The founder of NetJets placed one of the largest-ever orders for commercial helicopters, as the industry rebounds thanks to work from the oil and gas industry and the privatization of coastguard services.
By Doug Cameron
The founder of NetJets has placed one of the largest-ever orders for commercial helicopters, as the industry rebounds, thanks to work from the oil and gas industry and the privatization of coastguard services by governments overseas.
Milestone Aviation Group Ltd.— a company started by Richard Santulli two years ago after leaving NetJets, a corporate jet specialist he sold to Berkshire Hathaway Inc. in 1998—has ordered 19 more Sikorsky helicopters, adding to an existing order for three. The 22 have a total list price of $682 million including options. Milestone plans to lease the aircraft to big offshore operators such as Houston-based Bristow Group Inc., which fly workers and supplies to and from oil platforms in the North Sea, Gulf of Mexico and off the coasts of Brazil and West Africa.
Orders from Milestone and LCI Aviation, a London-based leasing company, have helped the commercial helicopter sector recover from the severe slump that started in 2008 as oil exploration slackened.
The big four global manufacturers are pressing ahead with plans for new aircraft: Sikorsky’s main rivals—AgustaWestland, Eurocopter and the Bell unit of Textron Inc.—are developing larger new helicopters with more speed and range to reach oil platforms hundreds of miles offshore.
Bob Kokorda, vice president of sales and marketing at Sikorsky, a unit of United Technologies Corp., said the faster speeds achieved by the new generation of twin-engine medium and heavy helicopters allows them to access far-flung oil facilities. Sikorsky builds 94 helicopters a year, and is looking to increase production.
Milestone already had three of the 19-seat Sikorsky S-92s on order and has leased 53 aircraft to 20 operators. Earlier this year, it agreed to buy 16 Eurocopter EC225s, a deal worth $480 million at list prices. Eurocopter is a unit of European Aeronautics, Defence and Space Co.
“We go where the oil is,” said Mr. Santulli in a recent interview. He said the company aims to have $1.1 billion in assets by the end of the year, with another $700 million in the pipeline. He started the company with $500 million from two private equity houses—the Jordan Company and Nautic Partners—and plans to seek more, having also recently raised $400 million in debt from a group of banks.
Operators such as Bristow, Vancouver-based CHC Helicopters and Inaer-Bond are contracted by oil and gas companies to service exploration and production rigs, but the sector remains fragmented with mixed credit quality, driving more to look at renting rather than buying aircraft.
That has been a boon for start-ups like Milestone and London-based LCI, an established commercial jet lessor, which moved into helicopters earlier this year with a $400 million order placed with AgustaWestland, a unit of Finmeccanica SpA.
While the oil and gas business is cyclical, a new market has emerged to provide search and rescue services previously performed by military or government agencies, notably in Europe.
The most closely watched is the result of final bids due in the fall for the U.K. government’s 10-year contract worth up to $5 billion to provide search and rescue services, with Bristow, CHC and Inaer-Bond all vying for the deal. Inaer-Bond was formed last year when funds associated with Investindustrial and KKR Financial Holdings LLC bought U.K.-based Bond Aviation Group Ltd. and merged it with their existing helicopter assets.
Mr. Santulli said the search and rescue market wasn’t even factored into his business plan when he started Milestone. It is only seen generating 10% of revenue in the $4 billion-a year global commercial helicopter market, but would represent a stable revenue stream for operators. The U.K. is expected to announce the winner of its contract early next year.