The fundamentals driving the helicopter industry remain intact, even as tight credit and a global recession compound to put the brakes on helicopter sales. Eurocopter’s order backlog stands at more than $18 billion–including a number of large military contracts. Eurocopter CEO Dr. Lutz Bertling says business will return to a more normal level after the economy’s troubles have sorted themselves out–but he hastens to add that he has no idea how long that will take.
What has been the impact of the economic slowdown on Eurocopter?
We didn’t feel much of an impact in 2008. We saw only a limited number
of cancellations and some order postponements. We fully met our sales objectives with 715 new helicopters sold and increased our turnover by 7.5 percent, to ?4.5 billion [$5.8 billion].
We ramped up deliveries to 588 helicopters in 2008 compared with 488 in 2007. We expect a reduction in sales in 2009 since the worldwide economic situation has become quite unpredictable. We will monitor the situation closely and remain flexible to adapt to market evolutions at short notice. However, I am confident that Eurocopter is well-positioned to ride out this crisis, especially because of our strong order backlog, which now totals more than ?14 billion [$18.075 billion] or the equivalent of 1,550 helicopters.
Moreover, our business model of having a global network of subsidiaries and a strong industrial footprint in all of our key markets is paying off. Eurocopter is what we call a “multi-local player,” able to react to local customer and market requirements quickly. Not all regions are affected equally by the present crisis. We have invested heavily in emerging markets such as Asia, Eastern Europe and Latin America where either the commercial helicopter market is only just taking off, or aging fleets need to be replaced.
Do you anticipate major production cutbacks or employee reductions?
Although there is a high level of uncertainty for the months ahead, which requires flexibility, from today’s perspective we do not expect a production cutback or employee layoffs. This is due to our strong backlog, which I mentioned before.
Military programs like the Tiger and NH90, of which we have several hundred units on our order books, as well as the U.S. Army’s UH-72A Lakota program, with a total requirement amounting to over 300, are a stabilizing factor for our production facilities. Should the commercial market decline very sharply, we may cut civil helicopter production numbers in the medium term.
A place where we are ramping up instead of cutting back is support and services, notably the training sector. We are deploying simulators in all our key markets to enable our customers to train for complex missions in safety, and close to their own bases. Our customers told us they need easy access to simulators, and we have responded to this need. Flight safety is a key priority for our company, and flight training is one of the keys to achieve it, apart from safety-enhancing equipment and safety-enhancing flight regulations. We are active in all of those fields.
When do you foresee the market for helicopters stabilizing?
Firstly, the global helicopter market is not affected the same way in all countries. We have invested heavily in emerging markets such as Asia, Eastern Europe and Latin America where the commercial market is only just gathering momentum, or where aging fleets will have to be replaced sooner or later.
Secondly, this present crisis is not due to any inherent problems of the helicopter industry. Some of our customers as well as some of our key suppliers find it difficult to obtain financing for their business. It doesn’t mean that the requirement or the need for helicopter services has gone away.
The financial crisis, which has turned into a global economic crisis, is affecting all business sectors. No one knows the full scope of it yet. All we can do is find solutions to help our key customers and suppliers to get over this very difficult time.
Unfortunately, I don’t have a crystal ball to predict when the global crisis will be over so we can return to regular business.
Which sectors have been hardest hit by the sales slowdown?
Some of the tourism operators have seen a sharp decline in business. While they were buying and leasing additional helicopters one year ago, they now have helicopters idle, so we don’t expect them to keep buying at the same rate they used to. The VIP/corporate and private business is also affected. However, homeland security agencies, the oil and gas operators and also EMS services remain active since they provide essential daily services and don’t have the option not to fly, or to cut back. There may be some postponements of new purchases and the effort to keep older helicopters flying a bit longer. We haven’t seen a lot of cancellations yet.