HI Uplift: CHC Helicopter learns lessons from the past

An S-92 CHC Helicopter deployed on an SAR misson over Norway.

Has CHC Helicopter’s business returned to pre-Covid levels? Not bad for an opening question, I thought. But Kevin Spengler, the firm’s senior vice president, Helicopter Services, wasn’t so sure. With his engineer’s precision, he reframed the question from a different perspective. His answer reveals a helicopter business and an industry facing great opportunity but also significant challenges.

“The better reference point is the pre-market crash of 2014,” he tells us. “Demand is probably more akin to that.” Oil prices have recovered – although not to 2013/2014 levels but there is a lot more exploration happening.

“There’s a lot more investment from oil and gas companies and that’s driving increasing demand,” he says. “But right now, supply is a big constraint.” He traces its origins to a period of prolonged low demand during after the 2014 crash, followed by the Covid slow down and rising demand for military helicopters in an age of war and rising global tensions.

The results, in some markets and in some geographies, are higher rates and longer contract terms, according to CHC. “It was an over-supplied from 2014/2015 that created certain contracts and behaviours,” explains Spengler. “But now, it’s an under-supplied market, which drives shifts in contracting behaviour and is generating improving prices and improving terms.”

‘That’s a hard question’

So, will he like my next question more than the first? Do you think the helicopter industry has learnt the lessons of the past? There’s a pause while he considers. “That’s a hard question. The honest answer: it depends.” He believes collective lessons have been learned. For him those lessons centre around acting sustainably for the long-term health of the business and forging long-term relationships with customers.

“What we are trying to achieve is long-term value from our partnership with our customers, so that our operation hums and runs,” he says. Certainly, the Texas-headquartered operator is not interested in entering contracts that do not guarantee the sustainability of the business.

But, on an industry level, Spengler believes it’s too early to fully answer that question. “The proof of understanding, remembering and institutionalising the past is that we never repeat its mistakes,” he says. “I don’t think we are at that point yet. Ask me in another five to 10 years.”

His answers are lent weight by the breadth of his oversight. As senior vice president for CHC’s Helicopter Services, he is ultimately responsible for the company’s 100-plus helicopter fleet operating across six different geographies. In addition to oil and gas offshore crew transfers, sectors served also include emergency medical service (EMS) and search and rescue (SAR).  CHC also operates Heli-One, its helicopter maintenance and repair organisation (MRO).

Spanning mediums, super-mediums and heavies, the operator’s exclusively twin-engine fleet includes Leonardo AW139s, AW189s, Airbus Helicopters H175s, 332s and Sikorsky S-92s. Its fleet also includes Bell 412s tasked with EMS missions in Australia.

“The super-mediums are giving a lot of pull in the market and we’ve offered them in our portfolio for years,” says Spengler. “They have their place – and a lot of that is backfilling what is perceived to be in the market the gradual decline of heavies.” But Spengler believes there’s still a lot of life left in the S-92 workhorse. “In some geographies, we see a very long life for the S-92. From its history, capability, performance and economics on a cost-per-seat basis, there’s a lot of value that still plays in the S-92.”

Opportunities for growth lie in all markets, says the operator. But one market stands out. “There’s a huge open tender with Petrobras in Brazil,” he says. Growth is not limited to the partly state-owned oil company, following the capital that is being in the country.

‘They need more volume’

 “They [oil companies] are realising that if they need more volume of aircraft, they need to work to make that attractive to supply the aircraft they need to support their operations offshore.”

From opportunities to challenges. While CHC thinks supply chain problems have stabilised, but progress needs to be made. “There’s still recovery that needs to happen to get back to what we would consider a more normal state of affairs,” says Spengler. “OEMs are working really hard to address any issues they’ve got and to ensure adequate supply of parts to the market, but there’s still some recovery to go.” (Windshields, other glass components, inflators for life rafts and dynamic parts remain hard-to-get items).

CHC is mitigating the challenges by partnering with its MRO Heli-One. Over the past three years the company has bought eight S-92s that were in storage. “We have made them serviceable and we have harvested parts for our operating fleet – all at our cost.”

Another challenge is the shortage of pilots and engineers, which is facing the whole industry, according to the company. CHC is acting to widen its pipeline by forging partnerships with training schools and launching apprenticeship programmes. While the shortage of pilots and engineers dominate conversations, Spengler is also focusing on airworthiness engineers. “It’s not just people turning the wrenches, it’s people managing airworthiness,” he says. “In some geographies, like Norway, we are working through these issues.”

‘The largest demand increase’

Finally, the conversation turns to MRO and CHC’s involvement in the sector through Heli-One. While the business works with both corporate and private helicopters, government and military contracts account for the bulk of the business. “If you go to an MRO shop, you’ll see different helicopters in different bays. Some will be wearing camo and some will be dressed up as VIP aircraft. We do work across numerous sectors, but the largest demand increase has been coming from the government and military space.”

For example, the company has operated a facility in Poland for many years offering heavy base maintenance inspections and activities. But for the past year, the facility has been at or beyond full capacity. And there’s no sign of that changing any time soon.

Meanwhile, note to self for July 2034. The next time I ask Kevin Spengler if the industry has truly learnt the lessons of the past, try to ask a classier openning question.

CHC Helicopter’s Kevin Spengler.

HI Uplift Dashboard: Helicopters for sale

Multi engine

• Total for sale/lease: 309 – nine fewer than last week
• Percentage for sale/lease: 4.18
• Absorption rate: 5.55
• Total fleet: 7,388 – nine more than last week.

Single engine

• Total for sale/lease: 405 – the same as last week
• Percentage for sale/lease: 3.53
• Absorption rate: 4.0
• Total fleet: 11,479 – the same as last week.

Source: Amstat, August 1st, 2024.