On the Record with

Honeywell Strategy to Beat Airliner Cycle

A strategic alliance with Matsushita Avionics Systems to create "a total aircraft avionics solution" in the cockpits and cabins of the world's airline and business aircraft fleet is taking much of Honeywell's attention this fall.

The company is working to beat the classic aerospace business cycle and achieve actual sales growth in the next downturn by concentrating on passenger-related avionics systems, airports and an increasingly electronic military.

Honeywell and Matsushita will develop avionics products to provide a "total aircraft information system solution" for airline and business customers. The system will process, manage, transmit and receive all digital communications signals from the cockpit, while making possible new products for the cabin in-flight entertainment system, such as e-mail and Internet access for the flying passenger.

"We're aiming squarely at one of the major growth areas in aviation electronics: information management and cabin electronics to support passenger communications and entertainment," Don Schwanz, president of Honeywell's Space and Aviation Control Division, told Show News. "It is just a tremendous opportunity."

The move is the latest by Honeywell's avionics business to diversify from cockpit navigation, flight management and communications systems. Too often in the past the company and its employees have suffered as their business rode the peaks and valleys of the air transport sector.

Schwanz sees the boom in demand for new airliners peaking next year before turning down, largely in response to the sharp declines in economic health of the economies of Asia and Russia. He is determined his business will not turn down with it.

"We are a different company now than we were in the early '90s," he said. Then, Honeywell's fortunes followed the decline in the airline, OEM airframer and defense markets. Schwanz said he's anticipating only slightly slower growth in revenues in 1999, on the order of 8 percent to 12 percent above 1998, compared with an annual 13% increase since 1995.

A determined push into new business areas "means we stand a real good chance of growing through the next OEM downturn, which is really exciting as we've suffered from the downturns for years," Schwanz said.

His Space and Aviation Control unit is focusing on seven additional strategic businesses: airport systems; aviation services; commercial space; tactical guidance; CNS/ATM-Honeywell's WorldNav avionics systems; railroad electronics; and surface vehicle tracking and control. "Together, these markets will be worth $50 billion over the next 10 years," Schwanz predicted.

A good example of Honeywell's strategy is its approach to airports, where the company plans to position itself to provide "end-to-end airport control systems," Schwanz said. In this sector, Honeywell Space and Aviation Control has made its first acquisitions since it bought Sperry Flight Systems in 1986: in March it bought the Hughey & Phillips airport lighting company, and in July it acquired the Daimler-Benz Aerospace Airport Systems business. Now it can offer the industry's most complete line for precision landing, ground vehicle tracking, lighting, gate scheduling, and visual docking products.

"We see an additional $150 million to $200 million a year coming from this business by the year 2000," Schwanz forecast.

Another $50 million to $100 million a year is expected to come from tactical guidance products utilizing Honeywell's laser ring gyro. The system has won 10 out of 11 recent application competitions, and is set for production so far of some 200,000 units.

World Nav is expected to develop over the next 10 to 15 years as airlines realize the economic benefit of free flight in many parts of the world, and this will spawn a retrofit as well as a new-aircraft market, Schwanz believes. CNS/ATM will generate an additional $50 million to $150 million a year in revenues.

By John Morris