VCheng
ELITE MEMBER
- Joined
- Sep 29, 2010
- Messages
- 48,460
- Reaction score
- 57
- Country
- Location
http://www.economist.com/news/busin...se-chopper-business-has-come-end-rotor-slayed
Helicopters
Rotor slayed
The rapid rise of the chopper business has come to an end
From the print edition
This is not a drone
HELICOPTERS appear to be on the up and up. On July 20th Lockheed Martin, America’s biggest defence contractor, agreed to pay $9 billion to buy Sikorsky, which makes helicopters, from United Technologies (UTC), a conglomerate. It is the largest deal the defence business has witnessed in two decades, but it may not be the wisest. Offloading Sikorsky is a sensible move for UTC; buying it is a gamble for Lockheed.
Five big companies dominate the civil and military markets for helicopters—Sikorsky, Airbus, AgustaWestland, Bell and Boeing. All have hit thinner air, because demand for helicopters is unlikely to grow as strongly as it did over the past ten years, a period of booming sales.
The oil-and-gas industry, destination for over half of all civil helicopters, is showing softer demand. Helicopters are routinely used to shift people and equipment to oil platforms. Aberdeen, which serves the North Sea, is the world’s busiest heliport. Years of high prices encouraged oil companies to head offshore to exploit new reserves. The recent collapse has prompted them to slash costs and abandon some expensive schemes, along with the helicopters that went with them. Sikorsky recently revised its forecast for revenues for civil sales in 2015 from growth of 5-7% to a contraction of up to 20% compared with 2014.
Helicopters used for transport, medical emergencies, such as air ambulances, and search and rescue will need replacing in rich countries; such services are becoming increasingly prevalent in Asia and the Middle East. Over the past decade an average of 550 civil craft were delivered each year, according to Alix Leboulanger of Frost & Sullivan, a consulting firm. Over the next ten years that will rise to around 900 annually. However, the problem, says Ms Leboulanger, is that these jobs are performed by smaller helicopters that sell for $2m-3m a piece rather than larger ones with a price tag of $10m-15m that serve oil platforms. Total revenues from civil sales doubled between 2005 and 2015 to $6 billion a year, but will fall to an average of $5 billion a year for the next decade.
What about the armed forces? Military craft barely registered the buffeting of the financial crisis, because America’s armed forces, the world’s biggest customer by far, needed choppers to fight in Iraq and Afghanistan. Military helicopters are loaded with plenty of equipment and constantly upgraded. Airbus reckons that its military machines will make up less than half the total number of helicopter sales but three-quarters of the revenues over the next ten years.
But in recent years defence budgets around the world have flattened or fallen. Helicopter programmes have been scrapped or delayed. Military sales will rise by a very modest 2.5% a year to hit $23 billion by 2020, according to Mordor Research, another consulting firm.
Sikorsky already supplies two-thirds of the choppers to America’s fighters, and this is the main prize Lockheed is after. It is adept at selling hardware to governments and may reckon that owning Sikorsky will help it to win more business at home. Sales abroad could grow as armies in developing countries upgrade and modernise. But it will face competition both from the companies that vie with it in rich countries and firms from the likes of Russia and India that make less technologically advanced but cheaper machines.
Lockheed, which also makes an array of unmanned aircraft, may do a better job of managing the disruption that drones will surely bring by offering craft with or without a pilot’s seat. Already smaller choppers used for news gathering, mapping and farming are being replaced by drones, which cost far less. Unmanned military reconnaissance and resupply missions, once performed by helicopters, are now common. The good news for helicopter firms is that unmanned passenger flights are still far off. But in the meantime, there is still plenty to worry about.
From the print edition: Business
Helicopters
Rotor slayed
The rapid rise of the chopper business has come to an end
From the print edition
This is not a drone
HELICOPTERS appear to be on the up and up. On July 20th Lockheed Martin, America’s biggest defence contractor, agreed to pay $9 billion to buy Sikorsky, which makes helicopters, from United Technologies (UTC), a conglomerate. It is the largest deal the defence business has witnessed in two decades, but it may not be the wisest. Offloading Sikorsky is a sensible move for UTC; buying it is a gamble for Lockheed.
Five big companies dominate the civil and military markets for helicopters—Sikorsky, Airbus, AgustaWestland, Bell and Boeing. All have hit thinner air, because demand for helicopters is unlikely to grow as strongly as it did over the past ten years, a period of booming sales.
The oil-and-gas industry, destination for over half of all civil helicopters, is showing softer demand. Helicopters are routinely used to shift people and equipment to oil platforms. Aberdeen, which serves the North Sea, is the world’s busiest heliport. Years of high prices encouraged oil companies to head offshore to exploit new reserves. The recent collapse has prompted them to slash costs and abandon some expensive schemes, along with the helicopters that went with them. Sikorsky recently revised its forecast for revenues for civil sales in 2015 from growth of 5-7% to a contraction of up to 20% compared with 2014.
Helicopters used for transport, medical emergencies, such as air ambulances, and search and rescue will need replacing in rich countries; such services are becoming increasingly prevalent in Asia and the Middle East. Over the past decade an average of 550 civil craft were delivered each year, according to Alix Leboulanger of Frost & Sullivan, a consulting firm. Over the next ten years that will rise to around 900 annually. However, the problem, says Ms Leboulanger, is that these jobs are performed by smaller helicopters that sell for $2m-3m a piece rather than larger ones with a price tag of $10m-15m that serve oil platforms. Total revenues from civil sales doubled between 2005 and 2015 to $6 billion a year, but will fall to an average of $5 billion a year for the next decade.
What about the armed forces? Military craft barely registered the buffeting of the financial crisis, because America’s armed forces, the world’s biggest customer by far, needed choppers to fight in Iraq and Afghanistan. Military helicopters are loaded with plenty of equipment and constantly upgraded. Airbus reckons that its military machines will make up less than half the total number of helicopter sales but three-quarters of the revenues over the next ten years.
But in recent years defence budgets around the world have flattened or fallen. Helicopter programmes have been scrapped or delayed. Military sales will rise by a very modest 2.5% a year to hit $23 billion by 2020, according to Mordor Research, another consulting firm.
Sikorsky already supplies two-thirds of the choppers to America’s fighters, and this is the main prize Lockheed is after. It is adept at selling hardware to governments and may reckon that owning Sikorsky will help it to win more business at home. Sales abroad could grow as armies in developing countries upgrade and modernise. But it will face competition both from the companies that vie with it in rich countries and firms from the likes of Russia and India that make less technologically advanced but cheaper machines.
Lockheed, which also makes an array of unmanned aircraft, may do a better job of managing the disruption that drones will surely bring by offering craft with or without a pilot’s seat. Already smaller choppers used for news gathering, mapping and farming are being replaced by drones, which cost far less. Unmanned military reconnaissance and resupply missions, once performed by helicopters, are now common. The good news for helicopter firms is that unmanned passenger flights are still far off. But in the meantime, there is still plenty to worry about.
From the print edition: Business
