Rockwell Collins’s planned acquisition of airborne communications provider Arinc positions it to benefit both on the ground and in the air from the increasing “digitization” of airline communications. The future paradigm for ATC calls for replacing voice communications between pilots and controllers with digital data messaging, and Arinc’s ground infrastructure provides one of two major pipes for routing those messages.
In the U.S., the Federal Aviation Administration plans to deploy data communications in ATC towers by 2016 for routine communications and in air route traffic control centers that manage high-altitude traffic beginning in 2019. Harris, the contractor the FAA chose to build that data network, will use one or both of the commercial air/ground datalinks provided by Arinc and Sita to route messages via VHF Digital Link Mode 2 message standard. Airlines use the existing datalink systems to communicate with their operations centers. Arinc claims to maintain service agreements with 85 percent of the U.S. domestic airline market, while Geneva-based Sita enjoys a stronger presence among international airlines.
“What we expect is an accelerated [number] of digital communications associated with VDL Mode 2, and Arinc is well suited to enjoy the growth associated with [that],” said Rockwell Collins president and CEO Kelly Ortberg.
Rockwell Collins’s avionics offerings include datalink communication management units, routers and multifunction control display units that pilots use to send and receive data messages. On August 11, the Cedar Rapids, Iowa-based manufacturer announced that it had entered into a definitive agreement to purchase Arinc from The Carlyle Group for $1.39 billion, its largest ever acquisition. The agreement was a bold opening stroke for Ortberg, 53, who only weeks earlier succeeded former fighter pilot Clayton Jones as CEO. Carlyle, a Washington, D.C., private equity firm, acquired Arinc from a group of airlines and other minority shareholders in 2007.
With reported annual revenues of more than $600 million, Annapolis, Maryland-based Arinc provides communications and information systems across the aviation, airport, rail, transit and nuclear power markets. Established in 1929 as Aeronautical Radio, Inc., it claims to support more than 300 airlines and 15,000 commercial and private aircraft.
In a conference call with analysts on August 12, Ortberg said that acquiring Arinc enables Rockwell Collins to provide “end-to-end, broader solutions” to the aviation market. “We’ll be able to do that by combining [Arinc’s] high-integrity ground networks and our information-enabled avionics and cabin systems,” he said. “The Arinc business model is heavily subscription-based, with very high contract retention rates. That creates a consistent revenue stream that’s less dependent on aircraft production rates.”
Ortberg said Arinc will henceforth be called “Arinc, a Rockwell Collins company,” and become a third business segment with Rockwell Collins’s commercial and government divisions. “Think of it not as a company any more, but as a business unit,” he told AIN. “That business unit will be headquartered in Annapolis, but all the corporate functions will now be integrated into our core business here in Cedar Rapids.”