After its first full quarter of ownership of Rockwell Collins, United Technologies Corp. (UTC) already is reaping greater-than-anticipated benefits, as the newly formed Collins Aerospace unit posted its first profit—$856 million on $6.5 billion in sales—and teams from the legacy UTC Aerospace Systems (UTAS) and Rockwell Collins look to line up on engineering expertise, product offerings, and customer services.
UTC completed its $30 billion acquisition of Rockwell Collins in late November, combining the avionics and interiors giant with its own UTAS. The resulting Collins Aerospace will mark its debut to the business aviation market during EBACE with the new brand on display (Booth R71).
Retaining the established Collins name, Collins Aerospace is broken into six major business units—aerostructures, avionics, interiors, mechanical systems, mission systems, and powers and controls—and employs 70,000 people at 300 locations worldwide.
The legacy units combined for $23 billion in annual sales in 2017; commercial business (including business aviation) makes up about 75 percent of that total with government and military making up the rest. Forward-fit OEM applications represent approximately 60 percent of the sales. With a combined 16,000 engineers, the organization collectively invests about $3.1 billion annually in research and development.
Kelly Ortberg, who had been CEO and president of Rockwell Collins, became CEO of Collins Aerospace, while UTAS president Dave Gitlin took the role of president and COO. The combined entity is headquartered in West Palm Beach, Florida.
While EBACE will be the first major business aviation show for the new Collins Aerospace, the group already has begun substantial outreach to customers to highlight benefits of the merger, said Craig Peterson, v-p of marketing for avionics for Collins Aerospace. This outreach has ranged from private gatherings to multi-group meetings to trade shows such as the recent Aircraft Interiors Expo in Hamburg, Germany.
The initial reaction, he said, is surprise at the sheer scope and breadth of Collins Aerospace. “We span so much of the airframe now with content from avionics to life rafts. We can bring a solution and a product range from A to Z,” Peterson said, adding response has been “pretty enthusiastic. It is a really exciting time here—the dynamics and the learning—it’s like drinking from a fire hose.”
Collins Aerospace has not only engaged in external education but also an internal “learning journey.” Teams have begun meeting and hosting webinars to highlight their various product lines and levels of expertise. “Through these learning journeys, a lot of cool things are happening,” he said. “That knowledge becomes the genesis of ideas of ‘wow, I didn’t know you did that. We have a product capability that has an affinity to what you are doing.’”
These efforts are a strong priority not only for Collins Aerospace but the larger UTC parent. Collins Aerospace already has begun to coordinate in certain areas on the customer services front.
One such area is what Peterson called “an aggregation value." Customers who did business with the various units may have had to conduct transactions with multiple companies. “We’re working very hard to make that more simple and efficient,” he said, by streamlining the number of entities that a customer would have to deal with for contract negotiations, billing, and other administrative areas. This coordination, already well underway, is being done in areas that most make sense, he said, adding that Collins Aerospace is trying to be careful to provide the customer flexibility to make choices about this sort of aggregation.
Peterson pointed to aviation parts sold to MROs as an example where this collaboration is taking root. MROs will have increased access to a broader product breadth with simpler transactions. This is the same for the dealer network that the legacy Rockwell Collins had assembled. “We had a rich set of dealer agreements. Those dealers now have at their disposal a much broader catalog of products and capabilities that they can aggregate” with an easier transaction process, he said.
Collins Aerospace has a customer and account management organization that is assimilating these aftermarket processes. “This is the first big layer of value in the marketplace,” Peterson said.
New Product Development
New products and product collaborations may take years to line up and integrate, Peterson conceded, but teams are exploring where they can leverage expertise and support each other. One such example is research into additive manufacturing that can cross business units.
Another longer-range project is UTC’s recently unveiled research into the future electrification of aircraft. The new $50 million lab under development, called the Grid, will pull resources from throughout UTC, including its traditional power and controls, as well as eventually from avionics as engineers look toward aircraft and flight deck integration.
Collins Aerospace also sees possibilities in areas such as the connected aircraft, where legacy Rockwell Collins avionics and its Information Management Systems (IMS) expertise can tie into the legacy UTAS components.
And, more immediately, the merger has bridged the process of collaboration even within the legacy Rockwell Collins units. Peterson said the avionics and IMS—ArincDirect—units typically operated independently. They have now been further integrated and this is producing results.
One such area is digital radios. The avionics organization has been investing in new lighter-weight, smaller digital HF long-range radios. Primarily targeting airliners and large, long-range business jets, these products will have the ability to provide a range of data applications but require ground stations to fully realize benefits.
With its collaboration with IMS, Collins can tap into that ground station expertise. The combination, he added, “will unlock a tremendous amount of value. There is any number of similar radio and service examples where we can marry connectivity services, trip services, or concierge services.”
Peterson credited the support of UTC for expediting these efforts. “The UTC merger literally interwove IMS into the avionics organization,” he said. “It has picked up the overall tempo, pace, urgency, and discipline in going forward in unlocking these kinds of synergies. The merger itself created the groundwork for turning up the game and amplified the speed in which we can go.”
When he released the first quarter performance, UTC chairman and CEO Greg Hayes told analysts that the merger of the two aerospace companies “exceeded even our expectations. As we worked as a combined team for a full quarter, I am even more confident in the long-term value the acquisition is going to bring to shareowners and our employees.”