Helicopter Investor Newsletter: Searching for silver linings
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Talk of recovery in the helicopter market is nothing new. There have long been predictions of a brighter outlook; helped potentially by new helicopter sales to service offshore wind farms or the impending rise of urban air mobility. But both remain niche markets, which are unlikely to significantly boost market sentiment any time soon.
So, a recent market update from aviation consultancy IBA Group, predicting a slow but steady increase in offshore oil and gas contracts and helicopter deliveries is welcome news.
It’s not before time. The past 12 months have seen the culmination of years of oversupply, growing debt and volatile oil prices result in several prominent helicopter companies entering Chapter 11 protection. Those include: Waypoint Leasing, PHI, Bristow and Great Slave Helicopters.
As a result, lenders are more cautious about financing helicopter transactions. Out of the 26 banks that have lent to Waypoint Leasing – many of which were secured lenders – only a few are willing to continue lending to the market, according to the update.
However, it is not all doom and gloom, Caixa Bank entered the market last year financing an LCI Helicopter transaction as well as Thora Capital. If you are wondering why a new lender would decide to enter the helicopter market now, you can read at our interview with CEO of Thora Capital Matthew Rothschild here.
Looking at fleets, many offshore large helicopter models, such as the Sikorsky S92 and the Airbus H225, are struggling to find homes, with a few units being shifted to operators in regions such as South East Asia.
The medium-sized class is still the most liquid market and remains popular with financiers. This is also the case in the resale market, with the medium twin market still accounting of 30% of all transactions YTD, according to data from Aero Asset.
The AW139, AW169, H130, H135, H145, H175 and the Bell 407 are among the most popular models in demand. The market update also predicts a slow uptake in deliveries over the next four years.
What about Urban Air Mobility?
This week, market analysis from NEXA and the Vertical Flight Society (VFS) claimed that helicopter operators will be early adopters and beneficiaries of eVTOL aircraft. If this new class of aircraft can prove itself in urban air transport, cargo and small utility operations, eVTOLs could very well replace light helicopters on these missions.
The selling point of eVTOLs are the substantially lower operating costs, lower noise levels, and lower price point when compared with other light aircraft and helicopters. We have already seen the Dubai Police trial a VTOL ‘hoverbike’ for quick city-wide transport – perhaps these aircraft could find homes in other missions.
While this would obviously have a negative impact on helicopters as an asset, it would allow operators to run the same job at a lower price.