Collins Aerospace Expects Cedar Rapids Business Units to 'Really Lead' Pandemic Recovery
May 21—Collins Aerospace, Cedar Rapids' largest employer, is boasting every intention of not only being at the forefront of America's aerospace recovery, it plans to lead the charge.
Collins Aerospace's two units based in Cedar Rapids — mission systems and avionics — have the opportunity to "really lead this recovery" from the coronavirus pandemic, President Stephen Timm said.
Mission systems' operations "aren't really impacted" by the commercial aerospace woes of COVID-19, Timm said during a Zoom interview with The Gazette Wednesday, because the unit focuses almost entirely on the defense side of the business.
Before COVID-19, defense was about 25 percent of Collins Aerospace's portfolio, Timm told investors earlier in the week.
Now, it's 40 percent of the portfolio, although he expects it to return to near 25 percent as commercial aerospace recovers.
Timm listed avionics as one of the business units to be at the "front end of the recovery" in the investor presentation. Other divisions, such as interiors or power and controls, are more likely to be at the back end of the recovery.
Timm said avionics' rebound is more closely tied to the demand for single-aisle commercial jets.
"They're on all aircraft, but included heavily on the single-aisle aircraft," Timm said in the interview.
Collins Aerospace, a business unit of Raytheon Technologies and Cedar Rapids' largest employer, also is projecting the fastest recovery for single-aisle aircraft as domestic travel shows some signs of recovery.
Timm expects single-aisle demand to return to pre-pandemic levels by "sometime in 2024."
Raytheon projects single-aisle aircraft production to jump from slightly more than 500 per year in 2020 to more than 1,000 in 2025, according to the investor presentation.
Twin-aisle and regional jets have much more modest projections. Twin-aisle, widebody planes, Timm said, are not expected to return to pre-pandemic levels until "2025 and beyond." Regional jet demand is anticipated to back in pre-virus health by 2023, though.
"The widebody aircraft are the most impacted by COVID because of the international border restrictions for travel," Timm said.
Avionics also has other technology offerings that are "favorable" to the commercial aerospace recovery.
That includes technology to reduce the number of surfaces travelers need to touch when traveling through an airport and adding digital capabilities to existing jets to create a "connected ecosystem" in commercial fleets.
While the influx of leisure travel "does help" Collins Aerospace with its maintenance, repair and overhaul services, the return of business travel is important "for the health of the industry."
About 9,000 of Collins Aerospace's 68,000 employees — about 13 percent — are in Iowa.
Across its six business units, Collins Aerospace is projecting its operating profit to grow by 27 percent to 30 percent between 2020 and 2025.
"Collins is going to lead, not lag commercial aerospace recovery," Timm said to investors.
Some of Collins Aerospace's plans to bolster future profit margins come from cost reductions.
In a Tuesday Raytheon investor call, Timm announced plans to broaden Collins Aerospace's cost-cutting goal from $600 million to $1 billion. He said those cost reductions will come in ways outside of layoffs, though, such as "duplication in our systems and duplication in our locations."
Timm said Iowa's relatively low cost for businesses "begins to secure what we do in Iowa."
Waltham, Mass.-based Raytheon Technologies, parent company of Collins Aerospace, indicated this past October its desire to move from high-cost to low-cost manufacturing sites.
"Depending on the types of work we're talking about, whether it's engineering work or operations work, clearly Iowa has competitive costs," Timm said, "and as a result, our locations in Iowa will continue to be focused locations for us to do the work that we're doing today."
The changes facing Collins Aerospace comes more than one year after United Technologies Corp. and Raytheon Co. finalized their merger to become Raytheon Technologies, with Collins Aerospace as one of its four business units.
UTC acquired Rockwell Collins in 2018. Timm was named president of Collins Aerospace in February 2020.
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