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Editorial: Fire and Rain

The results of a recent Helicopters magazine poll at www.helicoptersmagazine.com show that almost 30 per cent of respondents are having a better year than they expected. That sounds positive; but it also means that the other 70 per cent are experiencing pretty much what they thought would happen, or worse. And, as we entered 2009, Canadian helicopter operators were not particularly optimistic.

Overall, no one is doing very well, especially compared to the last two years. Some operators are reporting that business is OK, but virtually every fleet in the country has been underutilized so far this season.

In recent years, many operators were able to diversify their operations, allowing them to weather cyclical downturns in specific sectors, without suffering serious consequences. This year, many of those diverse activities have either dwindled or outright disappeared.

The forestry industry, in decline for many years, seems to have hit rock bottom this summer. Many are saying they’ve never seen it so bad. In June, the federal government announced a $1 billion aid plan for the pulp and paper sector, which will likely bolster the medium- to long-range health of the industry, but helicopter operators in the here and now are unlikely to see any real benefits before 2011.

Almost all of the surveying work has dried up. There are reports of some junior mining companies doing work in Alberta, Northern Ontario and elsewhere, and a couple of larger companies are still working, albeit on a greatly reduced scale. There are isolated areas of activity. In early July, EagleRidge Minerals Ltd. announced that field exploration crews had been mobilized to Newfoundland project sites with new project areas offering great opportunity for the discovery of gold and base metals mineralization. In these kinds of situations, however, work is essentially moved from one part of the country to another, so while one area gains, another loses.

The price of oil is slowly recovering, and as it does, so will associated helicopter work. Nevertheless, here again, there may be some changes on the horizon when it comes to where the work will be found. Last month, Manitoba dethroned both Saskatchewan and Alberta as the most attractive Canadian province or territory for oil and gas investment, according to an international survey of petroleum executives and managers taken by the Fraser Institute. It’s an area to keep an eye on.

Historically, the fire season has been extremely important for most helicopter operators. But, because of its unpredictability and the abundance of work in other areas over the last couple of years, some operators had moved away from flying forest fire operati’ons in favour of other kinds of work. By late spring, many of those operators were scrambling to get back into the firefighting business, sourcing equipment and experienced crews in the hope of salvaging their year.

Cool and damp conditions prevailed in large parts of the country throughout the spring. By late June, while the forest fire threat was above normal in Alberta, British Columbia and Saskatchewan, it was well below normal everywhere else in Canada. In general, hot, dry weather in the west will likely help the region get through the worst this season.

The shortage of work in the east has created a surplus of available resources. This has been true across most sectors this year and has already had some damaging effects. Noticeably, there’s been a downward pressure on hourly rates. Customers are shopping around for cheaper and cheaper prices. Some operators who find themselves with cash flow problems are undertaking work at cut-rate prices. The question is: Can these cut-rate operators save themselves with this strategy, or are they just delaying the inevitable – and making things worse for the entire industry?

There are certainly many operators who flatly refuse to play the game. Citing safety issues and the overall health of the business, they would rather see their ships sit on the ground than fly at below fair industry rates.

Running any business at a loss is bad business; it usually means that the end is near. And that will be the case with certain operators in Canada before the end of 2009. There are a few companies already planning to close their doors, and there will likely be a few more before all is said and done. For the rest, it’s going to be Mother Nature who in the end will make or break the season. Let’s all hope she co-operates.

Your comments and opinions are always welcome. You can contact me at dmccarthy@annexweb.com.