B/E Aerospace to bring diversity to Rockwell Collins

CEDAR RAPIDS - As airline leases expire on numerous widebody aircraft and the planes need interior upgrades, Rockwell Collins's planned acquisition of B/E Aerospace for $6.4 billion is expected to give the Cedar Rapids company a significant new source of revenue.

'About 30 percent of widebody aircraft are leased to the airlines. This is a lucrative market that we're just not able to serve with our product line,” Kelly Ortberg, Rockwell Collins president and CEO, said in an interview Tuesday.

'A typical widebody aircraft goes through multiple interior retrofits throughout its life cycle. That's not the case with our avionics, which stay on wing. We typically don't go through retrofit cycles.”

Ortberg said Rockwell Collins approached Wellington, Fla.-based B/E Aerospace as part of a strategy to grow sales beyond its core avionics and communications products. The company, with about 20,000 employees, followed a similar strategy in 2013 when it bought ARINC, a Maryland-based information management solutions company, for $1.4 billion.

B/E Aerospace, with 10,000 employees, will operate as a new segment of Rockwell Collins. Werner Lieberherr, who has been CEO, will become executive vice president and chief operating officer of B/E Aerospace and report to Ortberg.

'We will bolt it on, much in the same way that we did with ARINC,” Ortberg said. 'There will not be any impact on what is going on here in Cedar Rapids because the business will be relatively stand-alone.”

On Oct. 12, Rockwell Collins announced plans to reduce its workforce by between 400 and 600 non-union jobs through the end of its fiscal year on Sept. 30, 2017. The company cited continued weakness in the business jet market and airlines handling more of their own maintenance.

'I think we are getting to the bottom of the cycle and we will not see any further negative impact, but we will wait and see how the market behaves,” Ortberg said. 'I'm hopeful we will see some recovery in the business jet market in fiscal 2018.”

While Rockwell Collins will finance the purchase of B/E Aerospace with new debt, Ortberg said the company is expected to maintain a strong investment grade credit rating. The acquisition is projected to yield five-year free cash flow in excess of $6 billion, which the company intends to use to pay down $1.5 billion of the new debt by the end of its fiscal 2019, he said.