Leidos views itself as one of the FAA's three major contractors but eyes more runway

L3Harris Technologies is gearing up for one of its first major recompetes next year when the company will defend its role on the Federal Aviation Administration’s main telecommunications infrastructure contract.

The defense and government market’s newly-merged “Sixth Prime” could see a known opponent in that competition in Leidos, which has its own FAA credentials to tout should that company decide to pursue this takeaway opportunity.

Speaking at Credit Suisse's Industrials Conference on Tuesday, Leidos Chief Financial Officer Jim Reagan was asked whether a major contract L3Harris holds with the FAA to support the agency’s “NextGen” airspace modernization initiative would be of interest.

“Sure it is,” Reagan said, but with this caveat to the audience of investors in Palm Beach, Florida: “Harris has a long history with the FAA and they’re an incumbent that could be tough to unseat.”

A possible contract alluded to in both the question and answer is the potential $3.5 billion FAA Enterprise Network Services recompete also known as FENS, for which the agency expects to release a solicitation in January. The legacy Harris Corp. has held that work since 2002.

Both sides of the deal to create L3Harris in June brought their own products and services in civil aviation ranging from security checkpoint equipment to pilot training and avionics. Analysts noted to me then that L3Harris would be a formidable incumbent given those synergies, but Leidos could also present a challenge given that company’s self-described “sidewalk-to-sky” strategy for airport modernization.

“When you think of who have the real strong incumbencies at the FAA, it’s Harris, it’s Raytheon, and it’s us,” Reagan said at the conference.

Leidos gained a more substantial footing in the FAA three years ago through the merger with the former Lockheed Martin IT services business, which brought a contract the latter won in 2010 to help bring more automated data collection capabilities to air traffic controllers through displays.

Reston, Virginia-based Leidos also announced Tuesday it booked a potential 15-year, $1 billion contract that further expands the company’s footing with the FAA and with similar work. The new Future Flight Services program continues work Leidos has held since 2005 to update the FAA’s digital briefing service for pilots that integrates aeronautical, weather and other data into an interactive system to support flight planning.

Airports can be a murky market for contractors to navigate given the myriad governance structures each one has around the country. Some are owned by local jurisdictions and others are run by independent organizations such as airport authorities. More than one federal agency operates in airports and that group includes the FAA, Transportation Security Administration and Customs and Border Protection.

But regarding the FAA specifically, Reagan cited that agency as a main customer in which the company views more room to expand its civilian market footing and also create a more seamless sidewalk-to-sky experience for travelers.

“There continues to be a lot of opportunity to improve upon the infrastructure the FAA uses to make air travel more efficient, improve and reduce ground hold times, reduce the time that aircraft are flying around waiting for a landing spot in the congested Northeast corridor for example,” Reagan said.

“Think about how in congested airports: multiple aircraft converging upon a landing field and needing technology to zipper those aircraft in and optimize the time given the weather conditions between each landing sequentially in these congested places,” Reagan added. “It’s really important to improve the passenger experience.”