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A Bullish Market Predicted: Honeywell Looks to the Future

Strong interest in light single and intermediate multi-engine platforms are key factors in what Honeywell Commercial Aerospace suggests should be a generally bullish helicopter market for at least the next five years.

Worldwide sales of 4,450 new civil helicopters, particularly turbine-powered models in response to many operators’ calls for more power and efficiency, are forecast through to 2012. Moreover, sales could top 10,000 over the next 10 years due to increasing interest by corporate operators as well as air ambulance and security services, which are expected to account for some two-thirds of new acquisitions over the forecast period.

“Honeywell Aerospace’s 2008 survey has reaffirmed avionics capabilities, performance and power, along with cabin volume, as the top criteria,” explained Mike Cuff, Honeywell vice-president, Helicopters & Surface Systems. “The decision to acquire new helicopters is driven primarily by the age of  current aircraft, which is usually reflected in an operator’s desire for better technology, more range, more power, cargo or passenger capacity and lower operating costs.”

Released at HAI’s Heli-Expo 2008 in Houston, the latest outlook is the 10th by the Phoenix-based company. While such forecasts are obviously vulnerable to economic shifts, previous versions have proven “directionally” accurate. Survey results for the past five years have consistently improved. Civil deliveries last year were up 25-30 per cent from 2006 and are expected to be strong again this year as manufacturers spool up production to satisfy strong demand. In fact, Honeywell says 2008-2012 sales should be up to 50 per cent higher than in the previous five years.

“The 2008 outlook projects annual turbine helicopter delivery levels exceeding 800 units in the near term, with survey findings indicating that latent demand could drive rates of over 1,000 units a year even if capacity limits are not encountered,” Cuff said. “The gains seen in the 2008 outlook are also supported by potential new OEM entrants offering affordable high-value platforms, stimulating demand and drawing new operators into the turbine segment.”

Popular single-engine aircraft include the Bell 206 series and the 407, the AgustaWestland A119, the Eurocopter EC120, EC130 and AS350, and the MD 500 and 600 series. Twin-engine operations include the Eurocopter EC135 and AS355, the Bell 427 and 429, the AgustaWestland A109 series, and the MD 902 in the lightweight category, while the intermediates include the Sikorsky S-76, the AgustaWestland A139, the Bell 412 and 430, the Eurocopter BK117, EC145 and AS365 series and the EC155.

At the heavy-lift end of the spectrum, as few as 2 per cent and no more than 5 per cent of operators – depending on which market they are in and when they are likely to buy – are contemplating new aircraft through to 2012. However, Honeywell said that given the volume of petroleum-sector support and exploration being handled by large fleet operators, “demand for this class of helicopter as well as the intermediate class may be somewhat understated.” The bulk of projected demand for heavy helicopters is concentrated in Asia, Africa and the Middle East.

Overall, there is evidently little operator interest in trading up. Approximately 80 per cent of the more than 1,000 chief pilots and flight department managers surveyed indicated they planned to replace older aircraft in the same weight and price class. The only segment with “significant” trade-up plans were light-twin operators, 47 per cent of whom apparently are contemplating a move to the medium class.

More than half of all European purchases since 2003 have been twin-engine helicopters (54 per cent of 2008 and subsequent years’ plans involve multi-engine platforms, mainly twins), but the trend is more modest on this side of the Atlantic. Although down 10-11 per cent in the past three years, fully 59 per cent of North American operators’ plans involve single-engine aircraft; the corollary is a commensurate rise in planned upgrades to twins, but even at that only 23 per cent of the latest survey respondents signalled a move to twins from singles.

The motivation in Europe, of course, is that regulatory initiatives and proposals continue to drive the twin market due to perceived safety advantages. Regulators there have pressed the Montreal-based International Civil Aviation Organization to buy in, but ICAO has encountered strong resistance in Canada and the U.S., where most flying is over less densely populated areas. Operators here also cite higher operating costs, particularly fuel.

North America remains the hottest market, accounting for 40 per cent of planned turbine purchases in 2008-2012, with most of the gain attributable to corporate operators who plan to buy light twins. North America also will continue to dominate the light-twin market.

In Europe, the fleet replacement and expansion rate this year is forecast at nearly 27 per cent, a significant rise from 20 per cent last year with multi-engine platforms the preferred option as the new regulatory regime matures. Some 54 per cent of purchases over the next five years are expected to be multis and Europe also is expected to account for approximately 20 per cent of the global market for new turbine-powered helicopters over that
period.

Even so, Honeywell added, “the spike in planned orders and deliveries of twin-engine helicopters has softened and interest in less costly single-engine models remained fairly steady in the past two years.” Some of the overall gain is due to economic growth in Russia and Eastern Europe, bolstered by the strong euro. General utility and corporate use were most frequently mentioned by European operators, followed by EMS and law enforcement. In Latin America, 50 per cent of planned purchases are for singles but this is expected to slip in favour of twins. Operators in Asia, the Middle East and Africa strongly favour twins, accounting for between 65 and 75 per cent of their markets.