Rockwell, B/E Merger to Put Processors in Everything on Airplanes

By Woodrow Bellamy III  | October 25, 2016
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[Avionics Magazine 10-25-2016] Rockwell Collins CEO Kelly Ortberg said the aerospace and defense giant's $6.4 billion acquisition of aircraft cabin interior supplier B/E Aerospace creates the opportunity for the two companies to add new software, processors and connectivity to nearly every interior component on aircraft today. During Rockwell Collins' 2016 fourth quarter earnings call Monday, Ortberg told investors and analysts how much more connected and intelligent he believes aircraft can become as a result of the two companies becoming combined. 
Photo: Rockwell Collins.
If the acquisition clears regulatory approval, the two companies could take Rockwell Collins’ core technological capabilities and merge them with B/E’s interior components to bring to life an Internet of Things (IOT) concept inside aircraft cabins. The acquisition would also significantly increase Rockwell Collins’ content footprint on Boeing aircraft, where it currently provides the cockpit displays and other core cockpit avionics across Boeing's next-generation commercial aircraft lineup, the 737 MAX and 777X. Adding B/E Aerospace to the mix would bring in the supplier of passenger oxygen systems for all current production Airbus and Boeing aircraft, as well as the supplier of space wall modular lavatory systems of the 737 and the source of cabin lighting for 737s and 737 MAX aircraft. 
Ortberg believes now was the perfect timing for the acquisition, because of the future possibilities that can be created by combining the two product lines. He points specifically to Rockwell Collins’ ability to integrate more sensors, embedded sensors, digital controls, Wi-Fi interfaces and secured networks in areas of the aircraft that never had smart capabilities before. 
"I would also say that they have historically been standalone systems," Ortberg said during the earnings call, referring to Rockwell Collins' existing avionics, software, In-Flight Connectivity and Entertainment (IFEC) and other processor- and software-driven products compared to B/E's line of seating, galley systems, structures, lighting, water, waste and other interior components. 
"There's no question that what we do has more software-control content in it than what B/E does today. But, I see that as a great opportunity, because that's going to shift over time. Everything is going to become a smart device. We're going to be embedding microprocessors in everything. We're going to be embedding software and software applications across the airplane. I think this is a great opportunity for us to bring these portfolios together and seize that transformation that's going to happen in the market," said Ortberg. 
The B/E Aerospace third quarter report highlighted some of the interior products that it is seeing the most demand for right now that could become smarter in the future when joined up with microprocessors and software applications. In the third quarter, B/E Aerospace reported seeing its biggest demand for its new Meridian narrow body seating platform, and its Essence Inserts, a line-up that includes cabin coffee makers, water heaters, refrigerators, bun warmers and more. 
Airlines have already started providing previews of what future smarter cabins will look like. KLM, for example, send boarding passes and flight alerts through a dedicated airline Facebook messenger chat bot. Earlier this year Panasonic Avionics unveiled the Waterfront, a system that allows passengers to use their smartphones to control an airplane's built-in entertainment system. B/E itself had already been integrating new technologies into its existing products as well, such as with its Solar Eclipse solar powered airplane window shades with USB outlets that won a Crystal Cabin award in 2015. Adding Rockwell Collins' existing capabilities to the mix only expands the future possibilities with smarter airplane cabin set-ups.
Ortberg believes big opportunities also exist for B/E and Rockwell Collins in business aviation interiors. 
"It will be a prime area of focus for us. With more than 20,000 jets we can offer a full complementary of interiors from seating to lighting to electronics, while aircraft are undergoing avionics modifications. And depending on the size of the aircraft, we could easily see between $200,000 to well over $1 million of opportunity per aircraft," said Ortberg. 
When asked by an analyst if the B/E acquisition signals an increased shift for Rockwell Collins to increasingly focus on commercial opportunities as opposed to the military market, Ortberg said the acquisition could provide new defense activity as well. 
"We actually do a lot of work in the cabins of military aircraft. It's mostly mission systems equipment that we put in, either air refueling, signals intelligence, communications, networks — those types of things. But all those aircrafts when they're getting modified, all the interior systems are needed and are being modified," said Ortberg. "I think that the business will present some significant opportunities for us to grow the military market. And as that business recovers, we'll see some increased shift back to a little bit more balance there.”

Rockwell Collins expects the B/E Aerospace acquisition to close in the spring of 2017, and the company does not foresee any issues gaining regulatory approval for the transaction. The company has already raised its guidance for 2017 to forecast growth of 2 percent, generating $5.4 billion in total sales next year. 

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