HI Uplift: Town Hall predicts ‘landing you can walk away from’

insight

by Mike Stones

15 July 2022

Helicopter Investor’s latest Town Hall online meeting predicted a mild-to-moderate US economic recession and “a landing that you can walk away from” plus a 10% fall in the retail sales volume of single-engine, pre-owned helicopters.

The Town Hall, hosted by Aero Asset, first explored the likelihood of a recession impacting the helicopter finance market. The focus then moved to Aero Asset’s first Single Engine Pre-owned Heli Market Trends Report.

Christopher Lee, vice president, Specialty Finance Group, 1st Source Bank told the audience: “We would say a moderate landing – a landing you could walk away from – before the end of this year.” 1st Source Bank had seen a lot of business in the first quarter (Q1), followed by a relatively quiet Q2, with business picking up in the current quarter. “The Fed [US Federal Reserve] is driving a lot of fear in the market with the rising of interest rates.”

Aircraft values had already started to decline, while the time aircraft stayed on the market before selling had started to increase, he said. This is expected to continue throughout this year, as the Fed is expected to continue raising interest rates. “But I’m not predicting any crashes.”

Deciding whether the economic landing would be hard or soft was problematic, said George Ferguson, senior aerospace/defence and airline analyst and research team leader at Bloomberg Intelligence. “We are looking for the Fed to find a way to slow the economy without pushing it into recession – and that’s really hard,” he said. One positive sign was that manufacturers were unlikely to return to 2019 production levels this year, which would help to control helicopter supply on the market.

Meanwhile, introducing Aero Asset’s first report on pre-owned single engine helicopter sales, Will Sturm, the company’s vice president of Sales, confirmed falling sales in the first half (H1) of this year compared with the same period of 2021. As retail sales volume fell by 10%, supply for sale fell by 65%. Single-engine helicopters traded in the first six months of 2022 totalled 106 units, valued at $200m.

North American buyers accounted for two thirds of all transactions in the first half of 2022. Transactions to Europe fell 50% year-over-year, but still contributed 38% of the single-engine supply available for sale. North America contributed 12% of the total supply for sale, Latin America 19% and Asia Pacific 17%.

VIP configured helicopters accounted for more than half (60%) of the single engine deals so far in 2022. The supply of helicopters configured for Emergency Medical Services (EMS) dropped to historic lows and utility-configured supply dropped 75% year-over-year.

The most liquid (quickest to sell) pre-owned units during the first half of this year were the Airbus AS350 B3/B3e/H125, followed by the Bell 407/GX/P/I and the Airbus EC130 B4/H130. All three models had only three months of supply at 2022 trade levels. The least liquid (slowest to sell) pre-owned market during the same period was the Leonardo AW119K/Ke/Kx, with an absorption rate of 10 months.

Aero Asset plans to alternate the publication of single- and twin-engine reports. The next twin-engine report will be published in September and the next single-engine report in January 2023.

The Helicopter Investor Town Hall, hosted by Aero Asset, took place on Wednesday, July 13th. You can watch the hour-long Town Hall, listen back as a podcast or read the full report.