HELO MARKET TRENDS
Helicopter manufacturers step up corporate use capabilities
Speed, range, pax comfort, all-weather availability dominate new civil designs.
By Richard Aboulafia
VP Analysis, Teal Group
AgustaWestland's GrandNew. The company's long-running AW109 series has benefitted from aggressive new variant development.
For decades, the civil helicopter market was the 2nd smallest aviation segment, just above the equally stagnant trainer aircraft market.
Turbine-powered civil helicopter deliveries averaged just $2 billion annually (in 2011 dollars) between 1988 and 2005, with very few signs of any growth.
Yet in 2005–08, the industry experienced an unusual transformation. In 2006, deliveries rose to 573 helicopters, worth a record $3.3 billion. Deliveries in 2007 and 2008 set new records each year, with 2008 coming to 859 deliveries worth $5.4 billion.
Inevitably, the world economic downturn had an impact on this market. Deliveries fell 13.8% by value in 2008–10, and 2011 looks set to fall another 5%. But demand has stabilized and growth looks set to resume next year. Thus, the low point of a cyclical downturn induced by the worst economic disaster since WWII will be higher than any year seen in this market before 2007.
There were a myriad drivers behind this strong growth in the civil rotorcraft market. High energy and resource prices, particularly for oil, have been the biggest factor. Exploration and extraction are getting more expensive as operators look to more distant oil fields and mine sites to meet growing raw material needs. Rotorcraft play a key and irreplaceable role in exploiting these remote sources.
The next biggest growth driver has been public sector demand, including law enforcement, emergency services and border patrol. The experience of Hurricane Katrina and other seemingly more common and severe natural disasters confirms a basic fact—helicopters are the single most survivable and robust part of the transportation infrastructure.
They are essential for disaster relief, medical evacuation and community recovery. The diversion of National Guard airborne assets to Iraq and Afghanistan further increases the requirement for nonmilitary helicopters to be available for domestic and local needs.
Federal counterterrorism and homeland security grant money is helping states and municipalities afford new machines.
Corporate demand has also provided a boost to the industry, although it is the part of the market most affected by the present downturn. Strong corporate profit growth quintupled business jet demand between 1993 and 2008. While helicopters have a much narrower customer base due to their shorter range and slower speed, that customer base is better able than ever to afford new models.
Arriving in late 2012, this new medium twin will challenge AgustaWestland's AW139.
On top of these 3 primary drivers, civil helicopter sales have been boosted by emerging market demand. Sales to China and India have been increasing, although numbers are limited by infrastructure concerns.
China in particular shows enormous promise thanks to airspace liberalization. In Feb 2011 Chinese aviation authorities opened its low-altitude airspace to civil helicopter operators.
Russia also offers some promise, primarily due to high resource prices. The country has fewer than 2000 civil helicopters, and only half are in flyable condition. Domestic production is limited by product support and finance concerns. Imports of new and used Western machines are a growing alternative.
Given the diverse drivers behind civil helicopter demand, it is almost impossible to forecast future market requirements. There is no single metric such as GDP, world trade figures or corporate profits that can be used to anticipate civil helicopter demand.
In a conservative estimate, Teal Group forecasts a slow market recovery followed by a demand plateau, with only modest growth after deliveries reach their 2008 peak (in 2015–16). All told, the group forecasts 9449 turbine-powered civil helicopter deliveries, worth $50.3 billion, during 2011–20.
Europe's 2 civil helicopter primes are now the top players in the market.
The biggest players in this enlarged market are Eurocopter and AgustaWestland.
These 2 European manufacturers will hold 41.0% and 30.3% by value (respectively) of the civil market over Teal Group's 2011–20 forecast period.
Eurocopter achieved its number 1 spot in 1992, shortly after it was created in a merger of Aérospatiale and MBB's helicopter assets. While it was beaten for that spot by Bell for a few years in the mid-90s, its market share has averaged about 43% by value, with an all-time peak of 52% of the market in 2003. However, AgustaWestland's rise since that year has been largely at Eurocopter's expense.
There's no great secret to the success enjoyed by these 2 European companies. Both primes are willing to spend more on developing new products (and in AgustaWestland's case, acquiring them too) and creating a comprehensive product range. As a result, their profits have suffered (or remained minimal), as their market shares have grown.
This process mirrors Airbus's story in commercial jetliners, except that neither US helicopter prime has the wherewithal to copy Boeing and hold the line at a 50% market share.
Both European companies need to update their new product development roadmap continually in order to maintain their strong market positions.
Over the past 14 years, Eurocopter has consistently updated its product line with the EC series, starting with the EC 120 and including the EC 130, 135, 145 and 155. The next step will be the EC 175, a joint venture with Aviation Industries of China II (AVIC II)/Harbin Aircraft.
This PT6C-powered twin made its first flight in Dec 2009, with deliveries scheduled for Dec 2012, and will compete with AgustaWestland's AW139.