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OEMs, Experts Exude Market Caution

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Manufacturers and leading rotorcraft valuation analysts expect the markets for both new and used civil helicopters to remain tight in 2023, squeezed by a triumvirate of pressures including inventory, inflation, and supply chain constraints.

While the civil market has mostly returned to pre-covid normal in terms of overall new helicopter sales and/or flight hours, price increases have placed increasing pressure on the already constrained preowned market. Meaningful forecasting in this environment, clouded by continuing economic uncertainty, is difficult, so much so that, for the first time in memory, Honeywell will not issue its turbine helicopter sales forecast at this year’s Helicopter Association International (HAI) Heli-Expo.

“[The helicopter market is] actually kind of a muddy picture,” said Jason Zilberbrand, president of aircraft valuation and consultancy Vref. “You know, it’s really difficult I think for people to figure out what’s going on, what they should do.” 

Jason Kmiecik, president of HelValues, concurs. “It is very difficult for anybody to say how 2023 is going to pan out,” he noted.

For the OEMs already reporting 2022 civil sales results, the trend appears to indicate more of the same, with perhaps small increases in production, but nowhere near enough to take pressure off the used market.  For 2022, Airbus Helicopters said it maintained its 52 percent share of the civil and para-public helicopter market in 2022 with 374 orders and 344 deliveries. Customer fleet hours, meanwhile, returned to pre-pandemic 2019 levels. Demand for the company’s turbine singles and light twins again led the way, collectively accounting for 342 orders, while demand for Airbus’s super-medium and intermediate helicopters, the H175 and H160, remained weak, drawing orders for just eight and 12 examples, respectively. 

“Our orders came from 203 customers in 48 countries, underlining the importance of our global network, as well as showing that in uncertain times, the role of helicopters is more essential than ever,” said Airbus Helicopters CEO Bruno Even. “[2022] was a year in which Airbus Helicopters solidified its recovery, in a context of instability with the war in Ukraine and a fragile supply chain.”

Bell Textron’s civil deliveries surged, but largely on the popularity of the high-production, low-margin Bell 505 light single. Overall, for both military and civil sales, Bell’s revenues dropped 4.9 percent from its performance in 2021, to $3.1 billion, while the segment reported a profit of $282 million. Bell said it expects modest growth in 2023 revenues—to about $3.3 billion—with comparable profitability. Bell finished 2022 with a backlog of $4.8 billion and delivered 176 civil helicopters, up from 156 in 2021. The totals included 83 Model 505s and 49 Model 407 singles, as well as 32 light-twin 429s. Deliveries of 505s posted the largest gain, increasing from 63 in 2021. For the period, deliveries of Bell 412s more than doubled, from seven to 15.

Both Airbus and Bell deliveries benefitted from the strength in the singles market, where “government agencies and municipalities are buying this stuff like Tic Tacs,” said Zilberbrand. Demand for both new and used single-engine turbine helicopters remains strong and supply is tight, according to market consultancy Aero Asset. It reported that the preowned singles market remained tight for most of 2022 worldwide, with some signs of loosening in North America during most of the year and in Europe during the fourth quarter. Sales for those models fell 12 percent in 2022 compared with 2021, according to Aero Asset. For the year, 212 units sold for a collective $387 million—down 15 percent by value from 2021.

VIP singles accounted for 60 percent of all transactions in 2022 while the supply of helicopters configured for emergency medical services remains at an all-time low. The number of utility helicopters for sale dropped 30 percent year-over-year. The supply of popular models remains tight, with just five months’ supply of the Airbus AS350B3/H125, Bell 407/GX/P/I, and Airbus EC130B4/H130 remaining at 2022 trade levels. Leonardo’s AW119, while ranked last, still showed a strong absorption rate of 10 months. 

“North American buyers accounted for nearly 60 percent of all single-engine transactions in 2022 while retail transactions in Europe fell 40 percent year-over-year,” said Aero Asset v-p of market research Valerie Pereira. “Inventory for sale plummeted 40 percent year-over-year, but rose in the fourth quarter and actually tripled in North America between the second and last quarters of 2022.”

But that inventory doesn’t stay on the market long, said HeliValues’ Kmiecik. More than 90 percent of the adjustments made in HeliValues’ Official Helicopter Blue Book from the Q4 2022 pricing review have recently increased. “The supply of in-demand aircraft will continue to diminish,” he said. “Some of what’s remaining on the market are aircraft that buyers have picked through and have passed on already. We’re starting to see a lot of emails from brokers looking for off-market aircraft because there’s more demand than supply on certain models.”

On the singles side, Kmiecik sees hot demand for Airbus AStars, Bell 407s and 206L-3s and L-4s, and newer MD 500 series aircraft while owners increasingly part out older aircraft. The light twin market is also very active for almost everything from the Airbus EC135 and EC145 models.  For medium twins, low-time Sikorsky S-76C+ and C++ models are finding homes in the VIP market; however, from a broader perspective, demand for S-76 models has diminished as they leave the offshore energy sector.

In the intermediate twin space, although the price of used Leonardo AW139s has dropped slightly in the last six months, the demand for leasing has increased. “Lease rates are going up faster than the [sales] values are dropping,” said Kmiecik. “The 139 is still one of the most also popular aircraft because it has proven itself to be a very reliable aircraft. Everybody loves it, they love flying in it, they love flying it, they love working on it.”

Leasing activity also is increasing on the heavy Airbus EC225LP and the Sikorsky S-92A, driving down supply and stimulating an eventual price increase, according to Kmiecik. “We are finally starting to see prices rise for the first time in years for the heavy class of helicopters,” he said, adding that recent transactions in the third and fourth quarters of 2022 drove up valuations on both the EC225LP and S-92A. EC225LP sales involved the utility or search and rescue sector, and S-92A sales remained in the offshore energy transport sector. Offshore’s increasing sole reliance on the S-92A as its main heavy twin-engine helicopter could pave the way for the Bell 525 as a second-source aircraft, particularly in the North Sea, depending on its eventual sales price and timing of its final certification, he said.

The likelihood that OEMs will significantly boost production to alleviate scarcity across all categories remains low, according to the experts. “I think they’re [the OEMs] strapped for resources,” said Zilberbrand, who doesn’t see supply and prices getting back to normal until 2024 at the earliest. “I think a lot of folks just didn’t come back after Covid and it’s going to reduce capacity. They can’t get stuff up fast enough and the stuff that they’re getting out is having more issues post-delivery.”

Kmiecik thinks OEMs will remain cautious about raising production in the face of economic uncertainty. “Given that behavior, odds are the used market will remain tight for newer and current production models,” he explained.

Longer-term, Zilberbrand thinks the market for turbine singles will likely erode in the face of eVTOLs. “While currently used turbine singles are worth their weight in gold from an operational standpoint, they’re getting really expensive to fix,” he noted. “We’re going to get to this point where [eVTOLs] are going to be forced on us. Insurance premiums are not getting any cheaper and a lot of stuff’s getting past the [maintenance] point of no return.”