Civil Avionics in the Doldrums

Afew major new avionics projects and slowly improving avionics service and support sales are providing the first signs of hope for a deeply depressed commercial avionics market.

In a market dominated by immediate gloom, a few new large projects are offering hope for the future. The 200-300-seat Boeing 7E7 promises to be the next major prize for avionics manufacturers following contract awards on the A380 superjumbo jet. With an anticipated formal launch in 2004, the aircraft, which is expected to significantly reduced operating costs, should be an important growth opportunity. Commercial avionics suppliers have already been providing input into the design of the aircraft.

The contest for the A380's avionics is largely over, with the major systems awarded. Honeywell will build the flight management, aircraft environmental surveillance systems, and air data inertial reference system. Thales will provide the standby navigation system, the digital head-up display and high-resolution, liquid crystal displays. The two companies will be working together to supply a next-generation version of the Honeywell/Thales MCS-7000 Multi-Channel Satellite Communications System. Rockwell Collins will furnish communications and navigation equipment as well as the Airbus A380 AFDX Ethernet, which provides the communications infrastructure to connect aircraft systems such as radios, displays and navigation sensors.

Smaller projects like the Chinese ARJ21 regional jet that would have received considerably less attention by commercial avionics manufacturers in a buoyant market have become coveted trophies. China's AVIC I Commercial Aircraft Co. selected Rockwell Collins' Pro Line 21 avionics for its planned new 79-99-seat transport. Rockwell Collins was also named as the avionics system integrator for the aircraft. Honeywell and Parker Hannifin Corp. will jointly develop and produce the jet's primary flight control system.

However, new projects either for commercial airliners or regional jets will not meaningfully boost demand for commercial avionics for years to come. The current schedule for the 7E7 calls for launch by the summer of 2004 with deliveries beginning in 2008. A380 deliveries will not start until late 2006.

Just as the prospects for deliveries for new projects are years away, deliveries to original equipment manufacturers for commercial airliners also will remain depressed for several years to come. The new-aircraft build rate will have no recovery anticipated before late 2005 or 2006.

The prospect for 2004 is that sales will finally begin to stabilize. Boeing's commercial deliveries plummeted to 381 in 2002 from 527 in 2001. This past year they hit approximately 280, roughly the level of deliveries Boeing is projecting for 2004 as well. Airbus' deliveries have held up relatively well, declining from 325 aircraft in 2001 to 303 in 2002. For 2003, Airbus is projecting 300 deliveries.

Yet while the building of commercial airliners promises to be weak until late 2005 or 2006, harbingers of improvement in the commercial aftermarket are appearing. Commercial air traffic is up, especially in Asia. The number of aircraft being flown and the number of flights being made are increasing, boosting demand for spare parts and maintenance.

The next step of the improvement for commercial avionics manufacturers will come as commercial airlines begin to start retrofitting existing aircraft in their fleets with new avionics to improve safety or operating efficiency.