Milestone: Speculative orders could tip ‘finely balanced’ supply/demand equilibrium
By: Oliver Johnson, Retrieved from Vertical Magazine
Helicopter leasing company Milestone Aviation says the industry is experiencing a level of stability not seen for over a decade, but has cautioned against “exuberance” that could alter the current balance between supply and demand.
“I think a lot of industry participants have learned the lessons of the last downturn,” Pat Sheedy, the company’s president and CEO, told Vertical. “They’re determined not to repeat them.”
The last 12 months have seen both positive and negative changes to the industry, said Sheedy. “The market itself continues to be very robust in all mission [sectors],” he said. “I think currently, supply/demand remains in equilibrium in terms of helicopter supply.”
For Milestone, the supply of Leonardo AW139s in particular is proving “very, very tight,” he said.
The leasing company has a fleet of almost 90 AW139s. Sheedy said the type’s ability to work across a wide variety of missions was the reason for its popularity, bringing with it a wide base of operators.
“If, at any point in time, a 139 rolls off its current lease and comes back to us, we’ll have multiple options with what we do with that aircraft,” he said. “Over the last 15-plus years that Milestone has been in operation, the best performing asset for us has been the 139.”
The company’s heavy-lift fleet is also fully utilized, with all 82 S-92s currently out on lease.
“Where we would have some concerns . . . is about the amount of orders that are coming in [from other leasing companies], particularly for super mediums,” said Sheedy. While some of those orders are backed by strong end-user demand — such as from oil-and-gas companies including Equinor and Vår Energi — he said others are more speculative.
“That’s what got us [the helicopter industry] into trouble, if we look back over the last decade, was speculatively ordering aircraft and double ordering aircraft,” said Sheedy.
“A lot of the operators have ordered their own aircraft . . . and our role is to step in and finance that demand that’s already there. Where you have a lessors speculatively ordering on top of that, you’re running the risk that you’re going to tip off what is a very fine supply/demand balance and ultimately push us into oversupply, which is not what we want to do.”
Milestone isn’t forecasting any major expansion in offshore demand in terms of the number of heavy/super-medium helicopters required. According to Sheedy, there are about 300 helicopters in this class working offshore today.
“We don’t see that growing to 350 or 400 — we think it’s going to be relatively stable along 300, with a change in the product mix,” he said.
The company is anticipating a shift away from the S-92 for the offshore mission as aircraft reach 20 years old. The first of the type to enter the market are now reaching that landmark, and Sheedy said he expects to see 10 or 15 S-92s retire from their primary offshore role each year over the next five years.
“That’s where we see demand for super mediums to replace them,” he said. “It’s really replacement demand rather than growth demand.”
Sheedy said “it remains to be seen” as to whether there is room in the market for a third super medium, with the Bell 525 set for its long-awaited certification later this year.
“I think [Bell will] get it to market, which I think might have been a question mark three years ago . . . but it’s very difficult to see how they get it to scale,” he said. “The [Airbus H]175 and the [Leonardo AW]189 had a 10-year head start on it, and it’s an expensive aircraft, so even if they get it out, I struggle to see how you get it to 100-plus units delivered.”
Sébastien Moulin, Milestone’s chief commercial officer, said the recently-announced operational evaluation with Omni in Guyana is “a good first step” for the 525.
“That’s the best way to demonstrate the performance of the aircraft and see if it’s delivering what [Bell] have been promising,” said Moulin. “But it’s still a long way before getting the scale and the additional orders. Right now, you only have really Equinor as a firm order, and if Equinor needs the aircraft to be FAA [Federal Aviation Administration], EASA [European Union Aviation Safety Agency] and de-icing certified and flying… there’s quite a few steps [to go].”
As for the S-92, while much of the Milestone fleet is at the younger end of the spectrum, the company has been active in trying to develop a secondary market for the type to transition into following offshore retirement.
In 2022, Milestone announced a program to convert offshore S-92s into firefighting aircraft with a 1,320-US gallon (5,000-liter) Helitak belly tank.
The program led to the first utility-configured S-92s entering firefighting operations with VIH Aviation Group in British Columbia last summer, and Sheedy said Milestone hopes to have an aircraft in California this firefighting season to further demonstrate its capabilities.
Looking ahead, Sheedy said geopolitical changes will likely see a push for European nations to use their OEMs to build more military equipment.
“That will fill up production lines, is my guess, over the next three or five years — more so than we might have forecast — and whether or not that would put a constraint on the amount that they’re willing to supply into the civil market or not, remains to be seen,” he said.
This would help prevent any oversupply into the market, he added.