When we first wrote about how Covid-19 was impacting the helicopter industry 6 months ago, we anticipated that there would be numerous bankruptcies. While the bankruptcies or full-blown bank repossessions have not materialized, we have seen more mergers, restructuring, business model modifications, and voluntary exits from players in the space. One of the significant realities that we have seen is that banks have been very patient with helicopter owners and operators, providing interest only payment schemes or lowering lease rents during this period. Financial institutions clearly do not want assets sitting idle without the operator maintenance and insurance on the machines.
Over the course of the last 12 months, we’ve helped multiple financial institutions manage their helicopter assets in a value enhancing manner. For certain aircraft, it was prudent to unload as quickly as possible to avoid further deterioration of value as some aircraft types are extremely expensive to maintain and it is prudent to cut your losses. In other cases, we have helped arrange bulk portfolio sales at premium prices on very tough equipment. We assisted a financial institutions sell the remainder of their S92 offshore portfolio, supported the sale of a portfolio of S76C+ and disposed of a short-nosed AW139.
Although the market conditions remain challenged, we have been pleasantly surprised by the transaction volume and balance of buyers and sellers in the market. In the 45 days alone, we have sold 15 helicopters and a further 6 helicopters have been leased. Transaction have included the following helicopter types; AS332L2, AW139, B412EP, EC155B1, S76C+, Bell 212, EC135P2, A109SP GrandNew, AS350B3 and Bell 407s.
Going forward, the market will be in major flux. We expect to see more M&A activity/consolidation in the space and we still anticipate that there will be bankruptcies on the horizon when the banks start to get more aggressive with loan re-payment. As we come out of the pandemic, a recovery in vacation sector should help with tourism helicopter market, improvement in oil prices will help the oil and gas sector and another poor fire season in Canada will dictate a consolidation that is sorely needed. Understanding the markets and the key drivers is imperative during this sensitive period that will still require flexibility and a thorough understanding of what is the most appropriate decision (sell vs. buy, lease vs. finance).
Last year, JPMorgan’s CEO Jamie Dimon said “there should have been a pandemic playbook” to tackle the COVID-19 crisis.
We took cue from Dimon himself and put together our own Banker’s Playbook. This is a short best-practices guide on how banks and financial institutions can effectively navigate distress. Download the IAM Banker’s Playbook below.
The IAM Banker’s Playbook will take you through a 4-Step Strategy for times of distress and beyond. You will also learn:
• The unique characteristics of helicopters & why you must handle your asset with extreme caution during this time
• Simple ways to destroy value
• The impact of PBH vs. Non-PBH programs
• The most important questions you need to ask yourself, your customer, MRO providers, PBH suppliers, and OEMs