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Purchase scrutiny the trend in helicopter sales: Foley

Jan. 20, 2012, Sparta, N.J. - While helicopter buyers have traditionally been financially conservative and cost-conscious, the next decade will usher in a new era of tightened purchase scrutiny. General aviation analyst Brian Foley still foresees plenty of sales to be had, "But most if not all will require an indisputable, virtually airtight business-case justification. This could prolong the sales process, so smart buyers and sellers will plan further ahead.”


January 20, 2012
By Carey Fredericks

In addition, Foley advises rotary-wing manufacturers to provide better
evidence that fleet replacement or growth is a sounder financial choice
than it might appear at first glance (as is buying new vs. used). This
could include such things as reduced ownership costs or showing how a
new model's additional utility can cut expenses or increase revenue —
all the classical quantitative arguments.

Foley sees these economic pressures affecting virtually every segment of the market in some way. For example:

SAR/EMS. Whether privately or government funded, budget constraints
will drive these services to become more selective and purpose-oriented
in their procurement process.

Law Enforcement. Local, state and federal agencies face tighter
budgets, requiring future purchases to be even more deliberate and
pragmatic.

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Commercial Transport. Never a large market, this sector has the
potential to become even more successful by lowering ownership costs to
aid the business model.

Offshore Gas & Oil. This market is both huge and hugely
misunderstood. Given the industry's enormous profits, one might
conclude that these companies can buy new aircraft on a whim. In
fact, their procurement process is probably the most disciplined and
analytical of any segment, made possible by their vast management and
data resources. "If it's not saving or making money, they're not
interested," Foley says.

Corporate. One possible bright exception on the civil side is corporate
helicopter operations, where the paramount importance of executive time
savings makes cost somewhat less of an issue. Still, even the largest
and most profitable corporations were affected by the economic downturn
and many are still postponing purchase decisions.

Military & Defense. Throughout its historical ups and downs, the
helicopter industry has been sustained by defense programs either
directly or indirectly. But now worldwide military budgets have come
under pressure as countries work to balance their books. For example,
the United States (which is the world’s largest customer) plans to cut
$600 billion over the next decade. The trend will be for military
services to become more value-driven in procurement and to opt for
off-the-shelf solutions when they can.

In spite of this more challenging climate, Foley is very optimistic for
the industry, saying, “We anticipate future helicopter sales will trend
upward nicely over the next few years. But that's contingent upon the
manufacturers' ability to help customers with all the necessary
information and justification needed to make their numbers work. Value
will remain the future quest and mantra guiding helicopter purchases —
you can quote me on that.”


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