Heli-Expo is almost upon us, and it is a good time to both reflect on the year since the last event and look ahead to the future – hoping that we can see an improvement to give us a warm feeling inside. We look for new models being revealed, contracts being announced, the camaraderie of coming together as an industry, and the opportunities that presents.   All industries are cyclical, and the fittest are the players who read the future the best, and plan far enough ahead to minimise the downturns.

With HAI’s 2016 show in Louisville opening next week, those involved in the flying helicopters at the heavy end of the market are entrenching in, and current estimates suggest 30% of the offshore fleet is parked up thanks to the trading price of oil dropping around 70% in just 18 months. Exploration is decimated, and while the price driver is over-supply, production in some areas is also well down as the price of extraction is greater than what the oil companies can get for their famed “black gold” on the markets. Many platforms are only remaining in production because the cost of moth-balling the rig is higher still. The only sparkle in this market is the opportunity brought by the thawing of US relations with Iran, which should reach industry headlines in the near future.

As we emerged from the downturn of 5-7 years ago, the proverbial green shoots appeared and helicopter financing was the sector of our industry to be in. Leasing companies appeared, huge orders were placed and confidence was at a high. Then, as the western economies began a slow-but-steady recovery, the oil price outweighed everything else as the main industry influencer. Some Leasing companies are taking delivery of uncontracted “white tail” airframes. The OEMs will be hit the worst, and while they now have empty order books due to the over-supply in the market, the will continue to do so once the oil market picks up and the parked airframes are the first ones brought back into service – first the existing fleets being brought back on line, and then the leasing company airframes will come out of storage.

With the OEMs already suffering from some years of lower military spending, the lack of orders for large civil market helicopters is likely to hit the OEMs in different ways. Bell, working hard on getting the 525 Relentless through its certification process, are expected to win much fewer orders of this new type than they would like when introducing a new product to market – and what was looking really promising prior to the oil price crash could become a victim of bad timing in the first 3-5 years of its in-service life. In a conversation with a well-known engine manufacturer, it was even suggested that Bell could put the program on hold until market conditions were more certain. While the 525 is being developed in Texas, it is worth noting that Bell have reduced their headcount at their Canadian plant in Mirabel by a further 200 in February, taking the total down to around 1,000 – half the number of just three years ago.

Meanwhile, all eyes will focus on Sikorsky at Heli-Expo to see what their new masters Lockheed Martin have to say. Unless there is a significant announcement of support for the civilian products, it will confirm the market’s suspicion that the parent company’s $9 billion acquisition was only focused on the military opportunities, and the civilian interests will get quietly consigned to the history books. If this happens, future S-76 sales in particular will prove very difficult to win. The S-76D has been received poorly, and demand for the older S-76C++ is currently higher than the current model. While Bristow has ten D models in their name, it is believed that none are on revenue flights. At least another ten have been delivered to leasing companies, but are not contracted to operators. The S-92 continues production at a slower pace, and deliveries of the Canadian military order have started and are planned to continue to 2021.

The leasing companies are tightening their belts too. While some are less exposed to the offshore market, the happiest are those with interests in the airliner market – where demand is increasing as the lower fuel prices bring seat prices down and more passengers in. Key to the leasing market are airframe values, and at the recent Helicopter Investor conference in London, a panel of helicopter values experts such as Sharon Desfor from HeliValue$ were impressing on attendees that the lower values now being experienced are not a short-term change, but that we need to get used to it as the “new norm”.

AgustaWestland was renamed Finmeccanica Helicopters at the start of the year and became part of the single Finmeccanica operating company rather than a subsidiary in its own right. The company re-organisation sets to continue for some months yet. The AW139 remains the mainstay of their product offering with over 800 now produced. Initial deliveries of the AW169 have started and the larger AW189 continues a slow start in the difficult end of the market. The issue with the Full Ice Protection System on the AW189 is expected to be resolved mid-year, allowing deliveries to Bristow for the British SAR contract to resume. With the Family Concept already proven by the airliner manufacturers, 2016 is the year when this initiative will start to be play out with Finmeccanica delivering AW139, AW169 and AW189 models to customers with plenty of intentional commonalities between the three models. The AW609 tilt-rotor program continues, despite the sad accident in October, with the third prototype expecting to fly soon and a fourth being built in Philadelphia.

Airbus has recently flown its second H160 prototype with Turbomeca’s Arrano engine, and development time is heavily invested in this new type. The larger X6 has entered its concept phase but a long-term commitment to this programme may come down to a decision on when to close production of the H225, which it is intended to replace.

Single turbines is the strongest part of the civil helicopter market by a good margin, with Bell, Airbus and Robinson models all building at least 110 airframes in this sector in 2015. The Bell 505 JetRanger X is planned for certification this year, and will likely impact Robinson a little at the lower end – an area that Airbus has not given much attention to in recent years. It still seems surprising to many that the French plant at Marignane has produced less than ten H120s each year in the last six, coinciding with the uptake of the Robinson R66. With just two H120s produced in 2015 according to the GAMA production report, one wonders whether it is viable to keep the H120 line open, or whether Airbus is too embarrassed to close it?

The Airbus H125/H130 lines are outselling the Bell 407 about two to one, although the American manufacturer has now started deliveries of the huge Air Methods order. This will see the aeromedical operator receiving an average of 20 of the 407GXP model every year for the next ten. Of these, 70% are reported as fleet replacements and only 30% for expansion.

At the smaller end of the market, business is looking hopeful. Civil sales are up a few percentage points, although Robinson built their second lowest total in five years. Newer French manufacturer Guimbal is producing one G2 Cabri per week, and deliveries to US training schools have started. 2015 production numbers from GAMA confirm that the Cabri has now overtaken the R22, and the production rate at Guimbal will jump once they complete their recently-approved new plant, and strong rumours exist of a four-seater in due course. Robinson are expected to arrive at Heli-Expo with their new two-seat R44 Cadet model, the existence of which was scooped some three months ago by online news site HeliHub.com. Enstrom’s numbers are down, largely thanks to the completion of their big military orders to Japan and Venezuela, but they now have a more pressing problem to sort with the recent accident with their first TH-180 prototype.

With the industry in a poor overall position, eyes now focus on Louisville, Kentucky as the host city for Heli-Expo 2016. Lower industry sentiment would likely reduce Heli-Expo turnout in any year, but the 2016 location does not help either. Louisville is the first city used by HAI in recent years to only have air links to domestic US cities, and with just 20 pick from it is the perfect way to discourage international attendees. If the weather matches what the city experienced exactly a year ago – “the perfect storm” – domestic visitor numbers will be significantly down too.   With location bookings for large expo venues being made so far ahead, HAI is likely regretting the decision even before everyone arrives in the city of the Kentucky Derby.

Jeremy Parkin – HeliHub.com