China puts helicopter market on cutting edge of recovery

 - March 31, 2011, 6:40 AM

Industry analysts have been declaring China the “next big market” every year since the discussion came around to business aviation in China. Now, as an economic recovery appears to have begun, it seems China is finally fulfilling its promise, and based on activity at Heli-Expo 2011 in March, the helicopter industry is poised to take advantage of demand.

Bell Helicopter has sold 20 helicopters into China since it entered the market in 1984 but anticipates sales over the next several years will rise to 10 or 15 helicopters annually worth around $97 million. Just last fall, working through Heliflite China, Bell sold its first 429 in the country to industrialist Ren Jianjun.

At Heli-Expo, Eurocopter noted that the geographical allocation of business in 2010 saw a significant reshuffle, with Asia taking the number-one slot by pushing revenue to the $1 billion mark. And while there are currently some 200 civil helicopters in service over the 3.696 million square miles of China, Eurocopter CEO Lutz Bertling sees sufficient potential that the manufacturer is considering establishing a final assembly plant there.

Earlier this year, AgustaWestland of Milan took an order from the Public Security Bureau of China’s Zhejiang province for two helicopters. An AW119Ke light single will be used in law enforcement, fire fighting, offshore oil exploration and as a government passenger transport. The twin-engine AW139 will be equipped with an integrated avionics system for management of sensors, and will carry a comprehensive communications suite.

At Heli-Expo 2011, Enstrom announced a purchase agreement to sell a 480B to Wuhan Helicopters. Meant for multiple missions, the single-engine turbine will be fitted with spraying equipment, as well as Safe Flight’s powerline detection system. According to Enstrom director of sales and marketing Tracy Biegler, efforts are already well under way to have the 480B certified in China.

The new 480B, said Biegler, will allow Wuhan to take advantage of the Chinese government’s opening of the airspace.

Until 2003, private individuals and companies in The People’s Republic of China could not own an airplane, government regulations seemed bent on inhibiting business aviation rather than supporting it, taxes were prohibitive and airport access was stifling.

Today, ownership by private individuals and companies has become almost commonplace, if not quite widespread. Rules on flight clearance have been relaxed, and wait-times have gone from days to hours, a $4,400 flight-plan fee has been eliminated, and it is expected that a 17-percent value-added tax and an import duty on corporate jets could be reduced early next year.

Particularly encouraging is a decision by Chinese aviation authorities to conduct trials that, if successful, would allow private helicopter flights in low-altitude airspace. The trials, using four helicopters, began in January over the southern island of Hainan. 

China alone represents a great opportunity, said Turbomeca chairman and CEO Pierre Fabre, who pointed out that while the civil helicopter fleet in China is less than 10 percent than in the U.S., the population is five times greater. “Every time we go to China, people talk about the opening of the sky [and] they are starting to work on it seriously.”

Collectively, the world’s manufacturers make about 1,500 helicopters a year, said Fabre, and he added that demand from China could double that number.

Some 400 Turbomeca engines are currently in service in China, and the expectation is that another 100 engines will be delivered this year. While not a huge number, he concluded, “It’s a beginning.”

Erickson Air-Crane, exhibiting at Heli-Expo 2011, has signed an agreement with a consortium of government-owned Chinese aviation companies for up to five S-64F air cranes. Deliveries would begin in the first quarter of next year and initially consist of remanufactured helicopters. These would be rotated out and replaced with new-production helicopters.

Also at Heli-Expo 2011, Hillsboro Aviation continued to expand its presence in China. The company currently has more than 100 Chinese fixed-wing and helicopter student pilots training at its Hillsboro, Ore. facility. It is the only school in the U.S. approved by the Civil Aviation Administration of China for both fixed-wing and helicopter training. And to keep up with demand, Hillsboro plans to expand its physical plant to accommodate the demand from China and other countries.

In China, the Guangzhou Suilan helicopter pilot school has its six trainers full booked on any given day and is turning down applicants for lack of capacity.

Home-grown Helicopters Planned

As early as 2000, executives who ran China’s state-owned aviation companies predicted the country’s emergence as one of the foremost helicopter manufacturers by 2030. The statement reflects the long-term Chinese goal of producing its own helicopters for both domestic and international markets.

In the near term, China expects its in-service fleet to grow from slightly more than 200 aircraft today to as many as 2,000 civil helicopters by 2013, and 10,000 by 2020.

But this is long-term, and for the time being, and some time to come, China will continue to represent a major market for helicopters made in the west.

If China does acquire as many as 10,000 helicopters by 2020, as China National Aero-Technology Import and Export Company expects, it should come as no surprise. Individual and privately held wealth is continuing to grow in China and with its $5 trillion annual economy, it is already second only to the U.S.

To date, state-owned Chinese companies have established joint ventures with AgustaWestland, Bell, Eurocopter and Sikorsky for the manufacture and assembly of legacy aircraft in China, including the AW109 and S-76.

And in the meantime, China continues to invest heavily in a home-grown helicopter industry. Most recently, Avic’s first indigenous heavy-lift helicopter made its debut in 2010. Certification of the 27,600-pound AC313 is expected in 2012.

If its domestic helicopter effort has a weakness, the U.S.-China Economic and Security Review Commission believes it is the failure to successfully develop and produce a turboshaft engine. “Until China’s turbine engine industry becomes more mature, the country is unlikely to develop a truly indigenous helicopter for global consumption,” the commission concluded.

Looking forward to a recovering economy, analyst Brian Foley of Brian Foley Associates believes that the helicopter industry is entering a period in which civil helicopters will take a greater market share than military helicopters, spurred by rising profits and offshore oil and executive transportation segments.

He adds that the large and fast-growing economy of China, with its lack of airport infrastructure and likelihood of huge construction projects, is “ripe for rotorcraft.”

Aviation consultant Frost & Sullivan expects that the total helicopter fleet in China will rise to approximately 450 by 2015, making China the fastest-growing helicopter market in the world, well ahead of India and Russia. o