Honeywell International Inc. (HON)

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Honeywell International Inc. (HNO)

RBC Capital Markets Global Industrials Conference (Transcript)

September 10, 2013 06:40 PM ET


Carl Esposito - VP, Marketing and Product Management Aerospace.

Paul Vasington - CFO


Unidentified Analyst

Good afternoon. Our next company this afternoon is Honeywell Aerospace. And joining us today, we have Carl Esposito and Paul Vasington from Honeywell. They are going to give us a quick couple of introductory words on what they do in the company itself and also a very important forward-looking statement and then we are going to have some questions.

Carl Esposito

Great, thank you. Carlos Esposito, Vice President of Marketing and Product Management for Honeywell Aerospace. So I am responsible for our product portfolio and strategy across aerospace and managing that portfolio of products and services across all of aerospace.

From a forward-looking statement perspective, we will talk about and some documents have forward-looking statements. Those statements are based on the management assumptions and assessments and we've identified principal risks and uncertainties that affect our performance in our 10-K and filings with the SEC.

Paul Vasington

I am Paul Vasington, I am the CFO for Honeywell Aerospace, responsible for global financial operations for the company.

Question-and-Answer Session

Unidentified Analyst

I'll kick off maybe on the commercial side of the division and the aftermarket have the good pace focused. There is not a lot of visibility in this area. So (inaudible) what your thoughts are and how this is progressing, the industry has been sort bit of a soft patch without Honeywell has been performing relatively well.

And so I was wondering if you could talk about maybe some of the dynamics you are seeing and maybe why global businesses perhaps kind of differently from some of the peers?

Carl Esposito

Sure, happy to do that. We are now -- our commercial aftermarket is up in mid-single digit, I think these are easier comps from us from a comp perspective in the commercial side, but I will talk about both the transport airline aftermarket as well as the business aviation aftermarket, because they are two different animals.

So we see aftermarket, different streams of our aftermarket business, in spares, repairs and overhauls, upgrades and in some cases mandate to require upgrades for aircraft based on regulatory rules. And so one of the things that we like about our portfolio is it is very balanced portfolio from a mix of different type of aftermarket business.

So they were pairing overall business as parts get use sometimes based on flights hours, sometimes based on just life. The spare businesses airlines continue to acquire new aircraft, putting new spare equipment throughout their network to support their airline operation. Upgrades has been a big thing for us and looking at safety efficiency upgrades that we can provide to airlines to help them improve their operational performance from an efficiency standpoint and safety performance standpoint.

So things like where the radar upgrades to help improve the safety and navigation around storm. We had that today coming in here, (inaudible) use weather radar to navigate around storms to bring aircraft safely.

Performance upgrades and efficiency upgrades like flight management system software upgrades that will let airlines fly more efficient, more direct routes help them drive more efficient operation.

On the business aviation side of things, we also have a similar mix of aftermarket business, the repair and overhaul business, engine repair, APU repair and overhaul. Service plans and maintenance plans that we have in the aftermarket and then upgrades and we’ve seen a tremendous growth in our business aviation upgrades. We’ve invested lot of money in developing new value added upgrades and many of those are software based upgrades.

So I have had the cockpit on say Dassault F7X and I can now deliver significant value software upgrades to that cockpit to provide things like three dimensional synthetic vision, those flight efficiency upgrades in the flight management systems, new train warning and new aerospace procedures. So, really a very broad and diverse after market for us.

Unidentified Analyst

There has been some concern on the aftermarket about the negative impact of retirement’s cannibalization and (inaudible) Boeing making more new planes which is still on warranty. How you seen any sort of impacting your large aircraft business?

Carl Esposito

To that bid the impact of that is not new for us. We’ve seen those types of retirements. We actually participate in that aftermarket business from aerospace trading as part of our reselling of used equipment so we participate in that part of the dismantling and the refurbishment of aircraft parts. So we see it, it’s been in the market and certainly are adjusting to it as ebbs and flows, but again it’s part of one of the many streams of our aftermarket business, not unique to one particular piece.

Unidentified Analyst

You mentioned the upgrades and metric that’s on the business jet side of things. And as you talk to customers about this, do you see this as perhaps probably to pick up in new aircraft activity or they separate sort of drivers?

Carl Esposito

Well, we will be here in Las Vegas next month actually for NBAA, National Business Aircraft Association Trade Show where we will release our annual forecast of business aviation growth rate. And so I think this year we’ve seen a relatively flat to slightly down new aircraft build rate, but we are seeing some very nice adoption of those aftermarket upgrades, its aircraft particularly some of the high whole value aircraft and those value and those software upgrades, safety upgrades, connectivity upgrades are doing very well for us. So we are excited about NBAA in the next month and we really setup to any forecast in the next month.

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