Rockwell sees euro tempering airline fuel savings; seeks acquisitions

By Alwyn Scott

NEW YORK (Reuters) - Sharply falling oil prices are providing a windfall for global airlines by cutting their massive fuel bills, but a weaker euro will temper the benefits for European carriers and limit their ability to spend on aircraft upgrades, the head of Rockwell Collins said on Friday.

While the currency effects will not completely neutralise the fuel gains, "there's no question that ... European currency countries aren't going to see as much good news," Chief Executive Kelly Ortberg said in an interview.

"In some of those airlines, budgets are going to be tight because of the strengthening dollar against the euro," he added.

The Cedar Rapids, Iowa-based maker of avionics and information systems has not yet seen an impact from currencies or from lower fuel prices. The company also is actively exploring potential acquisitions for both its defence and information management businesses, Ortberg said.

Ortberg expects fuel savings to lift its sales to business jet companies as early as this summer, since they are less hedged on fuel than commercial airlines. Commercial airline sales likely would emerge in the company's next fiscal year.

Earlier Friday, Rockwell Collins reported a 26 percent rise in net profit on a 16 percent rise in sales for its fiscal first quarter.

On Thursday, the European Central bank announced a 1 trillion euro bond-buying programme, sending the euro to 11 year lows against the dollar.

"Most of the major airlines have hedges, some up to three years, so while fuel is coming down, they're not seeing the direct budget windfall," Ortberg said. "It's going to be a little while before we see any change in buying behaviour."

"Having said that, there's no question that this is good news for them. And if there are things they wanted to do but couldn't afford it, they're going to be revisiting that. We're going to see some good news, it's just a little early."

Rockwell Collins wants to build its defence portfolio with acquisitions that can also add capability to its commercial products, especially now that uncertainty about the U.S. defence budget has eased and company valuations are more clear.

Rockwell also wants to build its commercial products through acquisitions, Ortberg said.

"We're really focused on expanding our information management services portfolio," he said. "Companies that can enhance our previous ARINC acquisition are opportunities that we're exploring now."

(Reporting by Alwyn Scott, editing by Meredith Mazzilli and David Gregorio)