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Honeywell International Inc (NASDAQ:HON) took center stage at the 3rd Annual Jefferies eVTOL / AAM Summit. The discussion, led by David Chilladet and Sean Meakim, highlighted Honeywell’s strategic investments in the Advanced Air Mobility (AAM) sector. While emphasizing a mature technology stack and a $31 billion market opportunity by 2030, the company acknowledged challenges such as uneven geographical adoption.
Key Takeaways
- Honeywell estimates a $31 billion addressable market for AAM by 2030.
- Anthem integrated cockpit system shows promise with scalability and future-proofing features.
- Honeywell’s technology stack, initially for AAM, is adaptable to other sectors like business aviation and defense.
- The company collaborates closely with regulators for aircraft certification to ensure safety.
- Eastern Hemisphere leads in AAM adoption, with a focus on emergency services and DoD missions.
Financial Results
- Addressable market projected at $31 billion by 2030:
– Air Taxi: $20 billion
– Middle Mile Cargo: $10 billion
– Local Light Parcel: $1 billion
- Honeywell has a pipeline of about $10 billion, with no specific timeline.
Operational Updates
- Product Development and Adoption:
– Anthem Integrated Cockpit: Adopted by Vertical Aerospace, Bombardier, and Boom, with a target EIS in 2030.
– Flight Controls: Continued demand for compact fly-by-wire systems.
– Attune Micro Vapor Cycle System: Adopted by Archer and Bell Valor.
– Asure Electromechanical Actuation: Adopted by Archer and Elektra.
– Navigation Systems: High demand across all vehicle types.
– Ground Control Station: Developed for uncrewed vehicle operations.
- Market Dynamics:
– Shift towards emergency services and DoD special missions.
– Geographical adoption uneven, with the Eastern Hemisphere leading.
– Focus on larger vehicles with higher safety requirements.
Future Outlook
- Continued investment in adaptable aerospace road map.
- Focus on complex, safety-critical vehicles.
- Exploration of new business applications enabled by AAM vehicles.
- Anticipated material impact on Honeywell Aerospace in the 2030s.
Q&A Highlights
- Honeywell’s content per vehicle ranges significantly, reflecting the complexity of systems.
- The company is closely monitoring public perception of technologies like Waymo to inform UAM adoption strategies.
In conclusion, readers are encouraged to refer to the full transcript for a detailed understanding of Honeywell’s strategic direction in the AAM sector.
Full transcript – 3rd Annual Jefferies eVTOL / AAM Summit:
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Good morning, everyone. My name is Sheila Kahyaoglu with the Jefferies Aerospace Defense and Airlines Equity Research team. Thank you so much for joining us for our third Annual EVTOL AAM Summit. Today, we’re lucky to have Sean Meakim here, who’s VP of Investor Relations as well as David Chilladet, who’s VP and General Manager of Honeywell’s Aerospace Advanced Air Mobility business, who’ll be discussing how Honeywell is enabling the eVTOL market. In case you haven’t heard from David at an event recently, he’s VP and General Manager, as I mentioned, of the UAM organization.
He’s been with Honeywell for over nineteen years and most recently, prior to his current role was in the power systems business with engines and power systems. He’s based out of Phoenix, believe, right, David? You’re currently not and you’re at a rather neat facility of sorts. So with that intro, David, thank you so much for joining us. Maybe you could talk to us about how Honeywell plays into the advanced air mobility market.
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Yeah. And thank you for the opportunity to speak with you, Sheila. I always look forward to these discussions. About five years ago, Honeywell created a dedicated business unit for advanced air mobility And that was based on the belief that this nascent market was going to need a different set of solutions and a different model for support of these early stage customers. So we needed a group that could move at the pace of the archers and the verticals and the electros that had a startup mentality and a very disruptive MOS.
So we needed to be adaptable enough to work with legacy players and entrants from the automotive space at the same time. So we led the charge. We won some early programs with these early players knowing not all of them would ultimately see high volume production, but it would improve our core technology through collaboration with them. And now five years of that collaboration later, our technology stack has matured. It’s allowed us to create some new offerings things like Inceptors, which we’ve announced recently, while at the same time supporting flight testing on that first wave customers.
Some of those first customers are moving closer to certification and production and we’re right there alongside of them. The other cool thing that’s been great to witness over this five years is some of these solutions that we developed in that sandbox with our AAM customers have now found homes in more traditional end markets. You’ve seen Anthem, was developed in cooperation with a lot of early AAM players. Now announcements with folks like Bombardier and Boom, things like our tune cooling systems. We’ve now seen those announced on programs like the Bell Valor, as well as flight controls in areas like Hilo and Defense.
And so those are other big end markets for us. So it’s a great signal of how we’re able to innovate here in this space and ultimately how it fits with our broader road map and helps us achieve scale when these AAM customers go into production.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Maybe Honeywell is great at giving forecast. And so Sean’s on the phone to keep us in check. But I think you’ve previously talked about a $31,000,000,000 addressable market for Honeywell for AAM, including air taxi of $20,000,000,000 middle mile cargo of 10,000,000,000 and local light parcel of $1,000,000,000 by 02/1930. Can you maybe walk us through some of these? Should they should we be updating them?
How do you think about the mix of opportunities?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Yeah. I guess the biggest shift has been in what those early missions are going to be. We continue to believe in this end market. Some of the early forecasts were probably a bit optimistic for some of the commercial applications. But as we’ve seen the shift towards things like emergency services or things like DoD special missions, we’ve seen the vehicles pivot towards those special missions.
And so just starting with that as sort of the top level analysis. What the other thing that we’ve seen is that geographically it’s going to be an uneven road, right? Today, we’re seeing a lot of players in the East lead the way relative to rule making and early activities. I think we’re going to start to see some special missions in the rest of the world really start to pick up. But if the question is when do we think this is material to Honeywell Aerospace, we still feel confident that the AAM end market is material to Honeywell Aerospace in the 2030s.
And while we continue to expect that there’s going to be shift in mission and there’s going to be shift in who’s at the front of the race, we continue to believe in the end market as well as what we’re learning along the way.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Maybe if we could talk about your product fuel supply to the AAM market. How do we think about that? I think starting for most with Anthem that opportunity, of course, it will be EV cost, but you’ll supply that into commercial transport and business aviation, whether it’s newbuild or retrofits. If could talk to us about Anthem for a minute.
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Yeah. A lot going on in the world of Anthem. And a lot of the feedback we got from those early players like Vertical and Saturnal helped improve the architecture and the pilot experience for Anthem. And so now you’ve seen announcements for things like a multi platform partnership with Bombardier. We’ve got another announced biz app win as well as a retrofit campaign that we’ll be announcing soon.
And then you have things like BOOM, which is a pretty disruptive aircraft where they’ve announced they’re using the Anthem cockpit as well. And so that’s exactly what we want to see is our co innovation with these customers, making it a better solution for the next customer and the next customer, including the next AAM customer, right, who’s going to get the benefits of all of the development that we’ve done along the way.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Maybe step back because folks might not know what Anthem is. So can you talk about Anthem Avionics, how it’s different than the prior system Epic? What should we expect the first application to be? Is it eVTOL and when would it enter service?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: That’s a great question. So in terms of what Anthem is, Anthem is our integrated cockpit. And the big places it’s differentiated from systems like EPYC are one, it’s highly scalable to larger air transport aircraft all the way down to GA aircraft. And it allows you to host other applications on the Anthem cockpit, which gives you unique capabilities and unique co innovation opportunities with other software systems you might want to integrate there. The other thing is these systems, it is designed to be connected all the time, which is really what the future is going to look like, as well as it’s designed for a future where reduced crew operations up to zero crew operations are going to be evolving.
And so Anthem is future proofed for all of those developments along the way. So modular open system allows us to integrate with other systems or host other systems.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: And when would the first application come into place? Would it be new build on eVTOL? And when would you expect that to enter service?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Well, we publicly announced that it’s the cockpit. It’s the integrated cockpit on the vertical aircraft, which will is targeting EIS in 02/1930. I think that will be a bit of a foot race between it and some of the other unannounced applications for Anthem. So I’m I would say it’s fifty-fifty that it’s either an AAM application or a more traditional end market where you’ll see Anthem first.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: You mentioned Bombardier new products and thank goodness Sean is on, so I don’t get in trouble again. But how do we think about other applications in addition to potentially eVTOL? And would could it be retrofitted onto existing platforms? What sort of FAA certification would it involve?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Keeping myself out of trouble with both Sean and my boss. I’m going to keep my powder dry on that one except to say we have a big retrofit campaign for what we would consider to be a more traditional end market with Anthem that we’ll be announcing soon.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: And you could you retrofit it? Does the aircraft have to get recertified? Okay. I think you talked about the pipeline of UAM being about $10,000,000,000 What are you seeing in winning the largest opportunities across the portfolio?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Yeah. There’s been a bit of a shift. Early on our pipeline was really about Anthem, the integrated cockpit as well as our flight controls. Our compact fly by wire were really the big drivers for that pipeline. And while we continue to have demand for those, we’ve seen increased interest and wins for our attune, micro vapor cycle system.
Folks like Archer and Bell Valor have taken on that system. The Asure electromechanical actuation, a number of wins there including Archer and Elektra who are using that electromechanical actuation system. And we see demand across all vehicle types and missions for our navigation systems, right, where we have a long legacy. And probably the things we haven’t been talking about since the last time we were here with you is new technologies like our Inceptor, our Side Stick, which we originally developed for the Orion spacecraft, but we found that it is a unique benefit to AAM customers. So Vertical has recently announced that they’ll be using our side stick on their VX4 vehicle.
And so this is exactly what we want to be doing is either developing new technologies that fit an unmet need with our customers or adapting existing technology to meet that unmet need. So it’s a bit like puzzle pieces, right? The more we can understand these customer needs as they go through their development and certification process, add more pieces into the mix to help them solve that. And we think a year from now when we’re talking to you, there will be even more of that.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: So when we think about the AAM portfolio, like where should we think about the biggest value add? Is that avionics, fly by wire? Is it propulsion?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: So they have different business models. I guess, you think about our avionics systems or fly by wires, there’s constantly going to be updates and improvements to the control laws for updates and improvements to the software that goes into that integrated cockpit. By contrast, you can imagine things like electromechanical actuation or things like cooling systems, where those controls are learning over time how to operate more efficiently, how to predict wear out modes. And so the business models are very different, right, whether you’re talking software upgrade or whether you’re talking replacement and repair. So the biggest value add when we sell to the OEM may be something like the cockpit or like the flight controls over the life of the vehicle.
It could end up being something more mechanical, right? That’s going to need repair and replace something like the electromechanical actuation or a big cooling system.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: And how do you think about the investment involved in UAM? How do you how much of it is products you’ve developed for your existing portfolio that you could transfer into UAM? How does Honeywell think about that in developing new technologies with industry partners?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Yeah. So the vast majority of technologies we’re offering in this space were invested as part of an aerospace road map. They are not bespoke in any way for AAM. So if you think of the development of a cockpit of the future in Anthem that was a long term strategy for BizAb for defense for air transport. So the early adopters of that and some of the early iterations went through AAM, but that was always a core investment for us.
Similarly, electromechanical actuation, flight controls, cooling systems, again, core road maps where we were able to evolve and improve those products with our AAM customers. The number of unique AAM offerings, that’s a relatively modest investment, things like our ground control station that allows you to operate uncrewed vehicles in controlled airspace is something that we invested in specifically for this product in a relatively modest way and in coordination with a number of the regulators and a number of cooperative there. Another one that I would say sort of straddles the line between core investment and AAM investment is something like the work we do on autonomy. So we’ve announced some investments with a company called Near Earth Autonomy where we’re flying Blackhawks remotely. And part of that is how we advance the Anthem cockpit for more simplified vehicle operations or reduced crew operations.
That’s something that is on our long term road map, but will likely be adopted first by AAM customers. So maybe the three buckets to put it into Sheila, where we can take an existing certified product and drop it into an AAM vehicle, we do that. So think our navigation systems, think our sensors. If we can adapt it something like Anthem or our flight controls where the core product is developed, but specific software development or control laws need to be adapted for that vehicle that’s sort of the second bucket. And then the third bucket would be something we develop specifically for the AAM market, and that would be something like our down control station.
Hopefully, I’m still there, Sheila.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Sorry. I was muting it as I was writing. How do we think about target markets and revenue generation of Honeywell’s AAM business?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Yeah. The geography is highly dynamic. So sort of which geography is going to go first for which mission is I spend a lot of my day following that. And maybe the only non controversial statement would be that the Eastern Hemisphere is going to have the early adoption. The rulemaking landscape there has set the pace.
And the good news is that has been and will be a catalyst for progress in the West, right? They’ve published the rules. They’ve certified a couple of early vehicles for operation. And then we see folks in between like The UAE moving really aggressively to find a path to incorporate these vehicles into the airspace. And I don’t want to downplay The U.
S. Announced AM as a strategic priority on Inauguration Day. And while Secretary Duffy has a lot on his plate relative to modernizing the airspace, he’s really been he’s really leaned forward in terms of making this a priority. And one of your other speakers, I love what Archer has done relative to their commitment to LA twenty twenty eight as sort of a forcing function to move regulators and adoption forward. It increases the pressure for folks like us who are supporting Archer with critical systems, but we’ll gladly take that to see the market move forward and what the next need and what the next challenge is going to be so that we reveal those and get busy solving them.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Maybe if we could talk about just the content. Honeywell’s, I think given this content or we might have guessed it dollars 200,000 to $1,500,000 on a typical UAM, dollars 2,000,000 to $5,000,000 vehicle price. So I think I don’t know if we backed into that. And then $100,000 to $1,500,000 on an autonomous cargo and then five ks to 60 ks of content on a delivery drone. So how do you think about are those figures right?
Have they changed at all? What do you think is the first to enter service? How do you think about the allocation of your resources?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Yeah. That’s a lot. But maybe I’ll start with just the first part in terms of the value per vehicle. Our specialty is always going to be the most complex safety critical vehicles. And so things like Anthem and flight controls and some of the electromechanical systems I described that puts them probably towards the higher end of that range that you’ve described per vehicle.
Autonomous cargo is going to need fewer of those systems. Certainly, it doesn’t need a lot of a pilot interface, right, if they’re going to be remotely piloting or autonomously operating those vehicles. So that value comes down a little. And then as you move towards something like delivery drones, that’s not going to be our sweet spot. We do things like ground control stations to really figure out how we’re going to manage the airspace in the future.
But that is not the most safety critical big vehicle operation. So we’re going to tend to focus our precious resources as you described on those larger vehicles who really need higher safety requirements and more complex systems.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Any thoughts on like how you work with the regulators to certify the aircraft? Or does Honeywell take sort of a direction from the OEM on that?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: A little bit of both. So we’re certainly arm in arm with our customers when they’re talking with the regulators. Because certainly, we need an Anthem architecture, a flight controls architecture that we are confident will be certified under the most stringent rules. And so we typically go arm in arm with our OEM partners, so that we understand the feedback they’re getting from the regulators in a space that has not been solved before, right? These are new questions being asked in a lot of spaces that we’re going to have to navigate for the first time.
And so, the vehicle level, they’re going to be responsible for that ultimately. But for all those pieces along the way that we provide that allow them to meet those criteria to meet those vehicle level safety requirements. We try to join with them. And we also try to help educate regulators on some of the unique things with these vehicles and some of the design trades to solve it.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: When we think about Honeywell and UAM and the content there, is it similar to general transportation and commercial transportation when we think about the percentage Honeywell can have on an aircraft? Or is it more of an opportunity for Honeywell? I think it’s
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: more of an opportunity. One of the things I haven’t really touched on is because of the breadth of our portfolio. Think of everything from when the pilot touches the side stick, which then sends a signal to the flight controls, which then translates that into an action for an electromechanical actuator. And then the cockpit provides the feedback on what that has done to the orientation of the vehicle. We can provide all of those systems and we can also integrate those systems in a way that reduces the size, weight and power requirements of it.
And so I think there’s enormous opportunity for us to sort of redefine what those buckets of product offering are and merge them together in a way that reduces the cost of integration, creates simplicity, allows these vehicles to be certified and operate more efficiently. So I think the traditional silos of the products we provide are going to get merged together in new and unique ways. And I think it’s going to be to the benefit of our customers as well as to the people who get to fly on these aircraft.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: With that said, like how do we think about the revenue ramp and profit opportunity for Honeywell, if that’s possible at all? Sean’s watching down this space, so I’m not sure if I’m not allowed to ask that because that wasn’t in the original set of questions.
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: I think the one thing we can say for sure is that it’s going to be lumpy. It’s not going to be a straight line. And I expect that we’re going to see some missions that we hadn’t predicted suddenly ramp up, which will drive production of vehicles that maybe we thought would be second wave entrants. And we’ll I think we’ll see some folks that we thought would be at the front end potentially struggle. And we’re bullish on the end market.
And so we’re willing continue to advance our road map, find other homes for it while this market matures.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Maybe one more in terms of just the safety, the public acceptance of eVTOL. How do you think about some of the restrictions versus say commercial aircraft have? How could we make eVTOL like wider more widely accepted?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: So two thoughts there. One is the more conspicuous we can make the airspace, everything in the airspace, the more it will drive the opportunity for new vehicles to be part of that airspace. So conspicuity all the way down to small drones to GA aircraft to larger transport aircraft and awareness of the airspace will create an opportunity where we’re less concerned about a new and novel entrant coming into that airspace. So that sounds like motherhood and apple pie. But I do think it’s worth saying again and again as we think about modernizing the airspace that that’s critical not only for the vehicles that operate today, but for the vehicles that are coming around along the way.
The second is we keep very close tabs on sort of new and novel applications to see what the challenges with public adoption are. And I’ll just give two examples from where I live in Arizona. One is Waymo, where early on that felt like a novelty and now it is absolutely an indelible part of the landscape. People love Waymo’s. You see them all over our highways and our surface roads in Phoenix.
It went from I would never do that to suddenly it’s an indelible part of people’s lives there. The other one on the West Side Of Phoenix is where we see drone delivery. Again, small applications, fairly limited range, but we’re listening to what the public feedback is on that because we think it’s a potential indicator of either the challenges or the positive feedback we might see when UAM UAS vehicles become more seen and heard in the landscape.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Maybe two more and we’re done. I think we have 20 companies in total presenting today. Given Honeywell as a supplier, how many of them have you officially partnered with? And is this something that we should sort of look forward to as we think over the next few years more announcements and more partnerships and more products?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: The answer is yes. There’s plenty more that we are actively developing with that we have not announced. Being completely transparent, we are choosy. We have to be. We want to make sure we’re deploying our precious resources, primarily engineering resources on those programs and those vehicles that we feel have the highest chance of success.
And so there are a lot of programs that have not been made public that I think you’ll be pleasantly surprised when you hear our name attached to. But I don’t think you’ll see a list so long that you would be concerned about that Honeywell has spread themselves too thin.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Got it. Well and then one last one for you. What are one or two things you’re most excited for the next year looking ahead for Honeywell?
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Well, first and foremost in this space, I’d be remiss if I didn’t say I want to fly on one of these. Wherever the early opportunities are, whether it’s a demo tourism flight or some early opportunities to be with one of our customers as they do demonstration activity. I’m going to get on one of these aircraft sooner rather than later. The other is seeing business applications that were not originally envisioned, right? It’s like the early days of the Internet where we didn’t know what we’d do with high speed Internet until we had it.
I can’t wait to see when these really start to show up at scale, the great ideas that people have and the economies that get opened up as a result of these new and disruptive vehicles.
Sheila Kahyaoglu, Analyst, Jefferies Aerospace Defense and Airlines Equity Research team: Awesome. Well, we’ll look forward to that too. And I’m yet to try that VMO car. I’ve only seen it as I pass by Phoenix though and the Infran I But we’ll look forward to adoption of all things new and innovative. So thank you so much, David, for doing this.
David Chilladet, VP and General Manager of Aerospace Advanced Air Mobility business, Honeywell: Thank you, Sheila.
