How helicopter leasing companies are bouncing back
Written by Gerrard Cowan, and retrieved from Vertical Magazine | July 12, 2024
Photo: Anthony Pecchi
EXPERTS ON THE HELICOPTER LEASING SECTOR GIVE THEIR VIEWS ON THE STATE OF THE MARKET AND THE MAJOR THEMES FOR 2024.
It has been a tough decade for the helicopter leasing market, but industry insiders see positive signs in oil-and-gas, emergency medical services (EMS), search-andrescue (SAR) and beyond, with some even expanding their fleets to include electric vertical takeoff and landing (eVTOL) platforms.
The oil-and-gas slump of 2014 had a significant negative impact on the leasing sector, said Clark McGinn, a former executive at Waypoint Leasing and CHC Helicopter, who today works as an independent consultant. Combined with the Covid-19 pandemic, this "hit the demand for leasing helicopters to the energy sector for nearly a decade."
However, HAI Heli-Expo at the end of February showed "a much more buoyant helicopter market than we've seen over the last five or six years, with record footfall and number of exhibitor stands," McGinn said. The past six months has brought a return to equilibrium, he said, with Russia's full-scale invasion of Ukraine having pushed oil prices upwards.
"Because the energy companies need large, robust machines, that sector is by far the biggest in value to the lessors, so they, too, are just coming out of the doldrums," he said.
Even during tougher times, lessors were incentivized to find other uses for helicopters. While changing geography and mission configuration is expensive, they found good traction in areas like EMS, SAR and supporting wind farms, McGinn noted. "With the recovery in the oil price, the overhang of idle helicopters has been eliminated," he said. "In fact, the [Sikorsky] S-92 and [Leonardo] AW139 fleets are pretty much back at full capacity."
The recent demand brings supply chain challenges, McGinn said. While he pointed to several large orders at Heli-Expo, "the supply chain, after so many quiet years, is finding it hard to regain capacity in the face of quickly rising demand."
Even so, McGinn said the leasing sector has turned a corner. "While there are several bumps in the road ahead — mainly interest rates and supply chain — the outlook is for significantly improved demand, which will see both improved income and helicopter valuations."
The signs of a turnaround were on full display in late April, when a new helicopter leasing and finance company was launched in Dublin, Ireland. GD Helicopter Finance (GDHF), a subsidiary of Chinese company GDAT, entered the market with an existing order book of 50 Airbus H160s, before then placing an order for 20 Airbus H175s. The company also lists Leonardo AW189s and AW139s in its fleet.
The new company is led by Michael York, who was previously joint head of commercial at leasing giant Milestone Aviation. York said the company would offer near-term availability of the "newest technology, efficient, cost-effective, multi-mission helicopters" through its existing order book of H160s, as well as an additional order of super mediums.
THE ENERGY SECTOR
Demand in the offshore sector is buoyant, with considerable future growth potential, said Con Barber, chief investment officer at Macquarie Rotorcraft Limited (MRL). Recent geopolitical events have underpinned concerns over energy security, with increases in offshore oil production expected by 2030, along with a surge in wind energy, he noted.
The offshore segment is the dominant leasing market, Barber said. While helicopter leasing penetration overall is about 15 percent (compared with 50 percent in commercial fixed-wing aircraft), the proportion is higher in offshore. There, about a third of helicopters are under lease. This compares with around 15 percent in EMS and eight percent in SAR, he said.
"The size of the offshore market is expected to increase as operators continue to rationalize their balance sheets and seek efficient sources of funding in a capital constrained market," Barber added.
Given the relatively low levels of lease penetration across different markets, MRL adopts a diversified portfolio strategy, Barber said, enabling the lessor to adapt to future changes. In the past year, it has invested in one heavy platform (a Sikorsky S-92), four super mediums (Leonardo AW189 and Airbus H175), 16 mediums (Leonardo AW139 and Bell 412), and five intermediate-light twins (Leonardo AW169, Leonardo AW109, Airbus H145 and Airbus H135). "We also have a strong pipeline for further fleet growth, targeting modern helicopters in all market segments," said Barber.
The lessors are also exploring opportunities in renewables, such as wind energy. Barber said this is a focus for MRL. "Helicopters play a critical role in the energy transition by enabling the transition from high carbon sources of energy such as coal to low carbon offshore natural gas and ultimately to wind energy," he said. "MRLs future investments will continue to focus on efficient helicopters that will enable sustainable energy solutions."