Record year for Era, but getting tougher


New CFO arriving at Era

Era Group had a record year in 2014 with adjusted earnings of $84.7 million against adjusted earnings of $77 million in 2013.

But despite the good year, things were tougher in the fourth quarter. Fourth quarter revenues were $74.7 million versus $76 million in the last three months of 2013.

Era is seeing less demand for medium helicopters. It won some new contracts in the Gulf of Mexico and Petrobras in Brazil but these will not start until later this year or early 2016. Era is also placing helicopters with Petrobras on its 2013 seven helicopter contract (three are already operating, with the last starting in June).

Era is planning to take delivery of four new AW139s and its first new S92 heavy helicopters this year. All of these are expected to be based in the Gulf of Mexico. When these helicopters are delivered Era will be operating 67% more heavy helicopters than now.

In total Era has 10 AW189 helicopters due to be delivered between now and 2017 (plus one option). Four S92 helicopters coming in 2015 and 2016 (with an option on five more). It has five AW169 helicopters on order (and one option) but has not firmed up delivery dates.

Era’s actual earnings for the full year 2014 were $85.9 million versus $93.1 million in 2013 – the biggest difference being that Era sold less helicopters last year. In 2014 it sold helicopters for $7.1 million, making $6.1 million. In 2012 it made a gain of $18.3 million after selling helicopters worth $65.2 million. It is planning to keep selling helicopters.

“There has been a lot of new capital which has entered this space over the last four years which has driven down leasing rates”

We talk a lot about new leasing companies, but Era has been active in the market for years. Bradshaw says that new leasing companies are making it much harder for them to compete. “There has been a lot of new capital which has entered this space over the last four years which has driven down leasing rates,” said Bradshaw on an analyst call (transcript via Seeking Alpha here) this week.

“It’s gone through a point that if it’s just about financing the asset, we are really are not going to be competitive with the peer financial leasing companies,” said Bradshaw. “They have levered these assets 80% loan to value and are targeting returns that are different than the way that we approach return thresholds.”

Bradshaw says that do have a big advantage when operators are taking new types and need help training mechanics and pilots or need temporary flight crews.