January 9, 2012
We sat down with advisory board member Brian Humphries who currently serves as the President and Chairman of the European Business Aviation Association (EBAA) and Chairman of the British Helicopter Association. His past titles include CEO of Shell Aircraft International and Chairman of the International Business Aviation Council.
We asked Mr. Humphries about the current state of the helicopter industry and where he believes it is headed:
Q: What is your evaluation of the current helicopter market?
A: Like most industries, the civil market for rotor wing aircraft was greatly affected by the world recession. Corporate VIP outfitted aircraft took a considerable hit while bad credits and reduced cash flow reduced spending on new utility outfitted machines. Although we saw a decline, the rotor wing market was kept afloat by increased spending in the paramilitary sector coupled with sustainable growth in offshore oil and gas exploration. “Recession proof” industries like emergency medical services were sustained while civil aircraft sales for police departments and search and rescue efforts declined due to scale backs in government spending. We saw the effect of the global recession but overall, I believe the market is steady today.
Q: What is your prediction on the market forecast for the next five years?
A: I see promising growth in the next five years due to manufacturer innovation and development as well as an overall increase in demand. As manufacturers continue to innovate and provide safer, more technologically advanced aircraft, the need to replace older machines will increase. We see this with Sikorsky and the development of the S-76 with the D model and with Eurocopter and its new EC-175. Both manufacturers claim increased performance and safety measures in comparison to the models’ predecessors. Clients will demand higher safety standards as they come available and helicopter operators will respond accordingly.
Oil companies have announced new projects in the coming years for offshore oil exploration in emerging markets and continued growth in current areas of exploration which will amount to increased demand for heavy offshore configured machines. The demand for paramilitary and civil helicopters will continue to grow, particularly in booming economies with growing populations such as China and India, as well as the continued need for EMS/SAR aircraft.
Q: What has been the greatest challenge for helicopter operators in today’s market?
A: It is the same challenge they have always faced; barrier to entry. Operators must find and secure aircraft to bid on and execute contracts. With most utility helicopters ranging from $1 – 30 million, operators often find it challenging to secure financing in order to stay competitive. Some turn to traditional debt financing that requires money down and is often restrictive on aircraft registration. Others attempt to own all of their aircraft, making it essential to turn over their fleets in order to purchase new machines. The barrier to bidding on and executing a contract is the cost of the machine. The solution lies in the financing.
Q: How do you believe the “Milestone Solution” is affecting the marketplace?
A: Milestone brings a creative financing solution to the table with what I believe to be its three most important offerings; 100% financing, the ability to finance aircraft registered anywhere in the world and contingent pricing. Milestone’s dry operating lease structures give operators the ability to bid on contracts worldwide without an upfront financial commitment. Milestone has found a way to eliminate the “barrier” by easing the financing burden on operators coupled with conveniences such as marrying up lease commencements and term lengths with underlying contracts, sale-leasebacks on existing assets and assuming progress payments on new deliveries. It is a new and unique offering to the helicopter market and we have seen it in action. Milestone’s portfolio consists of both large and small operators with fleets ranging from 3 to 490 aircraft. They are helping operators grow and become more profitable regardless of their size.