19-Aug-2016 Source: Allan Blake
In an article published on 6th July 2016, “Future of H225 compounded by HUMS investigation remark”, I concluded that
“The CHC Chapter 11 process has a long way to run yet. The outcome for the offshore helicopter market will be significant as strategies for his large fleet emerge from the affected lessors; all of them are large commercial entities in their own right not unused to being innovative in times of potential adversity.”
The Chapter 11 process continues with some changes to the aircraft affected. This article updates the current position with regard to the affected fleet, focusing on the H225 as its enforced grounding continues.
To summarise so far there have been five court motions to return CHC aircraft to lessors or abandon aircraft to security holders affecting 98 helicopters. Of these applications, 65 have been approved by the court and 33 are pending a decision, including all 13 seeking to be abandoned.
The chart at the foot of this article states the position with regard to the different types of helicopter affected, showing that the H225 is being taken out of CHC’s fleet as CHC have indicated, with 38 H225s the subject of motions to reject leases or be abandoned, of which 32 have been approved. CHC have also declared that they aim to reduce their fleet size further to about 75 helicopters; I estimate this would involve a further reduction of about 59 aircraft from their fleet.
The H225 is also operated by Bristow with 27 aircraft in their fleet of which 11 are leased. The Bristow mix of heavy helicopters was always more geared towards the S92-A than CHC, comprising about 74% of their modern heavy fleet with CHC at 53%, partly attributable to the S-92A being the Bristow SAR helicopter on the UK Maritime Coastguard contract. However, that mix of heavy aircraft is now set to change dramatically for CHC. Bristow will no doubt also look closely at the opportunity to return their 11 leased H225s as the terms of individual leases expire, and will be looking closely at the other leased aircraft they have to enhance their cash position: these comprise 41 x S-92A, 11 x AW139, 9 x S76C/C++ and three small training aircraft.
Looking forward, what strategies can we expect to emerge from the leasing companies who will now collectively hold one of the largest fleet of offshore helicopters, and the largest fleet of H225s at 34 aircraft? An interesting development from one of the lessors, Sparebank, is to challenge the loss of the residual value insurance guarantees underpinning their lease agreements with CHC, seeking to pin some of their losses onto the insurers.
However, the bigger issues are:
How to put these distressed helicopters back to work. All offshore operators will be impacted commercially by the presence of such a large fleet standing idle. Lessors will not want to keep about $1 billion of assets on their books with no return. The most affected are Parilease, Milestone (part of GE Capital), Waypoint and Lombard with nine other lessors also impacted. Expect some marketing innovation which could alter the offshore helicopter market structure as the lessors are very experienced teams based within large global entities: they will see this sequence of events as a challenge to their undoubted skills. Until then the storage costs will mount up with Vector gaining some work in this area, and CHC ironically promoting their own storage facilities.
The future of the H225. By far the largest part of the $1b of distressed helicopter assets is attributed to the H225. One lessor in particular will be exerting pressure on their French colleagues at Airbus to remedy whatever the defects are to get the aircraft flying again as soon as possible – Parilease, a subsidiary of BNP Paribas, is the main lessor affected. Of the 38 H225s subject to proceedings so far, Parilease hold 22 of them, nearly as many as Bristow. As soon as the final accident report is released I would expect a very quick response from Airbus identifying the remedial action that would be taken to return the aircraft to service.
Copyright and full responsibility for the content of this article remains with Allan Blake, an independent Aviation Consultant. He was Regional Director (Asia Pacific) with the Bristow Group for seven years. The HeliHub.com editor has added the hyperlink and emboldening in the text only.