Helicopter market – seeking opportunities amid hardships: the military to the rescue?

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The helicopter market remains under pressure. Despite the stabilization of defence spending, budgets remain tight and parapublic markets are considered to be mature.

Various reasons can be put forward, notably low oil prices, which have constrained oil and gas helicopter business and offshore transport both in terms of new acquisitions and flight operations, thereby reducing maintenance revenues. Low oil prices have further reduced the economic capacity of oil-producing countries – especially in the Middle East and South America – which have reduced their military and parapublic demand.

However, manufacturers are aware that they must invest during hardships, and be ready when activity picks up. In that tense context, Airbus Helicopters, market leader in the civil and parapublic segment, reports 127 orders for the first half of 2016, down from 135 in the same period last year. Earnings (-11.1%) and revenues (-8.9%) were down, despite 163 deliveries in the first half of 2016, up from 152 in the same period last year.

Bell was similarly affected, with 49 civil helicopter deliveries during H1 2016 compared to 74 in H1 2015. Bell’s revenues (-2.6%), segment profit (-7.9%) and backlog (-7.1%) are down in H1 2016 compared to the same period time last year. For its part, Leonardo reported a 57.6% drop in orders and a 19.2% drop in revenues.

Sikorsky faces headwinds as well: although the company’s H1 2016 results are yet to be published and “incorporated” with Lockheed Martin’s global results, the trend is likely downward.

All regions are not equally affected however. The Asian and Chinese markets are still doing well, for instance, which is the main reason why Airbus Helicopters has decided to assemble its light twin-engine H135s in China. Although the Chinese market represents a small percentage of global operations, it is one of the fastest growing markets according to Airbus executives, and the manufacturer forecasts a demand for 200 civil rotorcraft per year by 2020. Bell Helicopter and Leonardo Helicopters also recorded interesting orders from China recently: Bell has taken a letter of intent (LoI) for 50 Jet Ranger X light single helicopters, which is to receive type certification in the next few months. The American manufacturer further signed an important agreement for 10 Bell 525 medium-lift helicopters with a Chinese company in March, with the 525 due for certification in 2017.

Meanwhile, Leonardo signed a framework agreement for up to 60 AW119Kx light single helicopters in China. In the meantime, Airbus is looking towards the service entry of its H160 medium utility helicopter, scheduled for 2018. The same timeline is expected for Leonardo’s AW609 tiltrotor, although the programme is going through headwinds following the fatal crash of the second prototype in October 2015 and the recent impounding of the PT-3 prototype by the Italian justice system. Leonardo Helicopters intends to restart its flight test programme and ground tests are back on track in Leonardo’s facilities. Certification of the AW609 by the FAA will now likely take place in 2018, rather than 2017 as previously hoped.

Sad news hit the helicopter community last month: the crash of Bell 525 FTV1 and the death of its two test pilots. The second and third test vehicles were grounded as a result. This accident may delay the certification process of the aircraft as Textron’s CEO Scott Donnelly implied during the investor hearing conference: “At this time we do not have an estimate as to when flight testing might resume or the length of delay in certification or first deliveries”.

For Russian Helicopters, the last few months saw notable milestones for two major programmes: in December 2015, the Mil Mi-38 heavy twin-engine helicopter obtained certification from the Russian federal air transport regulator Rosaviatsiya, paving the way for serial production. And in April 2016, the Kamov Ka-62 performed its maiden flight, two-and-a-half years behind schedule.

Mitch Snyder, promoted chief executive of Bell Helicopter and succeeding John Garrison in October 2015, told reporters during the 2016 Farnborough International Airshow that Bell is focused on “innovation”. According to Snyder, the immediate priority is clearly to lead the current development programmes to a successful service entry, including that of the Mirabel produced 505 Jet Ranger X, converting its hundreds of letters of intent into firm orders. But Bell is pressing for technology innovations, with a dedicated team recently being set up for the task. “We are really looking for solutions that are not just next steps or upgrades, but are game-changers or jump the kerb technologies ,” he said, further adding that these solutions could concern existing platforms or clean-sheet designs. Unmanned platforms are a particular area of interest for Bell according to Snyder, both for civil and military requirements, despite some unsuccessful ventures in that field.
“Bell is looking at what clean-sheet platforms match up with the technology we already have”, he said, giving the examples of fly-by-wire systems, new propulsion technology and sense-and-avoid sensors. Bell’s CEO is nonetheless conscious that the market is depressed and that any programme needs to match market assessments, but believes that sales will pick up. “We are beginning to work on concepts for the next models,” he said. Although no precision were given, a new single engine aircraft to replace the 407 and a new twin to replace the 412 are probably the next two programmes that should be launched by Bell Helicopters.

Development activities are also moving forward on the V-280 next generation tiltrotor demonstrator, with Bell already foreseeing export opportunities beyond the U.S. Army’s Joint Multi-Role programme. “We are not looking for this to be only a U.S. product, and we would welcome the opportunity for this to be developed with U.S. and international partners,” said Vince Tobin, vice-president of Bell’s advanced tiltrotor systems. The V-280 demonstrator’s maiden flight is expected for September 2017, and the test aircraft is currently under construction in Texas. Although based on the costly V-22 technology, Bell believes that the V-280 will be significantly cheaper, with a unit price close to the special operations variant of the Black Hawk.

Regarding current military tiltrotor, the strategic alliance between Bell Helicopter and Boeing Co., Bell-Boeing, seeks export sales for its V-22 Osprey tiltrotor to offset dwindling U.S. DoD orders. Several undisclosed customers reportedly expressed interest in the aircraft, and Japan confirmed last week that it had contracted 4 Bell-Boeing MV-22Bs in addition to the 5 already ordered. The total 9 Ospreys ordered by Japan are part of a global requirement for 17 aircraft. Among countries with potential interest in the aircraft, the UAE, India, Saudi Arabia, Israel and potentially Australia reportedly expressed interest. Several sources including IHS Jane’s also suggested that Bell-Boeing could offer its V-22 to the German Armed forces, as the country seeks replacement for its ageing CH-53G fleet. The new CH-53K and Boeing’s CH-47F are already competing for the bid, but joint venture officials believe that the V-22 has significant advantages despite its lower lift capacity. The V-22 could have further NATO applications, Bell officials said, including a jointly funded and operated pool of aircraft. To further support its international venture, the manufacturer developed a specific acquisition and support package for potential V-22 customers who could be concerned over costs and investments to operate the tiltrotor.

Despite the economic environment, the military market is increasingly seen as a growth driver for helicopter manufacturers given security concerns worldwide. This also seems to be Leonardo’s view: the manufacturer is confident that its new armed AgustaWestland AW149 super-medium-class helicopter will secure a launch deal soon. “We have very serious interest in the AW149,” said James Wang, senior vice-president of marketing at Leonardo’s helicopter division during the FIA. Several undisclosed customers reportedly expressed interest for the rotorcraft in its armed configuration. Besides, Leonardo officials highlighted the fact that takeoff weight could be expanded further if required by customers, pending airframe and engine upgrades. At last, Leonardo’s next step could be an armed AW169.

Interestingly, Sikorsky is taking a similar path: Lockheed Martin’s subsidiary displayed its new armed UH-60 Black Hawk helicopter during the Farnborough Airshow, aiming for export opportunities. By contrast with previous Black Hawks, the armed UH-60 is equipped with an integrated weapons system built directly into the cockpit, and fitted with various weaponry and sensors according to customers’ needs. Flight testing and aircraft qualification are expected to be completed by year-end. Sikorsky outlined the fact that current Black Hawk operators could either opt for an upgrade pack or an all-new helicopter, both options being economical and “customizable”. The manufacturer is eyeing Mil Mi-24 fleets replacement while capitalizing on the Black Hawk’s commercial success and reliability.

Poland is a key target, as the country is retiring its Mi-24 and transport helicopter fleet, especially as work on the armed UH-60 is carried out with Sikorsky subsidiary PZL Mielec in Poland, which assembles S-70i Black Hawks for export. Sikorsky is similarly cooperating with Turkish Aerospace Industries (TAI) and Aselsan for the T70 development under the Turkish Utility Helicopter programme. Turkey has –finally– officially ordered 109 T70s for military and parapublic agencies in a first batch (with many options), a prime example of successful multinational cooperation in the rotorcraft industry. TAI and Sikorsky hope to export the T70 to Central Asian and African markets, and are currently in discussions to establish a joint marketing team to support this initiative.

In the field of military rotorcraft, TAI is progressing on its T129 attack helicopter, which is expected to be fully weaponized by year-end after final qualification tests in coming months. Leonardo cooperates with TAI as a subcontractor on the T129 programme, derived from the A129 Mangusta, and TAI is eyeing several export opportunities for the attack helicopter, including Poland, Central Asian and Middle Eastern markets. TAI is also placing high hopes for its Turkish Light Utility Helicopter (TLUH), a fully indigenous new 5-6 tons rotorcraft scheduled for first flight in 2018, with both civil and military applications. “Once that project gets to a certain point, we are aiming to introduce more platforms. We aim to have a complete helicopter portfolio – if you don’t put a target in place like this, you just stand still and don’t grow. And we aim to be one of the main players,” said Metin Sancar, the executive vice-president of TAI’s helicopter group, speaking about the TLUH.

It has thus become clear that military markets are currently the key growth driver for most helicopter manufacturers, as they face a challenging sales environment on the commercial side. Boeing’s sale of 50 AH-64E Apaches for $2.3billion to the UK was among the major announcements of the Farnborough Airshow, but also a blow to Leonardo’s Yeovil facility’s future even if it manages to keep the maintenance work. Moreover, several armed forces are keen on purchasing attack rotorcraft, or weapon kits to enhance rotorcraft capabilities as part of their modernization efforts, fuelled by growing defence spending. Even if Airbus Helicopters didn’t seize the opportunity to promote its “H-Force” concept during the Farnborough Airshow, it remains active in this field. The “H-Force” concept has indeed been introduced by the company in February and gives the possibility to weaponize the H225M, the H145M and the H130M helicopters with flexible weapon and software solutions.



Written by ADIT – The Bulletin and republished with permission.