Rockwell to Buy Hughes In-Flight Entertainment Unit

In a move to dominate the rapidly growing market of in-flight entertainment systems, Rockwell International Corp. said Tuesday that it will acquire a Hughes Electronics Corp. unit that is a leading supplier for the industry.

The unit, Pomona-based Hughes-Avicom International Inc., is known for developing a system that allows airplane passengers to watch live television.

By picking up Hughes-Avicom, which has 1,200 employees and expects 1997 sales of about $120 million, Costa Mesa-based Rockwell is stepping toward the forefront of a hyper-competitive arena, analysts say.

Advanced entertainment systems serve as an attractive lure in the commercial airline industry--and technology companies are paying attention. Last year, airlines spent an estimated $1.2 billion on in-flight entertainment and communications--or up to $5 million per plane, according to the World Airline Entertainment Assn., an industry trade group.

“It’s all a diversion for the customer, and reliability is a huge problem for everyone in this arena,” said Rolfe Shellenberger, senior consultant on corporate travel for Runz Heimer International, a research firm in Rochester, Wis.

On international flights, “you’re dealing with people sitting in one chair for 10, 12, 14 hours at a stretch,” he said. “They want to be entertained. But if the systems don’t work, you’re going to have people sitting still and getting very cranky over a long flight.”

Hughes-Avicom officials acknowledge the firm had some technical problems with its interactive product line in the early ‘90s. These flaws have since been repaired, employees said Tuesday.

The acquisition is expected to be completed by the end of the year, officials said. Financial terms were not disclosed, but Hughes-Avicom will become part of Rockwell’s Collins business unit, a leading supplier of aviation electronics for the air transport, commercial and military aircraft markets.

Rockwell “makes the hardware and software for the cockpit; we make the hardware and software for the cabin,” said Ken McNamara, president and chief executive for Hughes-Avicom. “We’re a perfect fit.”

Airlines have turned to these systems as a new way to increase passenger loyalty and brand identity, said Joe Leach, president of the World Airline Entertainment Assn. When airlines offer the same price for a ticket to London, consumers often select the plane outfitted with the most toys, experts say.

It’s still unclear whether passengers will pay a fee, in addition to the price of their ticket, for the luxury of interactive entertainment.

A far cry from fuzzy overhead projectors, these systems range from telephones built into seat backs to personal video screens that offer movies and computer games. Some airlines--particularly Swissair--offer electronic gambling on flights outside the United States.

Most of the systems are offered only in first class and business class, and predominantly on long-haul, wide-body jets. But the airline industry, realizing that coach seats’ potential has not been fully tapped, see an opportunity for huge growth.

Hughes-Avicom also repairs its in-flight products for its airline customers, which include Delta Air Lines, United Airlines and American Airlines.

The Pomona firm faces heavy competition from BE Aerospace, Matsushita Electric Industrial, Sony Trans Com and Interactive Flight Technologies.

Though Rockwell wouldn’t say how much it’s spending on the deal, officials said the company is paying for the Hughes unit with proceeds from the recent spinoff of Rockwell’s automotive and graphics division.

Rockwell shares fell 25 cents to close at $49.75 on the New York Stock Exchange.