Paris Air Show

Ontic Sees Growth Opportunities For Support Of Legacy Components

 - June 13, 2013, 1:00 PM
Oscar Gutierrez, electronics technician level-A, is performing tests on radar antennas.

Gareth Hall, who was promoted to president and managing director of BBA Aviation’s Ontic subsidiary in January, is focused on accelerating the company’s rate of growth to take advantage of the improving aerospace economy. “The market’s coming back strongly,” he said, “and we see ourselves with lots of opportunities.”

Ontic (Hall 5 Stand B219) specializes in manufacturing aerospace components under license to OEMs and acquiring component lines that it can manufacture and support directly. In all cases, Ontic’s manufacturing activities are fully sanctioned by the OEM that originally designed and/or made the component.

Ontic’s avionics and electronics manufacturing activities take place at two locations, Cheltenham, UK, and Chatsworth, California, and its two other sites are located in Houston, Texas, and Singapore. In Houston, the company stocks more than 44,000 Hawker 125 series parts such as landing gear, ailerons, elevators, rudders, tabs, oxygen bottles, leading edges and doors. Earlier this year, Ontic opened a new MRO facility in Singapore, collocated with BBA Aviation’s Dallas Airmotive Regional Turbine Center at the Seletar Aerospace Park. The Singapore facility services and repairs all the fuel gauging components manufactured in Cheltenham, which includes newly manufactured systems for Airbus A320s and Boeing 777s. “A third of the fleet for both [types] operates in the Asian region,” said Hall. “so it’s important for us to have a presence in Asia so we can maintain and repair [those components].”

The Cheltenham facility was added through an acquisition of the fuel gauging systems from GE Aviation in 2011. And another recently purchased UK facility in Slough, which manufactures oxygen systems, was consolidated at Cheltenham in May.

During the past three years, Ontic’s topline revenue for electronics and avionics products has climbed to more than 30 percent from 3 percent. “We see that continuing to grow as there’s more electronic product on legacy aircraft,” he said. Hall expects the electronics segment to grow to 50 percent of revenue. “I see us continuing to expand in our core areas, which are electromechanical, expand our electronics content further and then increasing the pace of growth beyond that which we’ve seen previously.”

To facilitate that growth, a number of factors are coming together, Hall explained. “We’re probably looking at the healthiest licensing and acquisition pipeline that we’ve seen in the last two to three years. In the last 18 months we’ve got a much wider management and talent pool so that we can adopt multiple licenses at the same time, particularly in the UK [where] we’ve brought up a new facility with a strong management team who are hungry for the next product line to be adopted.”

At Chatsworth and Cheltenham, there is plenty of room for expansion into new product lines as well as space to build new facilities. “If the right deal comes along,” Hall said, “then we have no compunction about adding a fifth site.”

Ontic’s activities cover the commercial airline, military and business/general aviation markets. “We have a core of probably 20 OEMs that we deal with frequently,” he said. Many of these have an umbrella or blanket license agreement with Ontic, and it’s easy to add new products that the OEM no longer wishes to manufacture. “They identify noncore products,” he explained, “we discuss [them] and agree to value, and then those products move onto the negotiated umbrella license agreement. That [helps] in terms of liberating resources, which they’re desperate to pull from this legacy product, which is noncore to them and somewhat of a distraction. So that’s a perfect scenario.”

In other cases, OEMs might ask Ontic to review noncore products. “It may not be to ask us to outright license [the product],” Hall said, “but to ask our opinion on how should they deal with a set of products or a production line. The answer may not always be to license to Ontic. We’ve been doing since 1974, and we have become for a number of OEMs a trusted partner, someone to bounce ideas off as well as to do continued business with. And that’s what we’re seeking to expand with a number of other OEMs.”

In commercial aviation, Hall said, “We pay close attention to fleet dynamics and [look at] fleet retirements and fleet usage.” The fleets of Boeing 747-400s, 767s, 757s and 737 Classics are declining, “but they’ve got such a large installed base, that there is still a vast aftermarket out there.

“The military is difficult and complex in a number of ways,” he said, but because of tight budgets, many countries are trying to keep aircraft flying longer. “They’re looking for support strategies for those aircraft, when three or four years ago it was highly likely that they would have been retired.” Hall expects the AV-8B Harrier to fly until 2030, and the there is no telling when the long-lived B-52 will be retired. “There are several other platforms behind that,” he said, “and the majority of these we have content on.” This includes elements of the fuel gauging system on the BAE Hawk and the Eurofighter Typhoon.

The business and general aviation market has been poised for recovery for some time. While Ontic has seen “some slackening” in that market, Hall said, “All indications are that it’s going to come back pretty nicely over the next six to 18 months. We’re looking forward to that.”

Last month, Ontic announced that it signed an agreement with Curtiss-Wright Controls Integrated Sensing to support Curtiss-Wright’s pilot controls and transmitter/indicator product lines, to include production, aftermarket manufacturing and MRO services. These products include landing gear levers that have integral light plates and electronics, tiller modules, pilot LED checklists, flight control surface indicators, rudder trim switches and push-to-talk switches, all found on a variety of commercial, business and military aircraft. Ontic will incorporate these products into its Chatsworth and Cheltenham facilities using its adoption process, moving them from Curtiss-Wright facilities where they are currently manufactured.

Here at the Paris Air Show, Ontic executives plan to meet with OEMs that are new to the concept of licensing products to a third-party manufacturer. “And it’s an opportunity to cement relationships with OEMs that Ontic does business with,” Hall said, “to talk with them about how their products are doing, how they performed in the last 12 months and give them an idea of the value we’re continuing to increase for them as OEMs, even after they’ve licensed the product to Ontic.”