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Astronics profits taking off; Airplane cabin electronics products drive company's sales

The more iPads and laptops and smartphones airline passengers carry, the happier Peter Gundermann gets.

Gundermann, the president and chief executive officer of Astronics Corp., likes it because those electronically savvy passengers often are looking for ways to plug in their devices during flights, especially longer ones.

And that's where Astronics comes in. A fast-growing part of the East Aurora company's business is its line of products that help provide in-seat power and in-seat entertainment systems on airliners.

Those cabin electronics products now account for more than half of Astronics' sales, which are expected to approach $250 million this year. And Gundermann said Wednesday there's plenty of opportunity for those sales to keep growing.

Commercial aircraft production is picking up, led by Boeing Co.'s new 787 jet. Astronics will supply all of the in-seat power systems on that plane. And it hopes to have a similar arrangement for the new A350 commercial jet that Airbus is developing.

In addition, airlines are updating their existing fleets, especially their wide-body planes, to include in-seat power systems.

While those upgrades initially targeted passengers in the more expensive first-class and business-class sections, airlines gradually are starting to include them in the lower-priced coach seats.

"Passengers are increasingly expecting cabin electronics. The airlines are responding," Gundermann said after the company's annual shareholder's meeting. "There are more aiplanes, and more personal electronic devices. If you're like me, a few years ago, I had one device. Now I have three."

So far, most of the cabin electronic systems have gone into the wide-body aircraft that tend to fly longer routes. But about 80 percent of the planes the commercial airlines fly today are narrow-body aircraft that frequently are used on shorter routes -- and Gundermann estimates that only about 10 percent of those have in-seat power.

Gundermann sees that as a huge opportunity for Astronics, especially since airlines like Southwest use narrow-body planes, such as Boeing's 737, on long, coast-to-coast flights.

"People are spending more and more time in long-haul flights in these narrow-body airplanes," he said. "We look at that huge fleet of aircraft as a significant opportunity."

The weight of those in-seat power systems is a critical factor in persuading airlines to install in-seat power systems in the narrower jets, Gundermann said. The extra 10 pounds to 20 pounds associated with each in-seat power system is a key consideration.

To address those concerns, Astronics is developing an in-seat power system that would charge devices using a USB connection, which is available on many personal electronic devices today. A USB power system would be cheaper and weigh less than a conventional in-seat power system, Gundermann said.

"It's a halfway step, and it's forward-looking because some experts think [USB power] could be the wave of the future," Gundermann said.

While Astronics had what Gundermann described as "arguably the best quarter in the company's history" during the first quarter, with profits jumping by 17 percent and sales hitting a record high for the sixth straight quarter, one shareholder grilled Gundermann on the company's small, but struggling, test systems business in Florida.

The test systems unit, which accounts for about 5 percent of Astronics' sales, lost $1.1 million during the quarter, and its sales plunged by more than a third. Gundermann said the company has cut the test systems' staff by more than half but is resisting even deeper cuts because he believes its products still have promise.

Gundermann blamed the test systems business' prolonged struggles on weak federal spending on test systems products, which he expects to eventually rebound.

"Sooner or later, it's going to be a successful enterprise," Gundermann said. "We're planting seeds. We're planning. We're developing. We're talking with customers."

"I think we're doing the right things," Gundermann said. "I think we've had a string of bad luck."