, HOUSTON: Honeywell announced today that its tenth Turbine-Powered Civil Helicopter Purchase Outlook projects deliveries of roughly 4,450 new civil use helicopters during the five-year period 2008 – 2012, driven in part by strong demand for light single and intermediate twin-engine models offering newer technology.
Corporate, emergency medical services (EMS) and law enforcement helicopters combined are expected to account for more than 65% of all new civil rotorcraft sales during the five-year forecast period.
Some key findings revealed by the annual survey of civil helicopter operators’ purchase expectations are:
— Estimated Civil helicopter deliveries were up 25-30% in 2007 and are expected to rise again in 2008, as helicopter manufacturers increase production to satisfy strong demand for new aircraft around the world.
— Civil helicopter sales during the five-year period 2008-2012 are predicted to be up to 50% greater than in the five-year period 2003-2007.
— Global demand could exceed 10,000 new civil helicopters during the 2008-2018 period.
“Honeywell Aerospace’s 2008 survey has reaffirmed avionics capabilities, performance and power, along with cabin volume as the top criteria operators consider when selecting new helicopters,” said Mike Cuff, Honeywell Vice President, Helicopters & Surface Systems. “The decision to acquire new helicopters is driven primarily by the age of current aircraft which is usually reflected in an operator’s desire for better technology, more range, more power, cargo or passenger capacity and lower operating costs. Survey results have now improved for the last five years, and OEMs report strong sales activity supporting our view that helicopter demand has great long range prospects in a growing global economy.”
Near-term increases in demand is supported by ongoing strong worldwide demand for corporate, EMS, law enforcement, oil and gas and utility helicopters, expanding economies in emerging regions, the strength of many international currencies and continued exploration and support activity in oil producing regions.
In North America, law enforcement applications fell back in line with other popular rotorcraft use categories with 20% of all mentions this year, similar to other planned use categories such as Corporate at 20% and Utility at 23%. Emphasis on security and police capabilities remains high but is more balanced with other applications.
EMS applications held steady at 26% of planned new purchases in North America from 25% in the 2006 survey, and is the largest single end use category cited by the survey respondents for new helicopters in the region. Planned purchases for corporate use in North America nearly doubled from 11 % a year ago to 20% of the total in this year’s survey.
“The 2008 outlook projects annual turbine helicopter delivery levels exceeding 800 units in the near term, with survey findings indicating that latent demand could drive rates of over 1000 units a year even if capacity limits are not encountered,” Cuff said. “The gains seen in the 2008 outlook are also supported by potential new OEM entrants offering affordable high value platforms stimulating demand and drawing new operators into the turbine segment.”
Purchase Expectations Survey
The tenth worldwide survey of civil helicopter operators’ future purchase plans builds on last year’s outlook with much stronger demand for new aircraft over the next five years. Purchase expectations rose about 20% measured on the basis of specific new helicopter purchase plans in 2008 over 2007 levels. In terms of fleet replacement and addition %, the 2008 results were up roughly four points on top of a five point gain in 2007.
The survey continues to show that there was little trade-up expectation among the world operator base. Around 80% of new purchases will be made to replace older aircraft in the same size/capability and price class. Only about 16% of operators plan to trade-up to more expensive and capable machines. The only segment with significant trade up aspirations is the Light Twin class with 53% planned trade even purchases and 47% trade up plans into the medium twin class.
Buyer interest continues to improve broadly and there is no indication that a demand decline is likely to occur in the near future. These findings are based on inputs from over 1,000 flight departments. Consistently since 2003, over half of all European purchase expectations have been for twin-engine models. This year’s findings show 54% of purchase plans falling in the multi-engine helicopter class. Regulations requiring twin-engine aircraft on flights over congested areas and other use limitations continue to shape the preferences of the European operators. In a near repeat of last year’s result, single engine models were nearly as strong for the third year in a row at 46 % of expected purchases compared to an average of around 30% prior to 2006.
In North America, where there are no current or pending regulations requiring twin-engine aircraft, 59% of planned purchases are for single-engine aircraft. This actually represents a slide of 10-11% in the popularity of light single models over the past three years. Virtually all the shift in demand went to the light twin engine category which rose 12 points to 23% in the 2008 survey. In Latin America, 50% of planned purchases are for single-engine models. In both regions the higher single engine share has remained relatively stable in recent years but has begun to fall off this year in favor of twins. Operator preferences in Asia, The Middle East, Africa and Oceania strongly favor twin-engine machines maintaining a 65-75% share in the 2008 survey similar to last year’s levels.
“Honeywell’s global demand projections now stand at over 10,000 new Helicopter deliveries in the period 2008-2018 reflecting industry conditions that have continued to strengthen over the last five years” Cuff said.
40% of New Turbine Demand Projected in North America
North America continues to provide the greatest share of demand for new helicopters, accounting for 40% of planned future purchases, a slightly lower share to last year’s outlook. Buying plans were up again in this year’s survey compared to 2007 and 2006, with most of the improvement traced to increased purchase plans for light twin models as a class and corporate end-use applications.
Survey responses indicate that North America will still predominate in the purchase of light single-engine helicopters. On average more than 58% of future new aircraft purchases in this region are expected to be light singles, though this is somewhat lower as noted, than prior trends.
Avionics capabilities, aircraft age, new technology (especially engines), operating costs, cabin volume and fleet commonality were the most frequently mentioned factors by North American operators as to their reasons for planning to purchase new aircraft.
European Fleet Replacement and Expansion Plans Recover
The survey shows continued improvement in European purchase expectations, moving up to nearly 27% fleet replacement/expansion rate in 2008 over 20% in 2007. Broadly distributed buying plans again favors multi-engine machines compared to last year. As we moved further beyond the implementation of the single engine operations regulations in Europe, the spike in planned orders and deliveries of twin engine helicopters has softened and interest in less costly single-engine models remained fairly steady in the past two years. Even so, 54% of five year planned European purchases are for multi-engine models.
Survey responses suggest that about 20% of world new turbine-powered helicopter sales will occur in Europe during the next five year period, an improvement of several points over the 2006 survey share. Some of the gains are attributable to emerging growth in Eastern Europe and Russia as well as the strong Euro. European operators cite regulatory requirements and avionics capabilities as the top reason for acquiring a new helicopter after age. Other important factors are new technology engines, cabin size, performance, reliability and operating cost reductions.
The general utility and corporate use categories were most frequently mentioned by European respondents followed by EMS, and law enforcement.
Asia, Pacific, Africa and Middle East to Replace or Expand More Than 30% of Existing Fleet
On the basis of the equivalent percentage of fleet to be replaced or expanded, Asia, Oceania, Africa, Middle East together have maintained consistently high purchase expectations for the last five years. Operators in these regions expect to purchase new helicopters equal to 32 – 37% of their current fleets during the next five years for replacement and fleet addition. This compares to 25-27% in North America and Europe. Over the next five years, we estimate that up to 22% of total world new helicopter sales will be to customers in Asia / Pacific, Africa and the Middle East.
About 65 – 75% of future demand in these regions is expected to be for multi-engine craft. As in other regions, operators cited avionics capabilities, new technology engines Cabin volume/payload and fleet commonality as key reasons for replacing current helicopters.
In Asia / Pacific, close to 37% of expected purchases will be for corporate applications, followed by oil exploration and support helicopters at 17-18%; EMS and law enforcement trail at 14 and 6% respectively. In Africa / Middle East, oil and gas exploration applications remain most frequently mentioned at just over 42%, followed by corporate uses at 26%.
Latin American Purchase Expectations Recovered Strongly
Latin American expectations fell more than 10 points in last year’s survey after posting a record level in 2006. This year purchase plan levels rebounded to 33% just edging the 2006 level for a new high for the region. Since overall buying plans in the region are relatively high, purchase expectations as percentage of current fleet, coupled with the relatively smaller fleet in this geographic zone, brings Latin America’s total share of projected world new helicopter demand to just under Europe’s and on par with Asia/Pacific.
This region is expected to account for about 18 % of expected five year world demand for new helicopters, up about 4%age points from the lower 2007 survey projection. Approximately 50% of expected new aircraft demand in the region is for single-engine helicopters. Once again, avionics features, modernized engine. Oil and gas support rebounded from unusually low interest levels in 2007 to a more reasonable11% share of demand in the 2008 survey. Corporate end use continues to be far and away the most popular application for new helicopters planned for purchase in Latin America at a 74% level.
Civil Turbine Helicopter Survey Results
The 2007 Turbine Powered Civil Helicopter Outlook is based on Honeywell’s recently conducted customer expectations survey, an assessment of consensus forecasts, review of factory delivery rates and analysis of future new helicopter introductions. The 2008 outlook excludes uniformed military demand for civil helicopters but resulting civil estimates do include government and security force demand.
This year’s survey queried over 1000 chief pilots and flight department managers of companies operating over 2,500 helicopters worldwide. The survey detailed the types of aircraft operated and assessed specific plans to replace or add to the fleet with new aircraft.
The 2008 outlook presents a snapshot of the helicopter business at a point in time and does not reflect unforeseen events such as an unexpected economic downturn, sharp increases in fuel costs, a fuel availability crisis, imposition of heavy user fees or other unfavorable regulations / taxes that could affect results in future years. Demand for new helicopters is also highly price sensitive. Decisions by aircraft manufacturers to offer discounts or raise prices can significantly influence sales activity on affected models.
Demand by Helicopter Size Category
Light Single-engine Helicopters:
Operators continue to express a strong preference for light single-engine helicopters in their purchase expectations, choosing this class of aircraft 47 % of the time, a slightly lower level than seen for the last five years. Popular helicopters within this class include the Bell 206 series and 407, AgustaWestland A119, Eurocopter EC120, AS350/EC130 and MD 500 and MD600 series.
Regionally, the light single class is highly popular in North America, cited in 58% of new purchase expectations. Latin American operators also reported a strong preference for this class of equipment with 50 % of regional demand. In Europe, regulations requiring multi-engine aircraft limit the appeal of single-engine models. Prior to 2006, the average share of planned single-engine purchases in this region had been around 30%. Since 2006 survey, this percentage age jumped to 46-48%, driven by continued strong planned demand for the AS350 / EC130 series. Demand for single-engine models in Africa, Middle East, Asia and Oceania is relatively low compared to the Americas and Europe falling in the 24-34% range.
Light Twins:
Purchase expectation groupings for new helicopters in the light multi-engine class are exemplified by the Bell 427 and 429, Eurocopter EC135, AS355, AgustaWestland A109 series, and MD 902. Expectations for the future purchase of aircraft in this segment during the next five years continued to rise to nearly 22% compared to 16% recorded last year.
The largest regional demand for light twins will be in Europe, with a 26% projected share of total regional purchases. Gains in demand for light twins were recorded in all other regions except Africa/Middle East (12 point increase in North America and 6 point increase in Latin America over 2007 shares). Asia/Pacific recorded a 3 point gain in interest in this class helicopter to 15% share. Africa / Middle East light twin share of demand dropped 7% to under 5% of the regional total shifting to larger twin engine models.
Intermediate Twin Helicopters:
New intermediate twin-engine helicopters as a class received strong purchase expectations, ranking second behind light single engine craft in share of buyer interest at about 29%. This result is similar to the last three years and reflects the very strong attractiveness this segment holds based on the balance of payload, cabin space, power, range and speed in this class. This class was most popular in Asia and Africa/Middle East at over 50% in each region. Popularity in these areas is directly attributable to strong construction, and natural resource exploration and extraction activities. The most popular models mentioned included the Bell 412, and 430 models as well as the Eurocopter BK117/EC145, AS365 series, the EC155, the Sikorsky S-76 and AgustaWestland A139.
Heavy Lift Helicopters:
Heavy lift helicopters continue to exhibit relatively low purchase expectation scores relative to the other classes of aircraft, with share of mentions running between 2 and 5% over the last four surveys.. As discussed in our previous outlooks, this low level of demand is to be expected, both as a function of higher prices for larger helicopters as well as the more narrowly defined applications such craft typically serve. Based on the level of Oil and gas support and exploration being handled by large fleet operators, we feel that demand for this class of helicopter as well as the intermediate class may be somewhat understated in the survey feedback. Additional demand for this class aircraft often comes from governmental or “parapublic” sources that this survey may not always reach. Geographically, the bulk of projected demand for heavy helicopters is concentrated in Asia, and Africa/Middle East with up to 8% share of regional demand.
Demand by Primary Use of New Turbine Helicopters
Corporate and Law Enforcement
Corporate and general utility were the leading applications for which operators said they would purchase new helicopters in the 2008 survey. The corporate segment, the largest use category, totaled 38% of the projected new turbine helicopter sales. Substantial demand exists for new corporate use helicopters in nearly all world regions. Over 70% of all demand in Latin America is for corporate-use machines, followed by Europe over 40%, Asia at nearly 37%, Africa / Middle East at 26% followed by North America at an increased rate of 20%.
Mentioned second most frequently as a use category for new aircraft purchases, new helicopters buying plans for general Utility applications comprise 18% of total demand in line with levels in the 2007 survey. The most interest in Utility helicopters is in Europe, accounting for about 25% of regional demand.
EMS and Law Enforcement
World expectations for the purchase of new helicopters for EMS usage help fairly steady at 15% of total demand this year compared to 16 % in 2007. Interest in EMS applications grew strongly in Asia Pacific but fell in the U.S. and Canada as well as in Latin America. Expected demand for law enforcement helicopters fell from 19% of total in 2007 to 12% in 2008. The highest expected demand for law enforcement helicopters occurred in North America with about 20% of expected total future purchases in the region off sharply from levels a year ago. European operator’s interest in acquiring new law enforcement helicopters was stable at 10% of planned purchases in 2007 and 2008.
Oil and Gas Support
The oil and gas production and exploration segment’s share of new aircraft fell back to 9% after posting a 14% share in the 2007 survey. Based on the Survey respondent pool, Honeywell feels these levels likely understate true demand levels in this segment.
Additional research with mega-operators was used to augment the survey is reflected in the overall outlook projections. Regional interest in new helicopters for this industry continues to be highest in Africa/Middle-East at 42% of that region’s demand followed by Asia/Pacific at 18%. Obviously high energy prices have stimulated additional activity and recapitalization plans in this sector.
Operators in other segments such as Television News, Tourism, Firefighting and Training continue to report projected requirements for new helicopters over the next five years at levels well below the applications discussed above. Overall, this business segment is projected to comprise 5-8% of the new helicopter purchases anticipated in the 2007 – 2011 period except in Asia where strong Tourism demand was reported at an 8% share of projected regional demand.
Planned Turbine Helicopter Utilization Rate Growth
Overall, respondents reported using their turbine-powered helicopters between 430 and 580 hours during the past 12 months. The averages are higher in emerging high growth regions despite high fuel costs. Use rates vary by region, with the highest utilization rates in Africa, Middle-East, Asia and Latin America and the lowest in Europe. Compared to the 2007 survey, reported usage rates softened in North America ( -11%), rose strongly in Latin America (+28%), increased in Africa/Middle-East (+6%) and in Europe (+9%). Average usage in Asia Pacific was off modestly (-6 %). Increased fuel costs experienced during 2007 may be a factor in the utilization declines in North America. Only the Asia/Pacific region result seems contradictory, given the regional construction boom, as well as natural resource exploration and support activity.
Survey data clearly indicate that, on a global basis, the vast majority of operators plans to use their aircraft at least as much as or more than they did during the past 12 months. In North America and Europe, 96% of respondents expect their utilization to be the same or greater than the prior 12 month period. Looking ahead, nearly all Latin America operators polled indicated that utilization would remain steady or rise again this year. Estimates for aircraft utilization growth in Africa and the Middle East and Asia/Pacific operations run in the 93-97% range. All three regions have strong percentages of operators planning to increase utilization rates.
Based on survey responses and the fleet distribution in each region, Honeywell projects flight hours will remain at healthy levels assuming fuel costs remain near current levels or fall, with growth likely compared to last year depending on regional economic conditions. This assumes that no new legislation or regulations are enacted that would further restrict airspace access or create new economic burdens on operators.
Honeywell International is a $36 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell’s shares are traded on the New York, London, and Chicago Stock Exchanges.
Based in Phoenix, Honeywell’s aerospace business is a leading global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, business and general aviation, military, space and airport operations.
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