HI Uplift: Super-mediums on the rise (and rise) in $55bn civil heli market

Super-medium helicopters continue to “gain traction” in a civil commercial helicopter market valued at about $55bn, according to aviation market intelligence and consultancy company, IBA. But they are unlikely to replace all heavy helicopters.

“The rise in popularity of super-medium helicopters is driven by their unique combination of capabilities,” Rami Abdel Aziz, manager – Helicopter Valuations and Advisory, at IBA tells Helicopter Investor. “Super-mediums offer improved range, payload capacity and cost-effectiveness compared with medium helicopters, while still providing certain advantages over heavy helicopters.”

Initiated in 2013-14, with the introduction of the Airbus Helicopters H175 and the AgustaWestland AW189, super-mediums (classified as having a maximum take off weight (MTOW) of between 7-9t) are well-suited for various missions. Aziz singles out the main markets being search-and-rescue (SAR), utility work and offshore operations. Powered by their more compelling operating economics compared with heavies, IBA estimates that up to 10 aircraft of this size will be delivered this year.

But while their sun is undoubtedly rising, it is unlikely ever to eclipse totally the heavies. “While super-mediums are gaining traction in the market, it is unlikely that they will completely replace heavy helicopters,” confirms Aziz. “Heavy helicopters will continue to serve specific purposes far into the future that require their larger size and lifting capacity.”

So, super-mediums will continue to face stiff competition from both heavies and medium helicopters depending on the mission.

The heavy helicopter segment (classed as having a MTOW of +9t), and dominated by the Airbus H225 and Sikorsky S-92 ranges, has experienced very low delivery rates since 2016. But IBA reports a revival in the pre-owned market fuelled by higher oil prices and the recent uptick in offshore activity for both the oil and gas sector and wind power. “Delivery rates for heavy helicopters are likely to remain very modest, with IBA estimating up to four aircraft this year,” says Aziz.

By contrast, deliveries of medium helicopters (classed as a MTOW of 4-7t) are predicted to reach up to 75 aircraft this year compared with about 55 last year. The most popular helicopters delivered in this sector in the last five years were the Leonardo AW139 and AW169, the Bell 412 and the Airbus H155. The combined fleet reached about 3,800 helicopters by mid-2023 and were deployed on a range of missions including emergency medical services (EMS), SAR and offshore operations.

The biggest commercial market segment remains light helicopters (classed as a MTOW of 2-4t), with IBA estimating up to 360 aircraft to be delivered this year. Dominating the sector and flying EMS, utility and short-range transport missions, are Airbus H125s and H145s and Bell 407s. Annual deliveries over the past five years have averaged 350 aircraft.

Overall, the global fleet is estimated at more than 22,000 Western-built turbine helicopters, valued at about $55bn. IBA forecasts “robust recovery” in the sector over the coming years, with deliveries recovering to between 475 to 525 airframes this year after dipping to fewer than 500 last year reflecting supply chain challenges.

So, does that mean good news for the global helicopter supply chain? Partly, according to Aziz. Continuing efforts to resolve challenges have resulted in supply chain easing in the helicopter industry. “Industries worldwide have been hit with these issues, however, these supply chain problems are gradually being resolved, although some challenges will likely persist into 2024,” he tells us. “Helicopter manufacturers have been actively working to mitigate the impact of disruptions by diversifying supplier bases, directly supporting suppliers through capital injections, optimising production processes, and improving inventory management have been implemented.”

And rising interest rates – how will they impact the helicopter sector? There’s no doubt, inflation is continuing to drive increases in the price of new helicopters alongside rising lease rates for these assets due to the higher costs of financing and debt arising from increased interest rates, says Aziz. “The impact on secondary market values and lease rates are also exhibiting an upward trajectory, as new helicopter deliveries remain below historical trends and secondary market supply is being absorbed.”

Lease rates have recovered significantly, but with the same size category trends, according to IBA. Light helicopter lease rates are now at 112% of 2019 levels, with medium and super-mediums both at 110% and with further growth forecast for this year and next. “Much like the value outlook, the near-term future of heavy helicopter lease rates remains uncertain and will be heavily influenced by movements in oil price. Should oil remain at current levels or increase, the outlook for heavy helicopter lease rates will remain positive.”

Back to interest rates, IBA expects them to stabilise and then decline gradually, but, they are likely to settle at a higher baseline compared with previous years. “Therefore, both financing and leasing costs are likely to remain higher for the medium-term,” says Aziz. “Secondary market lease rates are largely driven by market availability and therefore if supply remains tight, lease rates may remain elevated even when interest rates fall.” (Pictured is a super-medium AW189).

Meanwhile, you can watch IBA’s recent webinar probing the performance of the global helicopter market here. And if you enjoyed reading this Helicopter Investor Uplift newsletter, please share this link with colleagues.