HI Uplift – Milestone: ‘Much to be cheerful about but challenges ahead’

insight

by Mike Stones

17 March 2023

The helicopter leasing market will continue to benefit from robust demand for all types of helicopters but still faces significant challenges. That’s the assessment of Pat Sheedy, CEO, Milestone Aviation, ahead of our Helicopter Investor London 2023 conference next week.

“There is much to be cheerful about in the global market and we expect the trends that are driving these factors to continue and should be positive for Milestone in 2023 and beyond,” Sheedy tells Helicopter Investor. “The market environment continues to improve, which is reflected in the strong performance Milestone had in 2022.” Last year the lessor closed 150 transactions and grew its customer base to more than 50 clients in over 40 countries worldwide.

Both demand and utilisation rates continue to rise across Milestone’s fleet. Demand for the S-92 (pictured above) in particular has rebounded faster than expected and the lessor is in the process of returning the last available aircraft to service.

“In terms of maturity, the overall market appears to have absorbed much of the excess capacity through a combination of incremental demand, alternate mission deployment and retirements,” says Sheedy. He reports seeing recovery in lease rates and more sustainable lease terms coming back to the space. “However, significant engagement is needed with end-users, particularly oil and gas operators, regarding what a sustainable future looks like and what needs to happen to bring this about.”

Lessons have been learned by lessors, operators and OEMs from the “exuberant over ordering” of a decade ago, and capital deployment has been much more disciplined, says Sheedy. “We expect the consolidation that we are seeing with operators and lessors will bring about more sustainable business models and we have started to see the emergence of a trading market for on-lease rotary assets. This all point towards a more stable and sustainable future for all industry participants.”

Perhaps the biggest challenge facing the industry this year is likely to be supply chain problems, according to Milestone. MRO capacity and issues regarding parts and component availability from the OEMs are significantly impacting owners and operators, says Sheedy. This will continue for the coming months and will require focus and resources from the OEMs to resolve, he adds.

The other challenge encountered by Milestone is a lack of available aircraft to support current campaigns. With the number of available aircraft considerably down, there is no overcapacity on the operator side, nor oversupply on the OEM side. “Most available helicopters are currently with the lessors,” says Sheedy. “Therefore, end users will need to significantly increase their planning horizons to adjust for aircraft availability lead-times as there is effectively no short term (up to 12 months) lift available in the current market.”

Improved contracting terms are needed to ensure that new technology assets can be introduced in a sustainable manner, he highlights.

Looking ahead (just seven years) to 2030, Milestone expects the helicopter leasing market to continue to grow and mature. The business anticipates continuing to support multiple aircraft types across a wide variety of mission critical industries. Offshore oil and incremental offshore oil exploration will be a feature of the global energy mix for the foreseeable future, as the world seeks a proven resource to cover the necessary energy demand, says Sheedy. “We continue to see increased demand in the sector as new projects are approved and come on stream, for example, the North Sea, Australia and Latin America.”

Growth is also expected in the renewables space, particularly wind. “Wind energy operations continue to be developed and they will require helicopter support for the installation, as well as the maintenance phase of these projects,” he says. “Between 30 to 40 helicopters currently operate in the offshore wind sector, of which about 30% are owned by Milestone. The overall market is likely to grow to 130 to 140 helicopters over the next 10 years.”

And what about the much-vaunted eVTOL market? Sheedy concedes it’s a very exciting segment but does not foresee rapid progress to market. The lessor continues to closely monitor the progress of the various OEMs and potential future operators. “However, it’s still early days with much to be done before there is a proven technology approved for commercial applications,” says the CEO. ”In the short-term, we don’t believe that eVTOL is a direct competitor for Milestone’s target market (which begins at light twin) for at least the next decade.”

Meanwhile, Milestone will be joining a panel on leasing at our Helicopter Investor London 2023 conference at the Royal Garden Hotel on March 22nd and 23rd. Take a look at our action-packed agenda here and book your place at Helicopter Investor London 2023 here.