Oil price plunge could leave helicopters sputtering

Thu Jan 15, 2015 1:00am EST
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By Lewis Krauskopf

NEW YORK Jan 15 (Reuters) - Tumbling oil prices are starting to ripple through the helicopter industry, which depends on oil companies that shuttle their crews to off-shore sites for a big chunk of its business.

Off-shore oil drilling and production in regions such as the North Sea and Gulf of Mexico have been a key source of demand for helicopter makers including United Technologies' Sikorsky unit, Finmeccanica's AgustaWestland and Airbus Helicopters. Textron's Bell Helicopter could soon become a bigger player with a new helicopter.

The oil and gas industry now accounts for as much as 40 percent of the roughly $6 billion annual sales of helicopters for civil use, making it the biggest non-military segment, according to aerospace research firm Teal Group.

While manufacturers have not indicated that the plunging price of crude has led to canceled orders or reduced production, some warning signs are emerging.

During United Technologies' annual outlook meeting last month, Sikorsky president Mick Maurer said falling oil prices would "put some short-term pressure on our commercial business." Oil and gas represents two-thirds of Sikorsky's non-military business, Maurer said last March.

The oil slide has already taken its toll on shares of helicopter transport firms, which along with leasing companies are major customers of the manufacturers. With their own fleets, these companies fly crews and material to offshore sites for oil companies. Their helicopters are also used for search-and-rescue missions and other purposes.

Since oil turned south in mid-2014, shares in the big transport firms have followed. CHC Group has dropped 70 percent, Era Group has slumped 29 percent and Bristow Group is down 24 percent. By contrast, the S&P 500 index has gained about 3 percent over that time.

"It's a pretty unsettled time in our industry right now," said CHC spokesman T.R. Reid, adding that CHC remained optimistic about long-term demand. "The industry is moving further and further offshore," Reid said.   Continued...