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Choose Wisely: Factors to Consider When Buying a Commercial Helicopter

A number of readers have contacted Helicopters to aid in their research on the best types of machines available in the marketplace. Helicopter type selection requires intense thought because commercial choppers generally must accomplish a broad selection of tasks from VIP travel to slinging loads, bucketing, longlining, cargo carrying, training and a host of other unique applications.
Sometimes the selection process is simplif


April 2, 2008
By Ken Armstrong

Topics

A number of readers have contacted Helicopters to aid in their research on the best types of machines available in the marketplace. Helicopter type selection requires intense thought because commercial choppers generally must accomplish a broad selection of tasks from VIP travel to slinging loads, bucketing, longlining, cargo carrying, training and a host of other unique applications.

Sometimes the selection process is simplified when a helicopter is purchased for one dedicated use, such as executive transport. But for most machines we need to consider aspects such as: customer wishes, rotor system design, special equipment requirements and their adaptability/availability for each type, utility or executive interior, location/proximity of service centres and the price associated with purchase and operating costs – to name a few.
When a helicopter will be used by only one customer or owner, the selection process is simplified. The operator simply selects the machine that best meets the requirements and budget limitations. But most operators will need to consider a broad spectrum of applications and opt for the machine that will best meet their needs – a decision that will almost always involve some compromises.

choose1
Most buyers opt for utility interiors because they are cheaper and easier to maintain.

In the case of existing hangarage, will the rotor system fit?  Bell stayed with two-rotor-blade designs for decades so their machines could fit almost anywhere – and realized great market success with their products. Today, the demand for greater efficiency and performance has resulted in multi-blade rotors. It’s fit versus function. Which will best suit your needs? Most buyers opt for utility interiors because they are cheaper and easier to maintain. If your equipment needs to appeal to higher-class occupants and there is no risk of firefighters or “rig pigs” torturing your interior, you might select a posher place to enclose them.

Will you buy new or used? Previously-owned helicopters are initially cheaper to purchase, but the higher costs for maintenance, requirement for increases in stocked parts, and potential downtime and unrealized revenue due to unforeseen breakdowns can escalate operating costs. Buying new brings a warranty period that essentially locks in all prices and promises much greater dependability for a period of time. Market prices fluctuate greatly on used machines, and our current industry boom drives up their prices. So do your research on all of the costs associated with ownership and choose wisely. For a look at business opportunities that have a high probability of success, refer to Bill de Decker’s article Not All Opportunities Are Created Equal in the summer 2007 issue of Helicopters as well as Aging Is Not For The Faint-hearted in the spring 2007 issue, where he discusses the impact of the aircraft aging process on availability, reliability and operator costs.

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Various used helicopters (and some new) have airworthiness directives (ADs) and other requirements that require grounding from time to time to accomplish sometimes expensive testing/replacement of components. Some of these tasks require special equipment not typically found in the field.  Potential purchasers should research the existing ADs and requirements on the types they are considering to ensure the procedures will not unduly interrupt their revenue-generating operations.

Most, but not all, helicopters have competitors with similar performance parameters. A few helicopter types fill a niche market and essentially crush any competition, resulting in huge sales. Robinson’s tremendous success is a good example. If your needs are met with a product that provides all the answers, your selection will be easy – but most purchasers will be well advised to look at a broad selection of criteria before they sign a helicopter financing contract.

choose2
Before you buy, you should consider all of the potential possibilities for revenue you are
likely to encounter.

One major deliberation should be the true price of ownership. Direct operating costs (DOCs) and indirect overhead are often quite different among machines, making some helicopters relatively expensive to operate. For instance, one class of turbine twins with equivalent performance have DOCs that are more than 30 per cent different. Also, helicopters with poor safety records can attract substantially higher insurance premiums. Not only are these costs widely divergent, but, there is also a considerable difference in support from each of these helicopter manufacturers for their parts. For many years one company has stood out in customer support and, largely as a result, has sold more helicopters. But this has backfired to a degree due to the Iraq war; the demand for parts in that theatre has created supply problems for our operators, since that company must place a priority on parts production for the war effort and so has been unable to keep up to civilian demands. More than one company has encountered these supply problems.

Operators with fleets also need to consider their various helicopter types and manufacturers’ mix. Some buyers opt for one type of helicopter to reduce the overhead costs related to parts stocking and storage. Other benefits of a one-type fleet are reduced management needs and simplified staff training for both pilots and engineers. Nonetheless, some operators opt for more than one helicopter type and still others for more than one manufacturer. Each of these diversifications will likely increase the fleet’s capabilities, but overall operational costs will also rise significantly. The question is, will these increases be eclipsed by much higher profits with fleet diversity?

Another issue is the future resale value of the helicopter. Some types hold their value much better than others and the price for which you eventually sell your helicopter will greatly affect your future bottom line. So helicopters that depreciate quickly are of less value in the overall financial picture. Moreover, market conditions can greatly affect the residual value years down the road. A case in point is the VIP Bell 206 I flew for two years that was valued at $225,000. After my departure, the company decided to sell it. Unfortunately, this occurred during a slump in the industry and this well-equipped machine with low-time components sold for $130,000. She now serves in the corrosive environment of an offshore tuna boat. Timing is everything! This leads to the observation that it is better to buy when the industry is in a slump – although most will find this difficult to achieve due to possible revenue challenges.

Some helicopter purchases may be dictated by special-equipment availability. If you are winching harbour pilots to and from ships, it will likely be necessary to acquire a twin-turbine machine with a hoist and a Category A capability. While a Hughes (MD) 500 might seem adequate for the task, the safety and contractual requirements will likely dictate specific equipment and capabilities that go beyond that efficient little single-turbine. Even the simple and specific contractual need of having a wire strike protection system can preclude some helicopters that do not have  installation approval for this equipment. Similarly, many contracts have specified the need for a Bambi Bucket for fire suppression – which leaves helicopters without a cargo hook unable to fly these lucrative missions. Before you buy, you should consider all of the potential possibilities for revenue you are likely to encounter, and ensure your choice can meet those needs.

Are you planning to purchase a new and exotic helicopter and be the first on the block to boast of this glorious acquisition? Think again. Don’t let emotion and perceived prestige govern your purchase. The prime goal of helicopter acquisition should be selecting the model that will maximize your profits and minimize your hassles – not for “show and tell.” If you are searching for bragging rights at the bar, you may be in the wrong business. Another issue with purchasing a new commercial helicopter is the scarcity of trained engineers and pilots available to crew the machine. While this is not insurmountable, it is simply one more concern requiring planning and effort.

Because most operators will finance their equipment, the availability of credit for a given helicopter may also be a factor in the selection process. Excellent terms, long amortization and flexibility are often go-no-go decisions. Options exist for bank, lending institutions and manufacturers’ programs. Beneficial terms can often swing a deal. Licensing can be a consideration and a would-be buyer should ensure that the helicopter type can be licensed in the country of operation as many ex-mili-tary and foreign machines are not approved in Canada. Hopefully, these guidelines will lead to a successful shopping experience and minimize costs while maximizing profits.

Ken Armstrong has a number of years’ experience in aircraft sales and has been involved in approximately 100 transactions.



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