June 19, 2015 / 4:23 PM / 2 years ago

Helicopter makers upbeat on market despite oil-led slump

PARIS (Reuters) - Top U.S. and European helicopter executives said this week that the oil price-led commercial helicopter market slump would be temporary and that they will keep investing in new technologies given the sector’s positive long-term outlook.

Visitors look at A H160 of Airbus Helicopter on display during the 51st Paris Air Show at Le Bourget airport near Paris June 17, 2015. REUTERS/Pascal Rossignol

The downturn will likely last 18 to 24 months, Sikorsky Aircraft’s new president, Robert Leduc, said at Paris Airshow, adding that he fully expected demand to rebound at some point.

United Technologies Corp’s (UTX.N) announcement this week that it would sell or spin off Sikorsky was not a sign of enduring overcapacity in the market but rather a strategic move to focus on its supplier role, Leduc and other helicopter executives added.

The optimism about a recovery was reflected in comments by the head of Textron Inc (TXT.N), who said the company was not interested in selling Bell Helicopter.

“We love our helicopter business,” Scott Donnelly said. “It’s a profitable business, it’s a great technology business, we’re investing a lot. It’s always going to go through cycles like every business in the world.”

Airbus Helicopters used the Paris show to launch a new heavy helicopter for civil customers. Chief Executive Guillaume Faury said the oil price slump had caused some delivery deferrals but had also prompted customers to seek more efficient models for future demand.

“It’s triggering efforts from customers to reduce their costs,” Faury told journalists.

The oil price LCOc1 is down almost 40 percent from a year ago, with Brent crude trading close to $63 a barrel.

Sikorsky’s Leduc said sales to the oil and gas sector accounted for about 80 percent of its commercial sales, but that demand in other sectors remained solid, including VIP transports and emergency medical services.

He said overall he was encouraged by the company’s $49 billion order backlog, largely in U.S. military programmes that account for about 70 percent of the company’s business as it is the Pentagon’s biggest helicopter supplier.

INVESTING FOR REBOUND

Bell Helicopter President and Chief Executive John Garrison declined to estimate how long the downturn would last but remained upbeat about longer-term demand and said the company was continuing to invest in new products and technologies to ensure it was well positioned when the market recovered.

Sales to the oil and gas sector accounted for just 12 to 15 percent of company revenue, but lower oil prices were dampening demand for new aircraft in the Middle East and other countries highly dependent on the sector, he told Reuters at the show.

He said Bell saw a strong correlation between worldwide GDP growth and helicopter demand.

“If you believe that the economy’s going to continue to grow on a global basis, and we do, growth will return in our segment,” he said.

Leduc said Sikorsky hoped its investments in autonomous flight control systems and automatic health monitoring of aircraft would lift future commercial sales. It planned to develop a new medium-lift helicopter around 2020.

Aviation leasing company LCI, part of Libra Group, moved into the helicopter leasing market in 2012, where it competes with GE-owned Milestone (GE.N).

Chairman Crispin Maunder said it was fortuitous in light of the oil price collapse that LCI had focused on the medium side of the market rather than the larger models that typically serve the oil and gas industry.

“The oil price is creeping up gently,” Maunder told Reuters. “We see it coming back and we have heavy helicopters on order from 2017 onwards.”

He said the company aimed for a helicopter portfolio with around one-third exposure to oil and gas, one-third to emergency and medical services and one-third serving other markets.

(This version of the story corrects to remove company ticker LIGL.SI for Libra Group Ltd in paragraph 16, which is a different company than the Libra Group associated with LCI.)

Editing by James Regan

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