Page 13 - ADT MARCH / APRIL 2020 Digital Magazine | GBP

Mega One- space, non-defense businesses, has the size [ ANALYSIS ]
and scope to dictate terms to plane makers
such as Boeing, Airbus and Lockheed Martin
when it comes to pricing, intellectual property
and aftermarket work.
Stop Shop Consolidation Trend Continues

Raytheon Technologies is also further confirma-
tion that the industry is shrinking, due to merger
of equals, as this one is, or through acquisitions,
with smaller companies being gobbled up by
RAYTHEON TECHNOLOGIES HAS THE SIZE AND bigger ones. In June 2018, Boeing set up a
THE CAPABILITIES TO TRANSFORM THE DEFENCE joint venture with engine manufacturer Safran
AND AEROSPACE INDUSTRY LANDSCAPE to make auxiliary power units for planes, a busi-
ness rival for Raytheon Technologies’ Pratt and
Whitney. Other instances of consolidation are
Northrop Grumman absorbing Orbital ATK and
Arun Sivasankaran General Dynamics acquiring CSRA. In June last
year, defence contractors Harris Corporation
and L3 Technologies merged to form L3Harris
Questions about whether the merger would harm competition and Technologies, further ensuring that the compe-
make negotiating defense contacts harder for the U.S. government tition comes down to a handful of behemoths.
remain unanswered, but Raytheon Technologies, built through the With the ongoing crisis causing market condi-
merger of a booming aerospace business and a major defence con- tions to go from bad to dire, do not be surprised
tractor, promises to be more than the sum of its considerable parts. if you hear about another major consolidation
The newly formed company, which is headquartered in Waltham, move in the not so distant future. Honeywell
Massachusetts, has the size and the scope to not just stay International and General Electric, makers of jet
unscathed in the face of unexpected setbacks such as the ongoing engines and other airplane parts, are just two of
Covid-19 crisis but also transform existing equations in the aero- the companies that are looking for partners as
space and defense industry landscape. The merger increases the part of their amplified focus on aviation.
scope for technological innovations and manufacturing advance-
ments, something that could prove crucial for the U.S. on the military A Hefty Powerhouse
side of things as China and Russia speed along in their quest for The new company is expected to have nearly
new age weapons. USD74 billion in annual sales and will easily
slot into the top two companies in the U.S.
The merger of equals comes at a time when plane makers have on the basis of annual revenue. “This mon-
been trying to exert more direct control over parts of their supply ster supplier in aerospace and defence,” as
chain and eyeing a bigger share of revenue from aftermarket ser- Richard Aboulafia, aerospace analyst at Teal
vices. In fact, it was the pressure from OEMs to cut costs that Group, calls the company, has four segments
was the driving factor behind UTC acquiring Rockwell Collins to - Collins Aerospace Systems, engine maker
form Collins Aerospace in 2018. The new pure play, formed after Pratt & Whitney, Raytheon Intelligence & Space,
United Technologies jettisoned Otis and Carrier, its two non-aero- and Raytheon Missiles & Defence. The four
segments would cover practically the whole
gamut of the industry, from engines for both
commercial and military aircraft, aerostruc-
tures, avionics, interiors, mechanical systems,
mission systems and power controls, missiles,
missile defence systems, electronic warfare
systems, counter-UAS systems, hypersonic
weapons, advanced sensors, cybersecurity
and software solutions.
The merger, which was announced in June
last year, clearly caught the industry by surprise.
Soon after taking over as CEO of Raytheon
Technologies, Greg Hayes, admitted to CNBC
that he himself was a little apprehensive
when Thomas Kennedy, Raytheon Chairman
and CEO, called him to discuss the idea of
bringing the two companies together. All the

ASIAN DEFENCE TECHNOLOGY March/April 2020 | 13