By Gerrard Cowan, Shephard Media
Leasing companies are seeing a raft of new opportunities presented by the stability of oil prices, the increasing use of wind farms and the challenges inherent in combatting wild fires. The fall in oil prices in 2014 fuelled a tough few years for the helicopter sector, including the lessors. However, the leasing sector is now seeing a number of positive signs, which are expected to feature prominently in discussions at this year’s Helitech International event.
Lease Corporation International (LCI) is seeing more activity in the oil and gas market now than it has for some time, said CEO Mike Platt. The company is currently tracking about a dozen tenders in the offshore space, he said, ranging from Australia to Brazil and Africa to the North Sea. ‘There’s definitely more activity, and we expect to see some placements,’ Platt told Helitech International Daily News.
Platt expects the super-medium market to experience an uptick over the next year or so, with the AW189, H175 and other platforms likely to see more interest from operators. ‘These platforms have now been on the market for some time and have accumulated some experience,’ he said. ‘I think operators are now looking at the capabilities of these aircraft versus the heavies, along with the different costs. It’s taken a while, but I think we’re starting to see a lot more interest in the super-medium category.’
Con Barber, head of global sales at Waypoint Leasing, agreed that there has been a modest pickup in activity in the oil and gas segment. He believes that a broader recovery in the offshore market could gain pace over the next year. ‘I think we’ll be in the midst of it before we even notice it’s really happening,’ he said. ‘The market is picking up in certain segments, as we are seeing market demand strengthening for particular helicopter types.’ Barber also pointed to demand for mediums, although he said the heavier helicopter space was more challenging. ‘That is to be expected, because the segment that the heavy helicopters serve is typically the long-range, deepwater, oil and gas segment, which is associated with higher costs of production,’ he explained. ‘That will probably be the last part of the market to benefit from a broad-based recovery.
However, it is inevitable that the new supermedium segment will have an impact on heavy demand.’ While a recovery appears to be under way, it is happening very gradually, confirmed Mark Kelly, MD and chief commercial officer at Lobo Leasing. Oil and gas companies are increasing their drilling activities, which is boosting demand for helicopters, ‘but the pace at which that’s happening is quite slow’, Kelly said. The price of oil has remained stable in the high $60s or low $70s per barrel for some time now, which Kelly said is clearly a positive thing and means that conditions are in place for the oil majors to put their capital to work again and increase their exploration activity. ‘But the recovery is not dramatic,’ he cautioned. ‘There’s still a lot of idle equipment within the oil and gas space that the operators, the lessors and the OEMs have to get through. It’s a market that needs continued discipline from all stakeholders to ensure it doesn’t overheat as it recovers.’
Accident and emergency
While each lessor has varying interests in different markets, the industry as a whole has increased its focus outside of energy in recent years, notably in EMS and SAR. Barber said that EMS is a key target for Waypoint, with the company recently delivering three new AW169s to Emerald Pacific Airlines in Taiwan for use in this activity. This was the lessor’s first foray into Taiwan and the first time it has leased AW169s in the EMS role. Barber also highlighted SAR, where opportunities have arisen thanks to the privatisation of services in a number of countries. ‘This is a very exciting part of the market, thanks to the privatisation of search and rescue services that were previously provided by state operators or by the military,’ he said. ‘However, the opportunities there are finite.’
In July this year, LCI secured its first helicopter lease in China, through a deal to provide three new AW139 aircraft to Shanghai Kingwing Aviation, configured for EMS operations. In its announcement of the deal, LCI said it reinforced the company’s strategy of ‘curating a balanced and diverse portfolio, with a majority of leases in the EMS market’. This has long been the lessor’s strategy, with oil and gas accounting for about a quarter of its fleet overall.
Small but mighty
There are also a number of small though growing markets, notably the wind farm space. LCI has several aircraft that serve this market, said Platt, adding that he expects wind to continue to grow, although from a very small base when compared to oil and gas or EMS. ‘We like the wind market and believe there will certainly be opportunities there, but it’s a relatively small market,’ he noted. While the Northern European region dominates offshore wind, it is now spreading to other parts of the world, Platt added. ‘It’s a long development process, but it’s proven itself to be pretty effective,’ he confirmed. ‘The technology on wind farms has gotten so much better and they produce so much more electricity that it’s starting to become very cost-effective. I think we’re going to see more and more of it.’ Europe, where Helitech International takes place, is a very mature market for the helicopter industry, said Kelly. ‘There’s a replacement cycle of aircraft, but there’s not a huge amount of expansion,’ he said. ‘However, the market is performing well.’
Barber also highlighted the maturity of the European market. He pointed to good growth in the North Sea for oil and gas, and enduring growth outside energy, particularly in EMS, which is ‘a much less cyclical or volatile segment’. Barber told Helitech International Daily News EMS operators are demonstrating an emerging preference for newer technologies which could be supported through the leasing industry.
Helitech International attracts operators and suppliers from across the world, Platt said. European operators at the event will also be interested in the potential of regional markets like Africa or the Middle East. Platt believes that the show is particularly useful in providing opportunities to meet current or prospective customers. LCI is expecting to run back-to-back meetings for three days. He expects that the company will meet with around 25 operators, as well as OEMs, suppliers, financiers and others. Kelly echoed this, saying: ‘The main reason we go to the shows is to meet our customers’. Helitech International provides an opportunity to meet them in one place over a few days, ‘so it is very efficient’, he said.
Waypoint will have a large presence at the show, Barber said, with the aim of meeting clients, OEMs and other participants in the industry. Helitech International is particularly useful for meeting customers from the Europe, Middle East and Africa region, he said. ‘That’s a key region for us, and one where we’re seeing good, solid growth,’ Barber explained. ‘We want to have the opportunity to meet with our clients and with the other participants in the industry.’ Kelly expects the major themes at the show to reflect the dominant stories of the past year, notably the stabilisation of the offshore oil and gas sector, expansion in EMS and SAR, and the growth of relatively small markets like the wind sector. ‘Wind is a very small market, but it’s continuing to expand,’ he told Helitech International Daily News. ‘In SAR, there’s a little bit of activity at the moment, with some tenders out there on the market, although nothing dramatic.’
Platt suggested that there could be a focus on fire-fighting at the show. ‘I think fire-fighting is getting a lot more attention from local governments,’ he said. ‘That’s an area that the lessors are not participating in as yet. We’ve had conversations with various parties about how we could assist and we would like to get into that business,’ he revealed. Leasing could be useful in fire-fighting because of its ability to provide new technology without requiring a large capital payment, Platt explained. ‘People are realising that newer technology with more capabilities is critical, along with having more aircraft to protect property and lives,’ he said. ‘I think if there’s any trend for this show and other shows over the next year or two, it will be a greater focus on fire-fighting.’