As the Rockwell Collins/United Technologies merger inches closer with European Commission approval, the market is assessing the underlying shift it will cause with the creation of “super suppliers,” industry analyst Ronald Epstein, managing director of equity research at Bank of America Merrill Lynch, said last week. “I think it’s going to be really important to the OEMs in how they partner with suppliers on future aircraft and how the future aircraft are integrated.”

One of the key findings in the European Commission approval of the United Technologies acquisition of Rockwell Collins was that the combined entity would neither have the market power nor incentives to shut out competitors through practices such as bundling. But Epstein noted that the new Collins Aerospace combined entity will manufacture components in almost every area of the airplane. On Bombardier’s C Series, for instance, he noted that the combined entity will account for nearly 40 percent of the value of the aircraft. “So then you have to scratch your head and say…who’s the OEM?”

These mergers will create super suppliers, which Epstein said are no longer Tier One. Now they are "Tier 0.5," he said. “They can do your engines, they can do your avionics, they can do your control systems, they can do your actuators, you name it. That's an important changing dynamic in the supply chain.”