Estimated reading time 14 minutes, 58 seconds.
Just before Heli-Expo 2010, we spoke with several members of the helicopter industry who had high hopes that 2010 held some promise of relief from the troubled economy (see p.60, Vertical, Feb-Mar 2010). This year, when we sat down with operators in several segments of the rotorcraft industry, we were pleased to hear many of those expectations from last year were actually met – and, in some cases, exceeded.
Relief from the financial pressures of the past few years is slowly coming to our industry. However, the world is certainly a different place than it was a few years ago, with both new opportunities and new obstacles. True to form, our resilient industry is finding its way through.
Utility: Construction, Logging, Fire, Utilities
As always, several related trends continue to dictate the demand for helicopters in the overall utility sector.
Logging, for one, is down in response to a slumping construction industry. But there are signs of recovery. “Logging typically leads the way for construction,” explained Dan Sweet, spokesperson for Columbia Helicopters of Aurora, Ore. “People need the raw materials and we’re slowly seeing an increase in that area.”
As the economy improves and construction picks up again, so will demand for timber. In the meantime, work has been steady in some areas, but down in others. Phoenix Heli-Flight of Fort McMurray, Alta., for instance, stayed busy with tree planting, block layout and regeneration surveys, and Columbia continued to work with timber companies on stream restoration work – as it is a federal requirement in the U.S. to restore fish habitat on timber lands. But, Ernest-Ulrich Maas of Transwest Helicopters in Chilliwack, B.C., reported that, “The market is the worst that I have seen it. . . . Since 2008, a combination of several things has seen the heli-logging market collapse.”
Firefighting work also depended on where you were located. Tied solely to the will of Mother Nature, fire contracts and suppression were way down throughout most of the U.S. and Canada, with one major exception: Alaska. The La Nia summer left most of North America cooler and wetter with far-lower-than-average fires, but Alaska dried out and saw its firefighting needs outweigh resources.
“Our fire season up here is typically April through July,” said Brenda Barber, marketing manager for Era Helicopters Alaska in Anchorage. “This year started quickly and lasted well into August, keeping our aircraft busy. In fact, we could have had more work if we had more helicopters.” Era also picked up a new multi-year fire contract in 2010.
On the whole, operators in North America remain hopeful of a stronger fire season in 2011, but continue to diversify their operations just in case.
Operators on the utilities side, meanwhile, saw an upward trend. In the U.S., increased energy demands, hand in hand with an expected growth in electric cars, has power companies scrambling to upgrade the nation’s aging power grid. This equates to an increase in powerline and tower construction contracts. “We did a lot of construction this year, both new and replacement work, for power companies,” said Columbia’s Sweet. “We’re definitely seeing an increase in bids for electrical grid replacements that should continue for some time.”
Robert Chalifoux, president of HeliQwest Aviation near Edmonton, Alta., concurred with what Sweet said in regards to infrastructure work in the U.S. “Business [and rates have] fallen off in Canada,” said Chalifoux. So, a lot of HeliQwest’s flying has shifted to “the U.S. and Mexico, where there has been a strong demand for the vertical-reference long-line flying we do.” Through its sister company HeliQwest International in Denver, Colo., its ships have “been busy working on seismic projects and on construction work that was stimulated by the Obama administration’s infrastructure funding. We’ve been doing aerial construction, powerline construction and building cell towers.”
Oil & Gas/Mining & Exploration
With oil prices remaining strong, the oil industry continues to keep helicopters flying, and 2010 was no exception.
In the oil sands of Alberta, Phoenix Heli-Flight saw an increase in exploration and development support work. “As long as oil prices remain strong, oil companies will continue to explore,” said Phoenix president Paul Spring. “That said, natural gas is down because of the price of gas. So, support work for that area has dropped. However, 2011 looks very healthy for us up here. There are lots of new projects coming in oil and I’m pretty enthusiastic about how things are going that’s even without a wildfire component.”
The story remains similar throughout the oil sector, with work remaining strong in Alaska, the Gulf of Mexico and even abroad. Oil companies continue to explore new opportunities. And, despite the ecological tragedy of the BP oil spill in the Gulf of Mexico, that, too, proved a boost for the several operators employed to help with the clean-up.
“If we had more Chinooks, the oil industry would use them, all over the world,” remarked Sweet. “I think that will remain the case – strong oil work opportunities – in 2011.”
On the mining side, while some areas had been hit hard, others have made up the slack, especially recently as global uncertainty continues and precious metals prices rise. Bart Stevenson, president of Forest Helicopters in northern Ontario, told Vertical that, “The junior mining companies that fund a lot of the exploration have seen their shares collapse . . . and they have been hanging onto their cash . . . .” Yet, the company has seen increased work in Canada’s northern territories. “We spent the last three summers working in Nunavut, flying up to 10 hours a day with our [Eurocopter] AStars. There has been a lot of gold exploration taking place and spending is increasing.”
The charter sector has seen some interesting shifts recently, which have led to increased work for the operators that positioned themselves for the change. While fractional ownership, in many cases, has seen a significant lag in the face of corporations trying to be fiscally prudent, charter work, especially for smaller aircraft, is climbing.
John Kjekstad, director of operations and co-owner of Helicopter Flight Services in New York City, N.Y., saw a more than 50 percent jump in his charter business in 2010. He attributes the gains to his investment in marketing and appearance. “We pay particular attention to our equipment and to our pilot skill and experience,” stated Kjekstad. “When people choose to fly with us once, they stay for the quality and value. You have to have top-notch everything to succeed in charter.” Kjekstad noted that this extra attention – as well as the cost savings
he can offer with his Bell 407s and Eurocopter AS 350B3 AStar, as compared to the charter of, say, a Sikorsky S-76 – won him the extra business in the current economy.
Brian Lantier, director of strategic and business development for HeliFlite, which is also based in New York City, actually saw companies stepping back into fractional ownership and aircraft management in the later part of 2010. He foresees this trend continuing: “Having a company manage your aircraft, or even getting into a fractional ownership, can help offset your corporate costs in a way a corporate flight department can’t. The challenge is getting the attention of the right people to sell this idea. It’s slowly catching on.”
The economic turmoil and the crash of the lending market had its own special effect on the flight-training sector. While there is still strong interest from new students, funding is the primary obstacle. This not only reduces student populations, it lays the groundwork for a bigger problem.
“The biggest challenge facing us is a 50 percent decrease in domestic students paying their own way,” said Anisha Hopkinson, student services manager at Bristow Academy in Titusville, Fla. “Our deepest concern here is how a decrease in domestic students could lead to a lack of quality future flight instructors and pilots for our industry.”
Even though domestic operations are down, Bristow is seeing a significant increase in overseas students, which is making up for the loss, plus some. Bristow is one of the few helicopter flight schools approved to offer the F-1 visa, which allows foreign students to learn to fly and also work as flight instructors. Bristow also provides both U.S. Federal Aviation Administration (FAA) and Joint Aviation Authorities courses for overseas students at a significant reduction in cost over European flight training programs. With Europe also feeling the economic crunch, training in the U.S. has become increasingly attractive.
In Broomfield, Colo., Dennis Pierce, co-owner of Colorado Heli-Ops, saw strong growth in 2010. After just 15 months in business, Colorado Heli-Ops has become the fastest growing flight school in the state.
“The students are out there and they’re able to afford their training if you know how to look for them . . . .” said Pierce. “The Silver State Helicopters debacle really hurt our industry and because of that, we set our company up to be completely transparent. We also help folks get financing, but we’re very careful of who we help. We won’t let someone make an irresponsible financial decision to learn to fly.” Pierce believes this type of connected-to-the-student approach is something that could benefit other flight schools, as well. “It’s certainly paying off here. I think it has to be the future of our industry.”
In Canada, training has been down. Paul Bergeron, president of Mountain View Helicopters near Calgary, Alta., said that some schools are following the rate-cutting pressures seen in other Canadian sectors: “There are new companies that are cutting their rates by 20 percent to 30 percent, but this doesn’t help the industry. They are trying to take business from us, but they don’t have the 25 years we have in the training business.” He added, “When the economy is weak, everyone is gun-shy and are careful about spending money on education.” Of course, if one can infer the reverse, good times might indeed be on the way: “We’re starting to see a pick up in [our] flight training department.”
The helicopter tourism industry has predictably suffered due to the ongoing concerns about the economy. In Canada, that suffering has also been due to the continued strength of the Canadian dollar. But, in the U.S. some parts of the sector are starting to see relief because of the international community.
In Las Vegas and the Grand Canyon, Papillon Airways chief operating officer John Becker reported the company had a strong boost in passenger numbers. With 70 percent of Papillon’s business traditionally coming from overseas, it was the return of international travelers that fed that growth. “Compared to 2009, we were strong out of Boulder City [Colorado] and Grand Canyon West [Arizona],” reported Becker. “We had the business to be strong at the South Rim of the Grand Canyon, but weather and other uncontrollable factors that keep our aircraft on the ground factored in.” Papillon is cautiously optimistic that 2011 holds more growth and a continuing upward trend for both domestic and international customers.
In Alaska, where helicopter tours are tightly tied to cruise ship passengers, the market remained flat. “It wasn’t any better, but no worse,” said Tim Cudney, director of business development for Era Helicopters Alaska. “We moved aircraft around where we had less aircraft flying more departures, freeing up a few ships to handle our growing utility work.” While Cudney expects a bit of an increase in tours in 2011, it’s 2012 that’s forecasted to be the big turnaround year for Alaskan helicopter tours.
In Hawaii, the helicopter industry as a whole is starting to see recovery. “I would say 2009 was definitely the worst year for us all,” said David Chevalier, chief executive officer of Blue Hawaiian Helicopters in Maui, “and our industry saw a lot of loss as a result. But, in 2010 we definitely saw some recovery. As the islands see more tourism, we see more passengers. While I don’t think helicopter tours suffered as much as many other sectors of our economy here, it was still rough.” Chevalier sees 2011 as a better year for everyone on the islands, given the projected tourism numbers for Hawaii.
The sector that is possibly undergoing the most change is helicopter emergency medical services in the U.S, partly due to the economy, partly to healthcare legislation. And, together with new proposed rules for HEMS operations (see p.54, Vertical 911, Heli-Expo 2011), this is perhaps one of the most volatile sectors of our industry.
“I think the entire emergency healthcare services sector has received a lot of attention, said Aaron Todd, CEO of Air Methods Corp., “and there has been a significant elevation of investment interest in the air medical sector specifically in the wake of healthcare reform. I see this as a positive sign.”
The economy led to some interesting trends in HEMS. Many large operators have been replacing bigger, multi-engine aircraft with new, economical, single-engine ships to save money and increase reliability. Air Methods, for example, has 25 single-engine aircraft on order for 2011; they will be used to rejuvenate the fleet and fuel expansion for the company.
The big issue facing HEMS is a long-standing one: safety. In addition to the FAA’s notice of proposed rulemaking, a great deal of focus is on safety management systems (SMS). Air Methods led the way as the first HEMS operator to exit Level 1 of the FAA’s SMS program, and now the only one to exit Level 2.
In the end, however, this sector still has what many consider an over-saturation. This will continue to keep prices down, but will also continue to drive creative ways to operate better with less.
Overall, one can cautiously state that it looks like the helicopter industry, from an operator’s perspective, began to show signs of recovery in 2010, as has been predicted. However, it looks like we’ll be in a shallow climb for at least another year. Which, taken on the whole, is a lot better than the alternative.
Additional reporting was provided by
Kenneth I. Swartz.