Industry enduring ‘unprecedented downturn’ according to global fleet analysis

By Oliver Johnson | October 12, 2016

Estimated reading time 5 minutes, 52 seconds.

An “unprecedented downturn” in the offshore helicopter sector has seen the global in-service offshore fleet fall by over 180 aircraft since the end of 2015, and resulted in up to 75 percent of the fleet being valued at below base level, according to figures released yesterday by Flight Ascend Consultancy.

In a seminar detailing the company’s helicopter market outlook at Helitech International 2016 in Amsterdam, the Netherlands, the company’s analysts said the current conditions — caused by low oil prices, the grounding of the Airbus Helicopters H225 and AS332 L2 Super Puma types, and fleet cuts resulting from CHC’s Chapter 11 bankruptcy protection — had hit the heavy segment particularly hard, with the number of offshore in-service heavy helicopters falling by 38 percent since the end of 2015.

“This is an unprecedented downturn,” said Chris Seymour, head of market analysis at Flight Ascend, highlighting the situation facing those operating offshore over the North Sea. “Undoubtedly there was already an overcapacity in this market prior to the groundings, as a result of the cutbacks due to the oil price. There were around 100 combined H225s/S-92s at the start of the year [performing operations in the North Sea] that’s now being met by 79 aircraft. We calculate only 59 of these are involved in multiple daily rotations, meaning there is still spare capacity.”

The excess capacity will be exacerbated by the return of an enormous number of aircraft from CHC, which is aiming to eventually reduce its fleet from 230 to 75 aircraft. According to Flight Ascend, CHC has already returned 70 of an initial group of 90, and among the rejected leases are 30 H225s (the vast majority of its H225 fleet), 19 AS332s, 16 Sikorsky S-76s, and 20 Leonardo AW139s.

Ben Chapman, Flight Ascend’s U.K. valuations manager, said the impact of the full fleet rationalization would probably not be felt by the market until 2018. “However, we are seeing indications of people looking at the expected oversupply of the aircraft in the market,” he said, with the impact being low valuations that “have not necessarily reached the bottom.”

“We’re seeing that 32 percent of the entire offshore operating H225 fleet is being handed back by CHC into the market,” Chapman continued. “The time it will take these aircraft to enter into the market will be key, and exactly how they will be absorbed is yet to be understood.”

Affecting this is the number of aircraft being kept in storage by their owners — a trend Chapman said was “a prudent option” given current market conditions. “We are [also] getting reports of a lot of them — not all of them — but a lot of them not being in serviceable condition,” he said. “So what we’re seeing is a delayed entry into the market for the amount of time it will take these aircraft to be returned to a saleable condition.”

The downturn hasn’t been limited solely to the offshore sector, however, with Flight Ascend’s figures revealing a total of 313 turbine civil and government aircraft deliveries so far in 2016, compared to 454 at the same point last year. Piston deliveries also fell from to 131 from 171 this time last year.

While all manufacturers saw their delivery numbers drop, the figures showed that Airbus Helicopters’ share of the turbine civil and government market increased to 42.8 percent, while Leonardo overtook Bell with 19.2 percent over 18.5 percent, through the emergence of the AW169 and the strength of the AW139.

By region, Europe increased its share of turbine deliveries to 35.5 percent (111 helicopters), while Asia-Pacific received 96 aircraft, representing the second largest amount at 30 percent. Flight Ascend said this was driven largely by China, which took 56 of the 96 deliveries. According to the company’s figures, deliveries in North America are set to decline, with only 70 units completed so far this year.

Orders are also down across the board, but the emergence of the market in China was highlighted as note of optimism. Since 2007, the number of aircraft in the country has grown by 495 percent (a total of 831 units), which compares to a growth rate of 22.5 percent in the rest of the world. Of the manufacturers, Robinson has largest fleet in China, with 293 aircraft (a market share of 29.3 percent); followed by Airbus with 212 (21.2 percent); and Bell third at 140 aircraft (14 percent).

“The dominant models in China have been the Robinsons — R44s and R22s — and that’s to fulfill the large training requirement in the country,” said John Maloney, Flight Ascend’s fleet research manager and OEM data relationship manager, while noting that the restrictive airspace issues in China still remain a barrier to the industry’s development.

Longer term, Flight Ascend said that with a third of the total worldwide turbine fleet now being over 30 years old, there will be a significant fleet replacement opportunity over the next 10 years. The company forecasts 9,150 deliveries over the upcoming decade, representing a value of $57 billion (at 2016 base values).

Over that time period, Flight Ascend expects North America to take 33 percent of deliveries , while Asia-Pacific will pass Europe to receive the second highest number of aircraft — as long as China’s predicted continued growth materializes.

“Yes, it’s going to be a challenging year this year — and probably a challenging year next year as well — but longer term, we’re still in a growth market, and there are new models coming in to help stimulate demand,” said Seymour.

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