This post is sponsored by The Merex Group.
Chris Celtruda has been the Chief Executive Officer and a Member of the Board of Directors for the Merex Group since 2013. He is responsible for the P&L and strategy for a portfolio of defense aftermarket businesses that includes the recently acquired Kellstrom Defense Aerospace and the High Tech Avionics and ALCO Services, Inc. aircraft equipment repair and overhaul businesses. Mr. Celtruda has more than 20 years of experience managing complex businesses in the aerospace, defense and industrial markets. He spoke with SmartBrief about changes in the aerospace industry and his own company. This is the first part in a two-part series.
Question: What are the one or two most significant changes the aerospace and defense industry will undergo in the next 10 years?
Chris Celtruda: Domestic defense budgets will continue to decline but the reduced spending level will continue to be focused on fielding new aircraft platforms (F-35, P-8 and KC-46) and sustaining legacy platforms (F-16, KC-135 and P-3) during the fleet recapitalization, which has taken longer than anticipated. Concurrently, the defense budgets in the emergent market will continue to expand with growing gross domestic products and local threats. We expect the older U.S. manufactured aircraft and helicopters to continue to proliferate into the international market and require service and support. These factors should drive additional consolidation and a pivot to faster growing global markets.
Q: If you had the power, what’s the one A&D industry issue you would resolve today, and how would you do it?
CC: The one A&D industry issue that I would resolve today would be to continue to streamline and simplify export compliance regulations and procedures to push clarity and speed. We drive a significant amount of business globally and find that there are still long approval cycles and cumbersome processes.
Q: How has the sequestration impacted your business directly and indirectly?
CC: The sequester has been a significant disrupter to our customers’ abilities to plan and ensure that funding is available for their maintenance priorities. We have seen a reduction in the operating cadence for specific aircraft types we support directly for the U.S. armed forces, with a corresponding decrease in funding for spares and repairs. We remain focused on the domestic and international markets and being flexible to meet our customers’ needs.
Q: How does the prospect of more aerospace industry consolidation affect your business?
CC: Our business model is aligned to the prospect of additional industry consolidation. We view the defense aftermarket and maintenance, repair and overhaul (MRO) community to be fragmented and in need of consolidation and professionalization. Our intent is to continue to build a one-stop solution for our customer base that leverages original equipment manufacturer (OEM) relationships across our distribution, MRO, and engineering & manufacturing product lines. Our strategy includes the acquisition of specific capabilities, market relationships and intellectual property to supplement the solutions we bring to the defense aftermarket.
Q: The recent Merex Group acquisitions, Kellstrom Defense in particular, have been widely publicized in the A&D industry. What is the unique value added solution(s) you are endeavoring to offer your customer base to distinguish yourself from the competition?
CC: The MEREX Group has maintained long-term customer relationships in the domestic and international markets and we are uniquely positioned to meet a full range of customer challenges for defense aircraft maintenance. Our acquisition strategy has been aligned with building a bundle of parts, services and solutions to meet the needs of airframe maintainers. We believe that our long-term OEM relationships ensure proprietary part availability, and the addition of component MRO and repair management ensures refurbishment needs are addressed. We continue to invest in licensing, proprietary tooling and unique product development to address the late-in-life needs of defense platforms where an OEM solution may no longer be available. The breath of our solution for aircraft maintainers across a variety of platforms is what distinguishes our solution in the global market.