Commercial helicopters vs military helicopters: A tale of two markets

insight

by Alasdair Whyte

25 July 2013

A fleet of Bell 412 helicopters being used as air ambulances.

Recent investor calls from Textron, owner of Bell, and Sikorsky parent UTC have been positive for the commercial market.

Bell delivered 44 commercial helicopters between April and June – slightly down on last year but mainly due to customer issues. Sikorsky delivered 15 commercial helicopters in the same three months, up five on the first quarter.

One analyst asked Scott Donnelly, chairman and CEO of Textron, if the commercial helicopter market is still holding up? “It is,” he said. “There’s no change to our view. The quarter was quite strong in terms of order rate – so a lot of order activity – and there is no change in our view of what is going on in the market nor our expectations in terms of our deliveries for 2013.”

Bell is forecasting that its 2013 commercial deliveries will be significantly up on last year’s 188 helicopters (which was also up from 125 in 2011).

Sikorsky is not planning to ramp up commercial deliveries as fast, but Gregory Hayes, chief financial officer of UTC, said that Sikorsky continues to see strong international demand for commercial helicopters.

This is a very different story to Sikorsky’s bigger military helicopter business. “We continue to see pressure in the military, and particularly at Sikorsky,” said Hayes.

Sikorsky delivered 47 military helicopters in the same quarter. But new military orders were down 40% with military aftermarket sales down by 25% (commercial ones were up). The company says that the cutting of military operations in Afghanistan was responsible for much of the drop.

Despite the strength of the commercial market, the company’s total sales were down 3% with operating profit down by 25%. The manufacturer expects its 2013 profit to be down by between $100 million and $150 million (although this is partly due to higher pension and export compliance costs).

Sikorsky has cut costs and is managing a situation largely beyond its control but clearly the commercial market is going to become even more important to the company.