What is driving today’s helicopter economy?
Sharon Desfor, President at HeliValue$, investigates the driving factors between the current commercial helicopter market.
At HeliValue$, our most-asked question of the past quarter has been: “What’s going on with the helicopter market?”
There are so many short answers to that: “Not much,” “It’s just the economy” or “Too much supply, too little demand,” accompanied by an eye-roll.
But what’s really behind the knee-jerk responses? What drives the current helicopter economy? There are lots of odd little quirks contributing to our lackadaisical resale market…
- Funding is being age-limited to newer helicopters. Fewer and fewer finance companies are offering money to acquire used machines. Some financiers have even established a flat 10-year age limit.
- Availability of capital is relatively more difficult in smaller amounts. Want to finance ten heavy twins? Just stop in, and half a dozen equipment leasing companies will compete to set you up today. Want to finance one lonely single turbine? So sorry, everyone has a $10 million lending floor.
- Funding is moving from equipment leasing to asset-based lending. The ABL guys are trying, really, but helicopters are so far out of their comfort zone they don’t even know what questions to ask. Or similarly, the entry of new financiers into the helicopter market. They don’t know what they don’t know, so every deal is fraught with unknown perils, and the banking environment is very risk-averse now.
- The G20. Dodd-Frank. Too big to fail. Basel III. Even Basel II still. Lately, if it’s in the news, it’s draining funds away from helicopter deals. Capital that is going to regularly compliance is not being put into transactions.
- Aviation authorities are scrutinizing paperwork for crossed T’s and dotted I’s. Around the globe, more and more helicopters are being left on the shelf because of part number or serial number mismatches against their Type Certificates. Not so long ago an airworthiness inspector would have delved into each of the parts individually and judged the helicopter in light of technological changes since the last TCDS revision date. Now, if the paperwork doesn’t match, it doesn’t get a CofA. Fini.
- The EC225 vertical shaft problem, of course. That’s a root cause, and the effect is the sale of new helicopters like the 332L1e, C1e, and S92.
- The breathless wait for new models. We’ve been waiting forever for the S76D, EC175, AW189, AW169 – so many new models are pending and everyone is holding back their purchase until the next new thing.
- The honestly weird production ending of the S76C++. When was the last time a manufacturer ran out of helicopters? Really?
- The business jet market is risky, so the helicopter market must be, too. Even though most of the biggest funders have never lost a penny on their helicopter deals, a fair percentage of the new finance entrants came from the corporate jet world. And they’ve lost a lot. Enough to need to try the helicopter market just for diversification, but also enough to think we helicopter people are very, very scary.
What does all this mean?
Everyone is waiting. Waiting for new helicopters, waiting for money, waiting for certification, waiting for clarification on new rules, waiting for fixes to ADs. Waiting for someone else to go first.
On the bright side, Milestone is going first. LCI is going first. Bristow and CHC and Inaer and Air Methods and AMGH and all the big operators are going first…but we’re not done waiting yet. Now we have to wait to make sure the big guys are all okay. Then maybe we can start picking up the pieces (and prices) of our market.