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Recession hurting avionics after-market segment
The recession hasn’t been grounded. In fact, the troubling economy has reached the higher altitudes of the business realm.
L-3 Avionics Systems, a division of New York-based L-3 Communications located on 52nd Street SE in Kentwood, has experienced the turbulence first hand.
The firm, which makes products for the military, business jet, commercial air and general avionics sectors, has held its own in most of its areas throughout the rough economic ride. But its after-market manufactured goods have taken a hit.
“One of the things that we’re very fortunate with our businesses is we’ve got pretty good balance among our segments,” said Jay LaFoy, company president.
“Certainly, we have seen sales decline, and have borne the brunt of the poor economic condition in our after-market and our general aviation and business jet sections. But we’ve actually grown our military side of our business, and our service and overhaul piece of our business has remained steady. Right now, we feel like we’re in a stable position,” said LaFoy, who became president of L-3 Avionics Systems last May.
The sales loss has been in after-market discretionary products — those that are not needed to fly an aircraft. LaFoy said commercial, corporate and general aviation pilots have weighed that expense against every other one, and many have chosen to either spend those dollars on some of life’s necessities or not spend at all.
“I think until the consumer side of the economy picks up, we’re going to continue to be soft there,” he said.
“This has been a pretty significant recession, so I would say it has been significant to us. It’s been an area of concern, and we expect we’re going to continue to be soft through 2010 in that area.”
L-3 Avionics Systems’ Larry Riddle, vice president of business development, added that the goods that have seen sales declines aren’t inexpensive. He said the least costly product the firm produces for its after-market segment sells for roughly $5,000.
“Am I going to get a kitchen pass from my significant other to spend $5,000 on my airplane or are we putting $5,000 into a new car or something else, or just in the bank?” he said of the decisions facing some of the company’s customers.
LaFoy also pointed out that a portion of the sales loss has come from the optional flight products the firm makes for aircraft manufacturers, as orders for new planes have fallen during the recession.
“If you look at the build rates for companies like Cessna and Hawker Beechcraft, they’ve seen significant declines in the numbers of aircraft that they’re producing. So, in turn, that’s going to produce less opportunities for us to sell optional equipment,” he said.
L-3 Avionics Systems received some good news this summer, though, when the Federal Aviation Administration granted the company a Technical Standard Order authorization for its new Trilogy ESI-1000 Electronic Standby Instrument, the first solid-state, integrated standby system for smaller airplanes. Trilogy was designed as a backup for glass cockpit avionics and can replace the old standby system with glass.
“It’s our newest product and it appears that it’s going to be very successful for us. By achieving TSO, it gives us the authorization to produce it and, in fact, certifies that it meets all of the regulations appropriate for that device,” said LaFoy.
Riddle explained that TSO in the avionics field is like the Underwriters Laboratory listing for electricity-powered consumer goods. He said consumers can assume that a product with a UL mark has “been beat-up pretty hard in the lab” before it reaches store shelves, and TSO represents the same standard in his field.
“The one difference here is, for a consumer product without something like that, that doesn’t mean they couldn’t go out and sell it. For us, we have to achieve TSO approval in order to market and sell that product,” said LaFoy.
The firm has begun to market Trilogy, which combines altitude, airspeed and optional heading data on a 3.7 inch matrix LCD display. The product was unveiled at the EAA AirVenture in Oshkosh in July.
“So far, the reviews from pilots and (from) periodicals about aircraft have been very favorable to it,” said LaFoy.
L-3 Avionics Systems also makes air-data computers, radars, actuation systems, gallery products, fuel measurement and cabin pressure instruments, voice and data recorders and other items.
LaFoy sees company sales remaining stable for the rest of this year and he expects next year’s business to be similar to this year’s, at least in the military market and the service and overhaul segment.
“We are hoping that the business and general aircraft markets will start to pick up a little bit. We talk all the time to the heads of those companies, and they’re starting to see more signs that maybe they’re near the bottom. Once that happens, then we think we’ll start to see some growth,” he said. “But our plans right now are conservative for a flat 2010.”