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Wednesday, November 11, 2015

Business, GA Avionics Demand Down in First Nine Months of 2015

Woodrow Bellamy III

Business and general aviation aircraft are seeing a decline in demand. Photo:Boeing

 [Avionics Today 11-11-2015] International sales of Business and General Aviation (BGA) avionics totaled $1.7 billion through the first nine months of 2015, a 7.5 percent drop from the same period last year, according to the 2015 third quarter avionics market report published by the Aircraft Electronics Association (AEA) this week. The report includes avionics sales from the BGA divisions of 21 manufacturers, including Aspen Avionics, Garmin, Gogo, Honeywell, L-3 and Rockwell Collins, among others.  

According to the report, total sales were split between 51.4 percent from forward-fit avionics equipment installed on in-production aircraft rolling out of assembly lines, and 48.6 percent attributed to aftermarket retrofit installations. In a statement accompanying the third quarter report, AEA President Paula Derks said the 7.5 percent year-over-year sales decline shows that the industry "continues to face some economic challenges that may be primarily related to the strength of the U.S. dollar in the international markets," adding that "while the FAA reports that the [Automatic Dependent Surveillance-Broadcast] ADS-B equipage pace has grown in the past year, it has not resulted in a similar increase in total avionics sales."
 
The latest data available from the FAA on ADS-B equipage in the BGA aircraft community indicates that avionics sales should increase over the next several years. Figures available from the agency on the latest equipage rate show that more than 13,000 general aviation aircraft are now equipped with ADS-B Out. FAA's statistics show that currently more than 150,000 U.S. registered general aviation aircraft. Furthermore, just 3 percent of "Air Taxi" category aircraft are equipped with ADS-B, while just 2 percent of U.S. registered helicopters are currently equipped. 
 
AEA's third quarter report also heavily reflects third quarter earnings reports from the BGA avionics divisions of Honeywell and Garmin, as well as the recent 2016 fiscal year outlook released by Rockwell Collins. 
 
Garmin's aviation segment posted an overall revenue decline of 5 percent in the third quarter of 2015, down to $94.2 million from $99.3 million during the same period a year ago. 
 
"The general aviation market has slowed throughout the year," Garmin said in a statement released along with its third quarter earnings report released last week, adding that "overall general aviation industry trends are difficult due to volatile global markets."
 
Honeywell released a similar statement within the aerospace segment performance description in its third quarter earnings report, stating that third quarter "commercial aftermarket sales were up [3 percent] on a core organic basis, driven by continued growth in repair and overhaul activities, partially offset by a decline in [Retrofit, Modifications, and Upgrades] RMU sales in BGA.” 
 
Similarly, when Rockwell Collins released its fiscal year outlook for 2016 recently, the company’s CEO Kelly Ortberg said that he was “encouraged” by the progress the manufacturer is making within its government systems, information management services, and commercial divisions, but that the next year would see weak market conditions in business aviation. 
 
“Our fiscal year 2016 guidance incorporates the previously announced production rate reduction on the Global 5000/6000 aircraft. In addition, we have assumed additional rate reductions in both the mid-size and light segments of the business jet market in our guidance. The resulting effect is that we now expect our overall business and regional jet OEM sales to decrease low-double digits from fiscal year 2015,” said Ortberg.
 
L-3 Communications Senior Vice President and Chief Financial Officer (CFO) Ralph Ambrosio made similar comments about BGA avionics demand in 2015 while discussing the company’s third quarter results during last week’s Goldman Sachs Industrial Conference. When asked how the company is performing across commercial, military, and business and general aviation segments, Ambrosio said “commercial transport looks the most solid.” 
 
“There has been a slowdown in the biz-jet market, but that is not new. I think we have been experiencing that for several years. So the question is really when it turns or improves and the [General Aviation] GA market has basically relatively stable to slow growth for us,” said Ambrosio.
 
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