Helicopter Leasing Remains Attractive

 - December 31, 2016, 5:08 AM

A recent analysis of the global civil helicopter market released by the IBA Group consultancy paints it as an attractive venue for more leasing activity despite continuing negative trends. The number of new helicopter deliveries dropped 11 percent in 2015, to 718 from 804 in 2014. That itself was a 21-percent drop from 2013. Heavy helicopters took the worst of it, with sales declining 49 percent year over year, while mediums dropped 25 percent and light singles declined 5 percent. Super-mediums bucked the trend, posting year-over-year gains of 31 percent, and light twins recorded a 1-percent gain. As a percentage of all 2015 deliveries, light singles constituted 62 percent, light twins 17 percent, mediums 13 percent, super-mediums 2 percent and heavies 5 percent.

North America continues to be the dominant market, representing a 41-percent share, followed by Europe and the CIS with 22 percent, Latin America with 10 percent, Asia and Australia and Oceania with 9 percent each, followed by Africa at 5 percent and the Middle East at 2 percent. Utility and offshore energy configurations account for 50 percent of all new orders, and IBA notes that although fleets in Latin America, the Middle East, Africa and Asia-Pacific are small, those markets account for a disproportionate share of new helicopter orders. The drop in energy prices is disproportionately hitting the demand for older-generation medium and heavy helicopters such as the Airbus AS332 and AS365 and the Sikorsky S-76; and in general accelerated the retirement of older helicopters, depressed the prices of new orders, and produced diminished revenue for hourly maintenance programs as flight hours have decayed. However, as Bristow has demonstrated in the UK, there are opportunities to privatize previously government-operated search-and-rescue operations as the legacy helicopters used in those operations reach their useful life limits, a market that remains promising for OGP helicopter service companies.

While helicopters have a longer useful life, depreciate more slowly than airplanes and are thus more attractive vehicles for leasing, certain models are less so. IBA's analysis shows that between 2014 and 2015 among light singles the Robinson R44 Raven II and the Airbus EC130B4 each depreciated 7 percent, the AW119/Ke 8 percent, the AS350B3/H125 9 percent, the MD600N 12 percent and the AS350 13 percent. In the light-twin category the AgustaWestland AW109S was down 7 percent, the MBB BO105 8 percent, the BK117 10 percent and the MD902 17 percent. Big drops in the medium/super-medium category included the Airbus AS365N2 and the Sikorsky S-76C+, each down 10 percent, and the Airbus AS332L/L1 Super Puma, the worst performing model tracked by the company, losing 25 percent of its value in just one year. As a class, despite declining worldwide demand, heavies did better: the Sikorsky S-92A lost 4.8 percent, the Airbus H225 was down 4.2 percent, the AS332L2 Super Puma fell 6 percent and Sikorsky S-61s were off 13 percent, no doubt a reflection of their advancing years. The last S-61 was produced in 1980.

Nevertheless IBA points out that service-life-extension programs, upgrades and hourly maintenance programs can extend the useful life of a helicopter to up to 40 years, larger helicopters depreciate more slowly, overall 10-year valuations on average are still 70 to 80 percent of list prices, and historic low production rates keep prices stable in the long-term. IBA concludes that there is plenty of room left for more leasing capacity in the helicopter market and that it remains economically attractive for investors.