ATI Well-Positioned For ‘Next-Gen’ Aviation Markets

Rich Harshman, Chairman, President and Chief Executive Officer, of Allegheny Technologies, Inc. (ATI) emphasized in the company’s Q2 2016 earnings call last week that sales to the aerospace and defense market continue to drive ATI’s results, representing over 50% of total 2016 sales.

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Harshman said, “Our aerospace market is being driven, in large part, by the growth of ATI’s next-generation mill products, forgings and castings.”

Defense, in both the aerospace engine and airframe segments, are helping ATI’s bottom line. Source: Department of Defense.

ATI’s business strategy is heavily focused on products which are proprietary to ATI or have high barriers to entry.  Based on long-term agreements, its technological prowess and its ability to meet build rate schedules, ATI seems well-positioned to capitalize on the increased build rates in commercial aerospace.

ATI has a foothold in legacy programs for both airframes and jet engines but has also been part of the research and development for the next generation of both. ATI has been awarded 300 new parts contracts which will represent over $1 billion n new business from 2016-2020.  The long-term agreements (LTAs) will lead to significant growth in ATI’s components business in precision forgings and castings as well as in powder metal alloys, which are usually used for additive manufacturing or 3D printing.

Structural changes occurring in the aerospace industry are benefiting ATI because they not only enabled but also led the changes in many cases. The airframe market is increasing its titanium content. Whereas the legacy Boeing 737 had roughly 4% titanium content, the Boeing 737 MAX has about 12% titanium content.

Jet engine firm order backlogs have been hitting new records this year. ATI expects the 2016 shipment year for its mill products, forgings and castings to be strong as it supports the 2018 original equipment manufacturer delivery schedule. Harshman also said the company sees strong next-generation spare parts demand beginning late this decade and running for a 20-to-30 year program life.

ATI has been at the forefront of developing products for hotter, next-generation airline and defense engines. Such products include nickel-based superalloys and complex titanium alloy powders for parts and components including those made with additive manufacturing technologies. ATI’s new hot-rolling and processing facility increased its capabilities for wider and flatter titanium alloys and nickel-based alloys in sheet, strip and plate. ATI is the largest producer of qualified plasma arc-melted titanium alloys preferred for use in jet engine rotating parts.

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ATI has positioned itself well for the transition into the next generation airframe and jet engine programs while it continues to support legacy programs in both segments. The aerospace market appears a good fit for ATI’s differentiated product offerings with their enabling technologies and capabilities. Some of the aerospace research has already trickled into the automotive segment as the demand for hotter temperature engines in turbo-charged environments has led to increased demand for nickel-based and specialty alloy products.

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