The freeze on oil and gas projects has plunged the commercial helicopter industry into crisis. The need to reach offshore platforms made energy concerns their main clients.

Photo: Zuma\TASS

Falling oil prices have forced energy companies to cut operating costs and abandon future projects. At the same time, one of the “victims” of the crisis was the helicopter production industry. As the American Wall Street Journal reports, this market is now facing overproduction, while two years ago there was great demand for helicopters: energy concerns needed the equipment to communicate with their production platforms on the high seas.

According to WSJ sources in the management of aviation concerns, now out of 1.9 thousand commercial helicopters serving oil and gas companies, about 20% are idle. In the foreseeable future, market players believe that the situation may worsen. Before the crisis, on the contrary, the industry barely had time to service orders from oil workers.

According to AgustaWestland (a helicopter manufacturing company, a subsidiary of the Italian concern Finmeccanica), energy concerns are the main customers of private, commercial helicopters, now possessing 26% of the total world fleet. In second place with 23% are various rescue services, another 19% is privately owned, and 11% is on the balance sheet of law enforcement agencies.

Now, writes WSJ, helicopter manufacturers are urgently seeking to diversify supplies, primarily through rescue services and private customers. However, this will not immediately affect industry revenue, Teal Group analysts warn. According to their calculations, in 2016, global sales of commercial helicopters will fall from almost $5.5 billion to $4.67 billion. Only in 2017 will revenue begin to recover, to approximately $4.95 billion. For comparison, in 2013 the figure was slightly higher than $6 billion

John Mannion, president of the Texas-based consulting firm Kylemore Group, is skeptical of aircraft manufacturers' attempts to sell unclaimed helicopters in other markets for other purposes. It all comes down to technical characteristics: for example, oil and gas companies purchase helicopters with a special radar for landing on an offshore platform in bad weather conditions and with a device for urgent splashdown. In general, the expert believes, helicopter manufacturers will soon be forced for the first time to face the problem of mass storage of unclaimed machines.

In the fall of 2015, the American aircraft concern Lockheed Martin closed a deal to purchase helicopter manufacturer Sikorsky for $9.1 billion. At the end of January, Lockheed announced the financial results of its new subsidiary for January-September 2015: revenue decreased by 19%, to $4.3 billion. On commercial helicopter sales, Lockheed CFO Bruce Tanner said he expects revenue for the segment to be only $375 million for the full year 2015. That's well below the $750 million expected and a quarter of the $1.5 billion it generated in 2014.

In addition to manufacturers, operators also find themselves in a difficult situation. Thus, the Canadian CHC, one of the leading operators of commercial helicopters in the world, was forced to withdraw its shares from the New York Stock Exchange in February. The company failed to meet the NYSE rule of maintaining a capitalization average of at least $15 million over the previous 30 days. At that time, one CHC paper cost exactly $4. The Canadian company went public in January 2014, at which time the share price was $294.

One of the reasons for CHC's failure is the debt problem, which has worsened during the crisis. Last Friday, March 25, Moody's affirmed CHC's credit rating at B2-PD (junk with the possibility of default), changing the outlook to negative. Before this, the concern itself reported for the last financial quarter November-January: revenue fell by 20% compared to the previous year, to $333 million, the net loss deepened from $30 million to $32 million.

“The oil and gas sector is under pressure from record low commodity prices, which is having a negative impact on offshore operations,” said CHC CEO Carl Fessenden. “With low visibility and high market uncertainty, we expect these challenging conditions to continue for some time to come, as we endeavor to manage the business accordingly.”

The oil crisis hits private helicopter manufacturers