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SUMMARY: After 86 years United Technologies Corp. (UTC) says good bye to $US 7.5 billion a year Sikorsky Helicopters as it sees a ‘rough’ future for its helicopters, and sells it for $US 9.0 billion to Lockheed Martin (which will benefit from $US 1.9 billion in tax benefits). With no wars to fight right now, the US Dept. of Defense (USDoD) is slashing its budget, and military helicopters are on its list, at the same time low oil prices have created a soft market from offshore helicopter operators (80% of Sikorsky’s commercial market), and in a perfect storm Sikorsky’s 3 main products (UH-60 Blackhawk, S-76D and S-90) struggle for new orders as backlogs diminish. Sikorsky has lots of new projects for the future like the S-97 Raider and the JMR Technology Program Demonstrator, but right now things are not good, 2014 showed revenues of $US 7.5 billion but only a $219 million net profit (2.92% profit margin), how Lockheed Martin will revive Sikorsky is a mystery (the global military and civilian helicopter market is worth $US 30 billion a year but in decline today), unfortunately many of the 15,264 workers at Sikorsky will be affected soon. The sad reality is that the large helicopter segment, cannot make money on commercial orders alone (only 30% of Sikorsky’s sales), the industry needs global conflicts (aka “wars”) to drive military sales (aka “military industrial complex”), unfortunately without war there are no profits in the large helicopter segment. Sikorsky is not alone, Airbus Helicopters and AgustaWestland are seeing the same and even Bell Textron now, as it is about to enter this segment with its new and largest helicopter yet, the Bell 525 Relentless, timing could not be worst. The USDoD is off course happy to see Lockheed Martin buy Sikorsky, and it will be interesting to see how this acquisition transforms the company over the coming years as it is a stranger to the civilian commercial market, and I am sure we will see more M&A activity in the aerospace industry in the next 1-2 years as US military spending comes down even further, and USDoD contract dependent companies struggle to grow and maintain profitability.

After several months of reviewing its options for its Sikorsky helicopter business, United Technologies Corp. (UTC) (UTX.N) has decided to sell the 86 year old division to Lockheed Martin Corp. (LMT.T) for $US 9.0 billion ($US cash and $US 8 billion in new debt) and $US 1.9 billion less due to tax benefits. In one … Continue reading

MAYDAY ! As if the situation was not bad enough at Bombardier following the Paris Air Show, where NO new orders for any of it’s 3 commercial aircraft were announced, and this week, it’s stock (TSX:BBD.B) hit a 22 year low at $C1.90 per share, down 49.3% in the past 12 months, and down 61.3% in the past 5 years ! another 49% drop and its a “penny stock” (<$C1.00). Meanwhile market capitalization of the company is now at an extremely low $C 4.3 billion for a company with $US 20+ billion in revenue. The latest bad news was that there is a "review" and a 18+ month delay in the new Global G7000/G8000 business jet programs. The Global brand is Bombardier's "cash cow", it is the light at the end of the tunnel today, as it provides the best margins, 60% of business jet revenue, 43% of Bombardier aerospace revenue with just 27% of total aircraft deliveries, trouble there means bigger troubles for the whole company, especially now. The ultra-long range business jet segment is weakening all over the world, new competitors are coming in like the new Gulfstream G500/G600's and Dassault's 8X and 5X, while the current Global G5000/G6000's badly need a "revamp" (e.g. Challenger 300 to 350 and 605 to 650), but everything is on the back burner these days because of the CSeries, a program that has changed the company for the worst, and a program that may yet destroy the company directly or indirectly in the end. Yet they want to stretch it into a 160 seater (CS500) and go toe to toe with Airbus and Boeing in the largest and most contested and price discounted aviation market segment today, the single aisle narrow-body, which will be joined by the Comac C919 and Irkut MC-21 in the next 5 years ? oh boy !

I thought things could not get worst for Bombardier after the Paris Air Show last month, but they have, as investors have seen the share price (TSX:BBD.B) hit a 22 year low last week of $C 1.84 and as of yesterday it closed at $C 1.90 per share as investors sell and lose confidence in … Continue reading