Connectivity and data are big drivers for Rockwell after Arinc buy


Rockwell Collins’ Arinc acquisition, featuring passenger-focused services such as inflight connectivity and self-service check-in kiosks in addition to cockpit communications, continues to do well for the OEM, making a strong contribution to the company’s overall 12% year-over-year revenue growth during the fiscal third quarter with a total $134 million in sales for the three-month period.

The December 2013 acquisition of Arinc has served as the foundation of a new Information Management Services (IMS) business that combines Arinc with Rockwell Collins’ Flight Information Solutions business and its Ascend family of products and services. Arinc “continues to perform above expectations in its second full quarter of performance, mostly on lower integration costs”, observed RBC Capital Markets on reviewing Rockwell Collins’ fiscal third quarter results.

Noting that Arinc represents “a new growth platform for us”, Rockwell Collins president and CEO Kelly Ortberg said he would “love to see some additional opportunities where we can supplement the synergies between what was the Arinc business and what was the Rockwell Collins business going forward”.

He added, “We’re sorting through that, our first priority was to get our feet on the ground with the integration and get that work behind us.”

Here’s what we know about the company’s plans so far. Among other initiatives, the new IMS business will take advantage of the growth in demand for inflight Wi-Fi to help it deliver double-digit revenue growth to the group. Speaking to journalists this spring at a briefing in London, IMS senior vice-president Jeff Standerski said that market conditions for the new unit are “very good for a couple of reasons”. The first is that “everyone wants the same Wi-Fi experience on an airplane as they have at home”, which Standerski said is a “big driver” going forward, both in the commercial air transport and business aviation markets. “We will take the strengths of IMS with connectivity for an end-to-end solution which is unique to Rockwell Collins,” said Standerski.

Arinc already has an inflight Wi-Fi solution known as Cabin Connect, which is being trialed by Virgin Atlantic on Airbus A330 aircraft. Cabin Connect operates over Inmarsat’s L-band satellite-supported SwiftBroadband aeronautical service, which Arinc has provisioned to migrate to Inmarsat’s forthcoming Ka-band service. In April, Inmarsat entered a memorandum of understanding with Rockwell Collins to make the latter firm a  ‘value added reseller’ of its Global Xpress Ka service.

Secondly, as more “information-enabled” aircraft, such as the Boeing 787 and the Airbus A350, are delivered to the market “with the capability to offload more data”, Rockwell Collins sees opportunities to “extend the value” of the positions it has already captured on the two aircraft types, said Standerski. On the 787, Rockwell Collins has “the largest content we’ve ever had on a Boeing airplane” and the same is true on the A350 with Airbus.

Pointing to a tenfold increase in the amount of data generated by a 787 compared with a Boeing 767, Standerski said: “There is a great deal of aircraft performance data…and maintenance data that can be downloaded off aircraft – this is creating a new set of users for this information.”

Sales and marketing are the IMS unit’s near-term priorities as it looks to upsell to existing airline customers. Rockwell Collins has identified a list of airline customers for which it is “not the primary communications provider”, and its plan is to “walk in with a broader value proposition”, said Standerski. Its mid-term plan for the 2017-18 timeframe is to “provide more end-to-end solutions to customers”.

Giving some examples of the types of solutions the IMS unit will offer, Standerski points to its existing business aviation weather radar application, which uploads weather information directly to the aircraft and displays it to the pilot. “Fast-forward that to airline transport and on the [Boeing] 737 MAX we’re providing flight deck displays. We can take the same app and provide the same information on the front flight deck display,” he says.

Another example is providing cabin crew with the ability to carry out real-time credit card transactions in flight, which Cathay Pacific is already doing through the “e-enablement” programme it entered with Arinc in 2012.

During the fiscal third quarter, Rockwell Collins’ Commercial Systems unit did not match Arinc’s performance momentum, though senior VP and CFO Patrick Allen said R&D commercial costs both weighed profit lines down and will create fourth quarter payoffs. Most of those investment costs went to systems for the 737 MAX, the Airbus A350, the Bombardier CSeries and the Global 7000/8000. Rockwell Collins expects to spend approximately $950 million in total R&D through the full year.

Commercial Systems still managed to increase during the quarter, however, up 5.8% to $583 million from the same period last year thanks to 787 deliveries.

Rockwell Collins experienced a Farnborough win on the Boeing 777X Flight Control Module (IFCE) fly-by-wire system through a competitive procurement bid led by BAE Systems, the prime supplier of the IFCE system. Ortberg said he hopes the bid will be the first of “more to come for this new airplane. … I like our chances of gaining share from what we have today on the legacy 777 aircraft,” he said.

Additional reporting from Kerry Reals in London