HeliValue$, Inc. held its first quarter 2015 Blue Book resale pricing review on April 1. Resale pricing adjustments were made on the following models on April 2, 2015. To view the adjustments, please log into your account and visit the resale trends page for each model.

Results of April 1, 2015 resale pricing review of The Official Helicopter Blue Book®

General Market Comments

There has been little change since our last review in January of 2015. As seen in the last two market updates, light single-turbine helicopters continue to flood the world market. At the time of this review, there were over 700 light singles on the market. The Airbus AS350B (H125) series makes up 35% of those 700 plus, followed by the Bell 206B series at 20%. We are also starting to see slight growth in the used light twin inventory. There are roughly 250 light twins on the market. Of those, 66% are listed as corporate/VIP configured, 77% are ten years or older and the A109 series makes up 45% of all light twin listings. There isn’t a strong secondary market for these machines, with the exception of the BK117, which has found some new life in the utility and oil & gas/mineral exploration markets. There is a softening in the heavy market mostly due to the replacement of older models like the S76A, B, C and AS332 series that are now coming onto the market.  We continue to see discounted resale values for most VIP configured machines across all categories.

Resale pricing adjustments are based on actual sales transactions and current market conditions such as overall trends in asking prices and increase or decreases in supply, demand, and sales volume. We obtain sales pricing data from owners and operators, lenders and lessors, brokers and equipment manufacturers worldwide.  With the information gathered from many different resources, we review each model covered in The Official Helicopter Blue Book®.  While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published page.  Stay up-to-date on resale pricing changes by subscribing to The Official Helicopter Blue Book® www.helivalues.com

As usual, we are interested in any recent sales transactions you would like to report. Every time you buy, sell, lease, finance, or trade a helicopter, and report this information to us, you help update The Official Helicopter Blue Book®. Sales transactions can be reported by emailing [email protected] All information received is held in the strictest confidence and is only used for our internal review.  The next pricing review is scheduled for July 20, 2015.

Please feel free to email with any questions or comments. 

Lindsay Higgins, HeliValue$, Inc.

You could get a barrel of West Texas Intermediate oil on Wednesday for just $44.66 (although what anyone would do with one barrel – or enough to fill 3.5 ten-gallon hats – is a mystery). This is the lowest price for six years and shows a fall of about 60 per cent from last summer.

In their analyst calls, Bristow, CHC and Era Group have all talked about whether it will be a U-shaped recovery or a V-shaped one. Of course no one knows. So sensibly, they are preparing for a U and hoping for a V (hopefully we will get a square root √).

While exploration accounts for less than 25 percent of their business, oil companies are also looking to cut production costs by asking operators to find savings and negotiate contracts.

There is little sign of a rebound in oil prices yet. US oil production has not yet fallen and the amount of oil stored in the US continues to rise. Yesterday, Ali al-Omair, Kuwait’s oil minister, told Reuters: “Within OPEC we don't have any other choice than keeping the ceiling of production as it is because we don't want to lose our share in the market."

Every downturn is different – and OEMs and operators are clearly in it together – but it will be interesting to see if leasing companies can give smaller operators more flexibility.

West Texas Intermediate futures for April are at $43.9 a barrel. The August future is now at $50.

CHC cutting costs

Continuing on oil, CHC’s third quarter call was far more depressing than Clark McGinn’s (its former head of asset finance’s, now gardening before moving to Waypoint) presentation at Helicopter Investor London 2015 last month. The operator is cutting costs and looking to boost its capital efficiency.

Karl Fessenden, CEO of CHC, said there have been lots of delays and cancellations on the exploration side. Although he stressed that 80 per cent of CHC’s flights are supporting production rather than exploration.

CHC Group had revenue of $415 million and a net loss of $465 million for its fiscal 2015 third quarter, which ended January 31, 2015.

Sales fell by 2 per cent in real terms (or 9 percent including currency changes). CHC had an adjusted loss of $30 million, when special items of $442 million (which includes $404 million of goodwill).  Adjusted EBITDAR – which includes lease rentals - was $115 million and was up in real terms when currency changes are excluded.

Joan Hooper, CFO of CHC, said they are expecting to take seven new helicopters in their 2016 fiscal year (which starts on 1 May this year) out of their firm orders for 19 helicopters.

Hooper discussed helicopter finance several times. CHC has recently had its fleet valued at about $3 billion. Some 80-85 per cent of these helicopters are leased. This many, however, may change said Hooper: “We’re just in throes of doing that in terms of what is the right mix of owned versus leased over the next several years.

“How do we refinance aircraft from a lease cost? Is there other ways to finance aircraft other than the same, so are there other debt related searches that might be cheaper than leasing. We are going to look at all those options to lower overall cost of capital and lower our fixed charges.”

CHC has bought back debt and estimates that this will save it $20 million a year in interest costs. Hooper also thinks they can get lease rates down.

“Lease is probably okay other than I mentioned, we are going to really look to find ways to actually lower the lease costs,” says Hooper. “We believe there is excess capacity in the lease financing market and so we're going to be talking to the lessors about coming up with a book of business that’s attractive to them and if we can refinance that at attractive rates we will be looking to do that.”

A great year(a) for Era

Chris Bradshaw, CEO of Era Group, was slightly more bullish (as was Jonathan Baliff at Bristow last month). Era had a record year in 2014 when special items for 2013 are removed.

ERA Group had net income for its fourth quarter, ending December 31, 2014 of $3.2 million on operating revenues of $74.7 million. It reported net income for its 2014 of $17.1 million, on operating revenues of $331.2 million compared to net income of $18.7 million on operating revenues of $299.0 million in the prior fiscal year.

Its 2014 EBITDA was $85.9 million compared to EBITDA of $93.1 million in the prior fiscal year – but 2013 included gains on asset dispositions and special items. Adjusted 2014 EBITDA was $84.7 million compared to $77 million in the prior year.

Era made a $6.1 million gain selling helicopters in 2014 compared to $18.3 million in the prior year.

Bradshaw estimates that 75 per cent of its business comes from production support, pipeline operations, transporting US Government inspectors and dry-leasing.

Era is waiting for its first four AW189s (it is the North American launch customer) and its first S92 comes in August. It says it has already placed all of these and two more S92s. In total, it has firm orders for 19 helicopters: 10 AW189s, four S92s and five AW169s.

He said: “The biggest driver of Era’s record profit was demand in the Gulf of Mexico” and Bradshaw is still bullish. “I would certainly note that relative to a lot of the other oil and gas markets around the world the Gulf of Mexico is a relative bright spot. The current floating rig count in the Gulf of Mexico today is about 43, which has held-up pretty well, it's actually up from about 38 at mid-year 2014 and about 36 at the end of September 2014.”

Bradshaw is also upbeat about Brazil…

Petrobras petrodollars

While everyone is being depressed about oil prices, operators are eagerly awaiting news from Petrobras. The latest bidding round closed at the end of January.

In its latest analyst call, Bradshaw said Era Group was the lowest bidder for four AW139 helicopters with contracts scheduled to start in the first quarter of 2016. It also said it won a bid for four heavy aircraft (three of these are renewals). Unusually for Era – which likes owning aircraft – it is considering sale and leasebacks.

CHC was more circumspect. With Fessenden saying: “I would just say that it's too early to comment on this. It’s a public tender. It also had public challenges, which are in the public domain and so we won’t make any comments on anything until the tender has closed and those challenges have been addressed. And there have been numerous challenges frankly.”

KKR really, really like helicopters

KKR these week firmly established itself as serial helicopter investor by buying Air Medical Group.

It now owns Air Medical, has a stake in Malaysia’s Westar and a joint venture with Lease Corporation International. Air Medical Group replaces its stake in Avincis which it sold out to Babcock (now the – genuinely – catchy Babcock Mission Critical Services).

Bain Capital bought its stake in Air Medical in 2010. At the time a source told Reuters it was valued at $1 billion. Another source has told Reuters that Bain is paying $2 billion now. This sounds like a good return, although Air Medical has grown significantly since then buying at least five operators and moving into ground transportation.

At Helicopter Investor Miami 2014, Dave Hinton, senior vice president of finance and controller of Air Medical, had a great motto: “We want to be the best thing that happens to you on the worst day of your life,” he said.

Singapore slings

We are still working on Helicopter Investor Asia 2015, which takes place for the first time in Singapore on 8 June. If you would be interested in speaking, sponsoring or attending (operators attend for free) please email [email protected].

Have a great weekend,

Alasdair Whyte
Editor
Helicopter Investor

HeliValue$ held its third quarter review of the Blue Book resale pricing data on October 28, 2014. Models updated after our review are listed below.  Resale pricing adjustments are based on actual sales transactions and current market conditions. We obtain sales pricing data from owners and operators, lenders and lessors, brokers and equipment manufacturers worldwide.  With the information gathered from many different resources, we review each model covered in The Official Helicopter Blue Book®.  While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published page.  Stay up-to-date on resale pricing changes by subscribing to The Official Helicopter Blue Book® www.helivalues.com.  

We are interested in any recent sales transactions you would like to report. Every time you buy, sell, lease, finance, or trade a helicopter, and report this information to us, you help update The Official Helicopter Blue Book®. Sales transactions can be reported via our website at Report a Sale or by emailing [email protected].  received is held in the strictest confidence and is only used for our internal review.

General Market Comments

This year HeliValue$ has seen a considerable increase of light single engine helicopters on the market. This is mostly due to the sharp decline in the mining and seismic explorations sectors. Aiding in the flooded light singles market is a shift to replace the popular electronic news gathering machine, the Airbus AS350 series, with the lighter, lower-cost to maintain, Robinson R44 and R66 models. The medium and heavy helicopter markets continue to be very strong with an increasing demand for offshore machines. We expect to see demands at this level continue for at least the next five years. The VIP/Corporate resale market is in a decline in all categories but especially in the medium and large helicopter categories. We still see new deliveries of VIP/Corporate machines, like the Agusta AW139, Bell 429 and Airbus EC145s. However, because there is a low supply of the more desirable offshore configured machines we see discounted prices for VIP/Corporate configured machines in the used market.

If you would like to receive a copy of our Newsletters, please email [email protected]

Mechanical failure, perception and confidence, and differing opinions about safety are all factors contributing to the successes and failures of rotorcraft.  In this article, we will look at other models that have faced similar mechanical issues, some with distinctly different outcomes, and compare them to the current issues faced by the Eurocopter family of Super Pumas.

On November 5, 1986, a Boeing 234LR Chinook crashed near the Sumburgh Airport in Shetland Islands killing 43 passengers and 2 crew.  The aircraft was grounded, and the resulting investigation by the Air Accidents Investigation Branch (AAIB) found the accident was caused by a failure of a bevel ring gear (gearbox) that allowed the two rotors to collide.  Despite no prior history of mechanical accidents, clearance by the Civil Aviation Authority (CAA) and several test flights conducted by British International Helicopters, (who held a contract with Shell Oil Company at the time) the fears of the offshore workers could not be overcome.  As a result, the oil industry sold off all remaining Chinooks which are now operated by Columbia Helicopters as non-passenger heavy-lift aircraft.  

Another large offshore model, the Sikorsky S-92A, has also faced gearbox issues resulting in an emergency airworthiness directive that grounded all S-92As in 2009.  Like the Chinook, these failures also resulted in catastrophic accidents.  The fix for the S-92 gearbox caused controversy because it did not pass the 30 minute run-dry regulation required by the FAA, EASA, and Transport Canada Regulatory agencies.  A provision of this regulation allows an exception for Category A transport helicopters; "The applicant must show that hazardous component effects are predicted to occur at a rate, not in excess of that defined as extremely remote".  The FAA defines "extremely remote" as "Not anticipated to occur to each item during its total life, may occur a few times in the life of an entire system or fleet.  Quantitative: Probability of occurrence per operational hour is less than one in ten billion flight hours."  As of March 2013 the global fleet of S-92As has flown only 500,000 flight hours raising concerns about the application of this exception to this model.  Despite the mechanical issues faced by the S-92 and concerns regarding the solution, the model continues to enjoy success, especially in the offshore transport market where 90% of the S-92As are being used.   

Most recently, the Eurocopter Super Pumas have been plagued by gearbox issues. They also share similar safety fears from offshore workers, much like the Chinook 234LR, after two ditchings of the EC225 in the North Sea due to gear box failure.  In fact, the initial grounding was not prompted by any civil aviation regulatory agency, but by the operators of the EC225.  The further grounding by the UK and Norway aviation regulatory agencies resulted in Eurocopter trying to mitigate the impact to the operators by supplying them with gearboxes and other components to retrofit their (also effected) AS332 L1s and L2s to an older design, allowing this aircraft to be put back into service.  On August 23, 2013, the crash of an AS332 caused offshore workers' to protest the continued use of the Super Pumas.  Although no mechanical cause has been determined in the AS332 crash, it has raised serious concerns with the offshore workers.  This is evidenced by the workers creation of a social media page protesting the continued use of Super Pumas.

Although an interim fix for the EC225 has been approved by civil aviation authorities of EASA, UK and Norway, operators have been slow to put the EC225 back into service.  Currently the fix for the EC225 consists of two preventative measures; an ultrasonic non-destructive inspection (NDI) which must be performed every 8-10 flight hours, and the updated Health and Usage Monitoring Systems (HUMS) which now detects irregular vibrations in the gear shaft, allowing the pilot to safely land within two hours of detection.    

The approval and implementation of these preventative measures has not allayed the fears of the workers.  Can we look at the abandonment of the Chinook as an example of an issue Eurocopter might face with Super Pumas once the gearbox and the subsequent shaft cracking issues have been resolved?  The ultimate solution to the problem is a redesign of the gear shaft which could take more than a year to complete.  Will the extended final fix time cause confidence concerns resulting in reduced operations of Super Pumas as offshore transport or does the current demand for the S-92A and other large offshore helicopters imply more trust in the civil aviation authorities' judgment and forgiveness of past mechanical failure?  Will Super Pumas make a successful return like the S-92A?   It seems the question is still up in the air.