Helicopter Investor London 2020: Day two; the industry in 2030

 

HI Day One – 25th January 2020 – Photo by Ben Hoskins

A bright picture of the new helicopter industry to emerge by 2030 – an industry that will be leaner, more diversified, safer and more profitable – was painted by speakers on the second day of Helicopter Investor’s London 2020 conference.

Delivering the keynote address, Ed Washecka, CEO RACE Aviation partners, said: “The surplus fleet will be gone – it will have been scrapped. The existing fleet will go back to work. The question is how many will be scrapped?”

The Big Five operators would be subject to further consolidation, while regionals will continue to grow. “If two or three of the regional operators get together then you have a new global operator.”

Leasing will be a mainstay of the industry in 2030. “When orders do return to manufacturers, they are more likely to be made by lessors than operators. That does make more sense. Lessors are better positioned to reposition these aircraft across a broader marketplace.”

Key challenges facing the helicopter sector over the next 10 years included the rise of drones or unmanned helicopters to replace pilot-operated helicopters on some missions. (At least one US operator is already trialling unmanned helicopters in hazardous night-time fire-fighting missions, according to Mark Clancy, President and CEO of HelicopterBuyer).

Falling oil and gas production

Falling oil and gas production, exacerbated by rapidly improving rig technology, would also reduce the fleet needed to service the sector, said Washecka. “Automation is already reducing the number of people who need to be offshore, which also reduces the number of aircraft to transport them.”

The number of helicopters serving offshore oil and gas would also be impacted by the reduction in fossil fuel demand and regulatory requirements.

“All that’s potentially negative,” acknowledged Washecka. “But provided the supply of aircraft gets reduced at the same time, the industry should still be able to make money even if there are fewer aircraft in it.”

In addition to the elimination of oversupply, the global helicopter market would be boosted by the growth of developing markets – for roles such as EMS (Emergency Medical Services) – new segments and governments continuing to outsource to private companies.

A range of speakers predicted big opportunities for EMS fleet in developing countries, as populations grow more affluent, to match those currently offered in Europe and North America. Several speakers highlighted the growing demand for helicopters to service offshore wind turbines. “I remember people were not looking at wind for offshore helicopter in 2010. It’s a meaningful segment of the market today. And 10 years from now I expect it to be an even more significant business,” said Washecka.

He also predicted that government outsourcing to private companies might create more opportunities for helicopter sales. For evidence he pointed to Bristow, which won a Search and Rescue (SAR) contract from the UK government.

‘Willing to aim for utilisation over profit’

But a key question remained: Would operators insist on earning sustainable returns? “Operators still seem willing to aim for utilisation over profit,” said Washecka. “That is something that absolutely needs to change. If the Bristow Era merger brings cost savings of $35m or more and Bristow Era decide to give that money to Shell or Chevron, it’s not accomplishing anything.” Also contract structures needed to change to eliminate short term cancellation provisions, which adversely affected operators.

Crispin Maunder, executive chairman of LCI, said: “End users – particularly the oil and gas companies – needed to come to the party and be part of the solution in more ways that just getting rid of early termination clauses.”

Washecka replied: “The struggle today is a certain amount of people [helicopter operators] trying not to follow Bristow CHC and PHI into bankruptcy by saying: ‘Let’s keep this stuff [fleet] working at all costs’ and it’s fed on by others in the industry.”

‘Zero tolerance for fatal accidents’

The helicopter industry of 2030 would not only be leaner, more diversified and more profitable, it would also be safer. Tony Cramp, chairman of the International Association of Oil and Gas Producers (IOGP), updated delegates on new guidelines designed to improve the safety record of helicopters serving offshore oil and gas installations. “The target [for accidents] is effectively zero,” said Cramp, who is also vice president aircraft, Shell Aircraft. “There is effectively zero tolerance for any fatal accidents across the industry. That’s not just in aviation – they are also in the other transportation areas and process safety.”

The guidelines set out a certification level for helicopters operating in oil and gas, according to IOGPs. “That effectively takes out 412s, 76s below the D, AS365s as a class of aircraft we don’t want to be flying offshore in oil and gas. We have also defined normal operations as being undertaken by twin engines, twin pilots and IFR [Instrument Flight Rules] aircraft.”

Clark McGinn, principle Uplifting Advice, closed the conference on a pointedly positive note. “We are past the worst [of the downturn in the helicopter market], said McGinn. But he added a caveat: “There is still pain to be taken by some. Two or three of the big lessors lag the operators in terms of taking pain. A couple of the big guys need to settle down and face reality.”

Helicopter Investor’s London 2020 was staged at the Royal Garden Hotel in central London on February 25th and 26th. Meanwhile, read the highlights of the first day here.

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