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Hope for the Best

Across the Canadian helicopter industry, 2007 and most of 2008 were stellar years. Business was booming and many operators found themselves scrambling to keep up with the demands on their physical and human resources. There weren’t always enough aircraft available, and pilot and maintenance engineer shortages compounded the situation. Staff turnover increased, as skilled helicopter employees were lured away, and then away again, by competitors offering more attractive packages. Some companies even had to turn business away.

As we enter 2009, the overheated business environment has suddenly turned chilly. The question that Canadian operators are asking themselves now is, how chilly and for how long?

The answer, of course, is that it all depends. I’ve had many conversations with operators across the country recently and while some have already been hit hard, others haven’t, and are not panicking… at least, not yet.

The logging industry has seen its share of trouble over the past few years and now the demand for oil and mineral exploration services has plummeted. Mineral exploration spending fell nearly 12 per cent in British Columbia in 2008 because of the drop in commodity prices. Mining companies continue to suffer from a lack of liquidity with financing from lenders and investors yet to reappear. Similar situations exist in Alberta, Saskatchewan and other provinces, and the industry is wondering how it is going to keep exploration programs running in 2009.

Operators whose bread and butter of late was coming from exploration contracts are looking at a poor season. But companies with more diversified activities will likely see less impact. It is even the case that companies such as CHC, with a business model that focuses on oil production support rather than exploration, will continue to fly as much as ever.

Those with government contracts will also continue to work, as will those working with utilities such as hydro, telephone and telecommunications companies. Traffic ENG and parapublic flying are likewise not going away. Similarly, flying related to environmental monitoring will not be affected for projects that are already up and running.

In general, most of the operators whom I’ve spoken to recently are expecting a slower but not necessarily bad season.

Some things never change and the fire season will, for most, have the biggest impact on the year. Last year’s weak fire season was in many cases offset by all of the other activities. Without those activities, the fire season will regain and maintain its primary importance.

One operator explained it to me this way: If the fire season is good and the oil exploration and seismic contracts are still down by the end of the year, it will be okay. And if the fire season is bad, but oil exploration and seismic are back, then that will be okay too. It’s only if there is a double whammy, that the year will be difficult.

The upshot of all this is that many operators are still cautiously optimistic. All are expecting a slower season, but with all of the activity over the last few years, there are some who are quietly welcoming it.
There is one operator in the North who recently told me that for him it’s been much too busy over the past couple of years, and he’s hoping to get back to normalcy. There are quite a few other operators out there saying that it’s about time things cooled off and that what we are seeing is really a correction.

For some, it’s like they just got a time-out – time to collect themselves and get organized. The helicopter business is a long-term proposition and success and failure is measured over decades and not over a year or two. The business has been dealt a downturn. This can provide opportunities for retooling or maybe some discretionary maintenance.

The industry has very quickly become conservative, with operators holding off on purchasing new aircraft, building hangars or undertaking other expensive projects. This is already having an enormous negative impact on many OEMs.

Certain companies have undoubtedly overextended themselves on their capital investments and are being forced to scale back quickly. In some cases, employees will be laid off and aircraft sold. Operators who ramped up aggressively, riding what everyone predicted would be a long-lasting wave, are now treading water.

All in all, it’s still a wait-and-see game. Everyone is getting ready to go, and ready to deal with whatever comes or doesn’t come their way. As the old expression goes, now is the time to “hope for the best, but also prepare for the worst.”

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