United Technology Corporation (UTC)and Rockwell Collins have struck a huge $30bn aviation deal that may very well shake up the industry. The deal which was announced on Monday brings UTC, which is the manufacturer of Pratt & Whitney jet engines, together with Rockwell Collins which makes airplane part. If the deal closes successfully next year, it would be one of the largest deals in the aviation industry.
To put it in perspective, Pratt and Whitney jet engines are used by companies like Airbus, Bombardier, and Embraer. Rockwell Collins also counts Airbus and Boeing as customers. But this might change soon. Both UTC and Rockell Collins have been pressured to lower their prices. This deal is thought to reduce that pressure.
The terms of the apparent merger will see UTC chief executive Greg Haynes stay on as CEO. Rockwell’s chairman, president, and CEO, Kelly Ortberg will move to running Collins Aerospace, which focuses on aviation part. The $30bn deal includes some of Collins debt and sets the two companies up to create a gigantic aerospace company that can outfit planes inside and out.
It would also exert pressure on other manufacturers because they are being pressured to lower costs and speed up the production of aircraft. French manufacturer Airbus has not been happy about the news so far. It has expressed concerns about late deliveries on orders from the company due to what they termed as “empire building.”
So far bothUTC and Rockwell Collins have said that there are very few visible hurdles in the way of the merger. They have very little in the way of product overlap. But examination from regulators is expected. UTC received some scrutiny of its own when it purchased Goodrich. The European Union subjected it to an extended antitrust probe over concerns of electric power generation, and small engine control.
Boeingcould still block the deal however. The major aircraft manufacturer issued a statement early on Monday saying that it would be looking very closely at the deal. It went on to say that until this happens, Boeing is unsure of how good the deal will be for the aviation industry and customers. They intend to safeguard the interests of customers, employees, and shareholders. So they may raise issues before the deal closes.