[Avionics Magazine 11-8-2016] Demand for avionics retrofit activity is down for most major avionics Original Equipment Manufacturers (OEMs), according to a slew of third quarter earnings reports released within the last week. Here is a look back at how some of the industry’s manufacturers of flight management systems, avionics test equipment, cockpit displays and connected aircraft technology did in the third quarter and where they see the industry going from here.
Boeing 737 cockpit avionics. Photo: Astronics Corp.
Astronics Corp. President and CEO Peter J. Gundermann called the third quarter results for his company “obviously disappointing.” The aerospace and defense manufacturer reported a 9.8 percent year-over-year decline in aerospace segment sales, down $13.5 million from $125.2 million in the third quarter of 2015 to $111.7 million during the same period in 2016.
Half of the decline in overall aerospace segment sales were attributed to a drop in sales of avionics products, which declined by $6.7 million mainly because of lower sales of satellite antenna systems. Astronics has several new satellite antenna systems going through the certification process. The company also saw declines in sales of In-Flight Entertainment (IFE) and cabin management systems for Very, Very Important Person (VVIP) aircraft, which it attributes to the “decline in the oil and gas industry, primarily in the Middle East,” according to Gundermann.
Systems certification and electrical power and motion sales also declined by a combined $6.4 million.
In contrast to avionics equipment, Astronics did see an increase in demand for its aerospace and defense test equipment products, with sales of aerospace and defense test offerings increasing by $1.6 million in the third quarter. Aerospace and defense test systems sales are up 10 percent overall through the first nine months of the year for Astronics.
“We expect the aerospace and defense market to continue its growth into
2017 and anticipate improvement in the semiconductor business as we expand our capabilities and customers,” said Gundermann.
Honeywell, Rockwell Collins
Honeywell and Rockwell Collins both reported declines in their commercial and business aviation avionics equipment sales in the third quarter, with each company citing different reasons for the declines.
Rockwell Collins’ overall commercial systems business segment, which provides aviation electronics systems, products and services to air transport, business and regional aircraft OEMs and operators worldwide, saw sales decline overall by 4 percent from $636 million to $610 million in what they qualify as their fiscal year fourth quarter. The company noted that commercial systems original equipment sales were lower due to lower business jet production rates, flat aftermarket sales and lower overall business jet sales, as well as a “$4 million charge related to employee headcount reductions, and higher research and development expense and amortization of pre-production engineering costs.”
In contrast, within its government systems business segment, which includes sales of equipment for military aircraft, total avionics sales actually increased from $400 million in the fourth quarter of 2015 to $457 million in the same period in 2016. Rockwell Collins attributed the increase to “higher fixed-wing platform revenues, simulation and training program sales, and sales from a classified program,” Rockwell Collins noted in the report. The latest earnings report from Rockwell Collins was published at the same time as their recently reached agreement to purchase B/E Aerospace was announced.
Honeywell reported a six percent decline in total third quarter 2015 aerospace sales primarily driven by the “unfavorable impact of third-quarter OEM incentives, lower volumes in business and general aviation … and continued weakness in the commercial helicopter business.”
Despite the decline, Honeywell CEO Dave Cote sees big demand ahead for the company’s new multi-channel satellite Jetwave terminals, which enable business, commercial and military aircraft connectivity to Inmarsat’s Global Xpress Ka-band Jet ConneX broadband service.
“2017 will be an inflection year for several core business units: growing demand for our UOP catalysts and modular equipment, Jetwave and other products and services tied to connected aircraft, further turbo penetration, and strong sales growth from Solstice (HFOs), our line of low-global-warming refrigerants and blowing agents,” Cote said in statement released with Honeywell’s third quarter earnings report.
Among the larger avionics OEMs, Thales reported a strong first nine months of the year for its aerospace segment, as it reported sales in terms of the first nine months of the year instead of the three months ending September 30, 2016.
The Toulouse, France-based company reported an 8.7 percent increase in total aerospace segment sales up to $3.89 billion in the first nine months of 2016, compared with the same period a year ago.
“The avionics segment remained strong, particularly in commercial and military aircraft, while IFE returned to growth following a first quarter which had been affected by a particularly high basis for comparison. However, avionics sales for helicopters were still down over the period,” Thales notes in its latest earnings report.
Overall BA and GA Industry Report
The Aircraft Electronics Association (AEA) released its third quarter 2016 avionics market report, which indicated a 5.7 percent decrease in business and general aviation avionics sales between July and September, a drop to $548.8 million down from $581.8 million reported during the same period a year ago.
AEA also reported an overall 6.2 percent decrease in year-over-year sales of business and general aviation avionics for the first nine months of 2016, down to $1.6 billion compared to $1.8 billion reported during the same period in 2015. The AEA report includes earnings reported by 21 total business and general aviation avionics OEMs, including Aspen Avionics, BendixKing, FreeFlight Systems, Garmin, Gogo Business Aviation, L-3 and Universal Avionics Systems Corp., among others.
Total business and general aviation avionics sales as reported by AEA have declined in each of the first three quarters of 2016 when compared to the same time frame last year.
"Although the U.S. market has seen the equipage-pace pick up slightly for avionics installations to meet the FAA's [Automatic Dependent Surveillance-Broadcast] ADS-B Out mandate, that has not translated into an uptick in overall avionics sales. Last year, the strongest period for sales was the fourth quarter, so it will be interesting to note whether that late-year surge continues again this year,” AEA President Paula Derks said in a statement released with the latest AEA earnings report.