Raytheon Aircraft Integration Over

The worst should be over for Raytheon's aircraft integration business after setbacks with several commercial and military projects, says Dan Burnham, the company's chairman and CEO.
Burnham concedes there have been problems, but says, "We've done terrifically well since." And, he adds, he's pleased with the basic strategy of the business.

Among the difficulties Raytheon encountered was poor performance on P-3 work for the U.S. Navy, delays in the Australian AP-3C program, and, in particular, an inability to meet its end of the bargain to do Boeing Business Jets completions. In retrospect, Burnham said, the company should never have gotten into the BBJ business.

Raytheon also suffered a recent setback by being one of the losing bidders for the U.S. Air Force's C-130 Avionics Modernization Program, which went to Boeing. But Burnham isn't too perturbed by that development. He said the company only stood an outside chance because the work is for more than 500 aircraft, but he still thinks it was worth the risk of pursuing the deal.

Burnham is still bullish about the company's chances to expand its business in special mission aircraft. Raytheon, for some time, has modified small numbers of aircraft with highly specialized, often sensitive equipment to allow them to undertake intelligence-gathering missions.

There are several new Pentagon programs on the horizon that the Raytheon unit is likely to vie for. They include the U.S. Navy's P-3 replacement Multimission Martime Aircraft and a multi-mission aircraft for the USAF that would replace the 707, KC-135, and C-130 special mission aircraft. How Raytheon will play in those competitions, whether as a prime or subcontractor, Burnham won't say.

While Burnham sees the aircraft integration business as relatively healthy, he doesn't appear as optimistic about Raytheon Aircraft, which the company has so far been unsuccessful in trying to sell. "We've seen a softening in demand," he says of that market. Furthermore, the business has been slow in developing and delivering new products. Nevertheless, he insists that the aircraft in the company's portfolio are "real winners."

But selling business units remains an option, especially as Raytheon struggles to drive its debt down. The war on debt is attracting a lot of management attention and is causing the company to try to drum-up more higher margin business, particularly in defense.

Burnham is confident the company's defense business is largely in synch with the emerging Pentagon priorities being set by the Bush Administration. The company could gain particularly if missile defense gets a major cash infusion. Raytheon is a major player on naval missile defenses and has key radar and kill vehicle contracts for national missile defense.

Burnham also is looking for the Pentagon to make reforms to its acquisition programs. He expressed support for a new commission on aerospace that has been created to redress existing problems.