More than 100 times a day, helicopters painted red, silver, black and white cross the beach on their way to offshore platforms in the Gulf of Mexico, Alaskas Cook Inlet and a dozen other locations around the globe.

These helicopters belong to the Era Group Inc., the oldest commercial helicopter operator in the United States and the third-largest U.S. operator flying offshore in the Gulf of Mexico. Soon, a new chapter will begin in the 64-year history of the Era Group when parent company Seacor Holdings Inc. spins off its quarter-billion-dollar helicopter business as an independent, standalone, publicly traded aviation company.

We are excited about the tremendous potential opportunities that this spin-off will enable us to pursue, wrote Sten Gustafson, chief executive officer of Era Group Inc., in an October newsletter to employees. This is truly the next great step in Eras long and storied history.

For the Era Groups 874 employees (including 287 pilots and 244 mechanics as of June 30), the biggest change will the company flying solo again after more than 40 years under the wings of much larger offshore drilling and marine service companies (Era was first acquired by Rowan Companies in 1967, before being purchased by Seacor in late 2004).

Era Group executives are not doing media interviews on the spin-off at this time. However, the companys Securities and Exchange Commission (SEC ) filings provide many insights into Eras helicopter business, and into why Seacor decided to pursue the spin-off route.

For Seacor, one of the benefits of the spin-off will be a reduction in the internal competition for capital from its different businesses (Seacor has historically funded certain of Eras operating and capital expenditures, including new helicopters). For Era, the spin-off will allow the company to offer its common stock to facilitate new partnerships, mergers and acquisitions.

We have found that potential targets in our industry are often more interested in receiving stock of a company, the value of which is tied directly to the helicopter services business rather than stock of a more diversified company, says the Era Preliminary Information Statement filed with the Securities and Exchange Commission on Oct. 12. In addition, the Seacor board of directors believes that following the spin-off, the aggregate value of (the Era Group) common stock and Seacors common stock should, over time and assuming the same market conditions, exceed the pre-spin-off value of Seacors common stock.

The spinoff will see all of Seacors common and preferred capital stock in the Era Group recapitalized as Era Group common shares, which will then be distributed to Seacor shareholders on a one-for-one proportional basis.

Seacor had 20.8 million shares outstanding as of mid-2012, with the largest single shareholders including five large U.S. investment firms (with 32.45 percent of its shares) and Seacor founder Charles Fabrikant (4.78 percent).

Once the share distribution is complete, Era Group shares will start trading on the New York Stock Exchange under the ERA ticker symbol. At this point Seacor will no longer own any capital stock in Era. The future value of the Era shares will ultimately be determined by its earnings and market conditions.

These developments have come with some management changes, too. Gustafson was appointed Eras CEO on April 1, 2012, and Chris Bradshaw was appointed executive vice president and chief financial officer on Oct. 22. Both executives have strong backgrounds in financial services and the energy sector and will be based at the Era Groups new headquarters in Houston, Texas.

Other members of Eras new senior management team appointed in October include Anna Goss, senior vice president finance and chief accounting officer; Stuart Stavley, senior vice president fleet management; Robert Reguero, senior vice president international; and Paul White, senior vice president domestic.

In fiscal 2011, Seacor had consolidated revenues of $2.1 billion US , which included revenues of $258.1 million earned by its Aviation Services (Era Group) unit. In the first nine months of 2012, the Era Group had revenues of $202 million and operating income of $22.3 million, with 80 percent of revenues coming from U.S. operations and 20 percent from international operations. As of June 30, 2012, Era had $294.5 million of outstanding indebtedness, which has since been reduced.

Eras year-to-date 2012 (third quarter) results give an indication of the relative importance of its various business units. Leading the way was offshore flying in the Gulf of Mexico, which generated 56 percent of revenues. This was followed by utility helicopter operations in Alaska (nine percent), air medical services (eight percent), sightseeing flights in Alaska (three percent) and FBO operations at Anchorage International Airport (four percent).

Era has seen steady growth under Seacors watch, with much of this coming through mergers and acquisitions. When Seacor acquired Era Aviation Inc. and its 80 helicopters in December 2004, it merged the company with Ed Behnes Tex-Air Helicopters and its 36-helicopter fleet, which it had acquired in December 2002. The resulting company was rebranded as Era Helicopters LLC and its head office moved to Lake Charles, La.

Further growth occurred in January 2007 when Era bought the air medical business of Keystone Helicopters, which operated 36 helicopters (five owned, 10 leased and 34 managed). Between that and organic growth, Eras fleet grew from owning and/or operating 127 helicopters in early 2005 to 184 helicopters by Sept. 30, 2012.

But there is more to the story behind these numbers. Between 2005 and mid-2012, Era added 117 helicopters, disposed of 80 helicopters and reduced the average age of the helicopters it owned from 17 years to 12 years. In fact, Era now has one of the youngest offshore helicopter fleets in the world, with 34 percent of the fleet five years old or less as of mid-2012. Since 2005, Seacor invested $1,024.2 million in property and equipment (at Era), of which $827.1 million was invested in new helicopters, according to its filings with the SEC.

The current Era fleet includes include 59 light helicopters (35 Eurocopter AS350B and 24 AgustaWestland AW119 models), 45 light twins (nine Agusta A109, two MBB Bo.105, nine MBB BK 117, 19 Eurocopter EC135 and six Eurocopter EC145 models), and 70 mediums (32 AgustaWestland AW139, 13 Bell 212, six Bell 412, 10 Sikorsky S-76A++ and nine S-76C++ models). Era is also the only offshore operator of the Eurocopter EC225 heavy helicopters in the Gulf of Mexico, with 10 of the aircraft in its fleet, but these were recently grounded following the precautionary landing of an EC225 operated by CHC Helicopters in the North Sea. Commenting on the grounding in a written statement, Era said it would continue the suspension of EC225 operations while carefully reviewing the situation and awaiting a response from Eurocopter.”

Looking ahead, Era has commitments to purchase five eight- to 10-seat AgustaWestland AW169 helicopters and five 16- to 18-seat AW189 medium helicopters. Era also has outstanding options to purchase up to an additional five AW139 medium helicopters and five AW189 medium helicopters. 

Promising Offshore Prospects 

The Era spin-off coincides with a rebound in drilling in the Gulf of Mexico. In early November, there were 45 deepwater rigs active in the Gulf of Mexico which is more than the rig count on April 20, 2010, when the Deepwater Horizon exploded and sank while drilling BP s Macondo Prospect, triggering the worst offshore oil spill in U.S. history.

For the first nine months of 2012, Era reported that operating revenues in the U.S. Gulf of Mexico were $24.1 million higher than the prior nine months primarily due to newly delivered medium and heavy helicopters being placed on contract, an expansion of government services support and an increase in charter flights primarily in support of hurricane evacuations and additional drilling activity. 

Key offshore customers include major oil and gas companies such as Anadarko Petroleum Corporation, ExxonMobil Corporation and Shell Pipeline Company. In the Gulf, Era also renewed its contract through 2016 with the Bureau of Safety and Environmental Enforcement (BSEE , generally pronounced Bessie). This contract sees 20 helicopters flying inspectors to offshore drilling rigs, with the option to add eight more helicopters. 

Also in the Gulf of Mexico, Era has been developing a subscription-based search-and-rescue/helicopter emergency medical services (SAR/HEMS ) operation for the offshore industry that currently employees four HEMS -configured AW139s. 

Meanwhile, Era has been continuously flying in Alaska, its birthplace, since 1949 when Carl Brady started his own company with a Bell 47 after working for other operators (see p.108, Vertical, Dec09-Jan10). Today, it has six bases in Alaska, with its Nikiski base on the Kenai Peninsula supporting many of the 14 active platforms in Cook Inlet; its Deadhorse base supporting near-shore wells in the Beaufort Sea; and these and other bases supporting northern mining, forestry, sightseeing and onshore oil and gas activity. 

Era has seen significant activity in its other business sectors, too, including its air medical services under the EraMED LLC name, which are primarily based in the northeastern United States and Florida. Operating revenues from air medical services increased by $3.6 million in the first nine months of 2012, primarily due to $1.1 million of additional revenues generated from a new hospital contract and a $2.7 million increase in activity in support of an existing patient-pay customer.

Over the past several years, the company has also sought to diversify its business by expanding internationally and establishing several joint ventures and partnering arrangements. As of mid-2012, Era had 49 helicopters operating outside the U.S., compared with 15 helicopters at the end of 2006.

A focus on helicopter leasing has allowed Era to expand its geographic footprint into emerging deepwater drilling plays off the coasts of Australia, India, Southeast Asia, West Africa and South America in particular Brazil, which has been described as the new North Sea for the offshore energy and helicopter industry.

In July 2011, Era acquired a 50 percent economic interest and a 20 percent voting interest in Aerleo of Brazil. As of June 30, 2012, Era had three EC225s and four AW139s contract-leased to Aerleo which were assigned to multi-year contracts support rigs operated by Petrobras and OGX Petroleo e Gas Participacoes.

In Spain, Era holds a 51 percent interest in Lake Palma, S.L., a joint venture that leases six helicopters to FAASA Aviacioa, S.A., a firefighting operator. Elsewhere in Europe, Era has been leasing helicopters to four operators located in Sweden, Norway, Denmark and the United Kingdom. And while leasing contracts in Argentina, Thailand and Trinidad recently expired, Era has other helicopters on lease to other operators in Canada, India, Indonesia, Mexico, Sweden and Venezuela.

Eras other aviation business interests include an FBO at Ted Stevens Anchorage International Airport and a 50 percent interest in Era Training Center, a joint venture based in Lake Charles, La. Era also holds a 50 percent interest in Dart Holding Company Ltd., a sales and manufacturing organization based in Canada that engineers and manufactures after-market helicopter parts and accessories and distributes parts and accessories on behalf of other manufacturers.

Overall, with its pioneering rotary-wing roots on the Alaska frontier, its ultra-modern fleet of helicopters and its many international partners, the Era Group seems well positioned to capture a growing share of offshore, utility and air medical business in the U.S. and overseas in its new role as a nimble stand-alone company.