifications, Boeing risks not completing the flight test programs on schedule. However, Boeing expects to be more efficient in the second half of testing and doesn’t anticipates the discovery any new technical risk. Despite this setback Boeing is still expected to deliver 18 tankers and nine refueling pods by October 2018.
Government Technology Solutions Update
The Trump administration plans to separate out air traffic control from the larger Federal Aviation Administration (“FAA”) and outsource it to a private non-profit enterprise, citing years of funding issues and budget cuts. The administration believes that a private organization would be better equipped to update air traffic control to Next Generation Air Transportation System (NextGen”). It is believed that this new GPS-based technology can reduce fuel costs, eradicate flight delays and enhance air travel safety. The two major costs involved in upgrading to NextGen are updating existing planes to make them compatible with the new technology, and adapting the technology so that it can be used in air traffic control towers. These costs will be funded via user fees that the non-profit chargers rather than through taxpayer dollars earmarked for infrastructure spending. Under the proposed timeline, the technology is anticipated to be rolled out over the next three years.
The U.S. Department of Veterans Affairs (“VA”) will adopt the same electronic health vendor as the Department of Defense (“DoD”). The VA’s current legacy healthcare system, VistA, has faced problems in recent years due in part to its age and compatibility issues with other organizations. On Monday, President Trump announced Secretary Shulkin’s decision to select the current DoD electronic health record (“EHR”) vendor, Cerner, to provide the system to the VA. For years, the DoD and VA have been working together to share information across their two different systems. However, the money, time, and effort being spent in doing so was becoming increasingly prohibitive. Various policy changes, as well as necessary maintenance to the aging systems, further complicated the process of sharing information between the two agencies. This new system will not be exactly the same as the one being implemented across the DoD, due to the fact that the VA has different needs; however, the platforms will be similar, allowing for greater interoperability. In addition, the VA will adopt more advanced cybersecurity enhancements similar to those used by the DoD. With the updated system in place, the VA will be able to better track veterans’ information after they leave service.
BBA Aviation (down 5.2%) – Share prices were down this week after chief executive Simon Pryce stepped down after 10 years at the helm of the aviation support services group.
Bombardier (down 6.9%) – Share prices were down this week after the Company announced that it plans to lay off 650 workers in Switzerland.
Accenture Federal Services has acquired Phase One Consulting, Inc., a provider of Salesforce-implementation and consulting services in support of modernization and digital transformation projects to the Federal government. Terms of the deal were not disclosed.
Elite Aerospace Group, Inc. has acquired HALO Industries, Inc., a provider of precision machining and engineering services that supports the aerospace, defense, orbital rocket and communication sectors. Terms of the deal were not disclosed.
Emergency Communications Network, a portfolio company of Veritas Capital, has acquired SWN Communications Inc., a provider of enterprise notification solutions. Terms of the deal were not disclosed.
Royal Adhesives & Sealants LLC has acquired Ball Ground, Georgia Business, a provider of use pre-mixed and frozen aircraft sealants and other unique packaging and application kits to aircraft manufacturers and their subcontractors. Terms of the deal were not disclosed.
SoftBank Group Corp. has agreed to acquire subsidiaries of Alphabet Inc., Boston Dynamics, Inc. and Schaft Inc., a provider of dynamic robots and software for human simulation and bipedal robotics research, respectively. Terms of the deal were not disclosed.
Valiant Integrated Services has acquired ABM Government Services LLC, a provider of linguistic and translation services, healthcare facility services, and infrastructure backbone solutions to Federal government customer. The deal is worth an estimated $35.5 million.