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September 20, 2019 | International, Aerospace
Opportunity knocks: A look at the used helicopter market
by Howard Slutsken
If you're thinking of buying or selling a used helicopter, this might actually be a good time to do so. Maybe we're finally getting past our focus on the doldrums in the oil and gas sector, or it could be that the replacement cycle is catching up with older helicopters, with operators making the decision to upgrade their fleets.
The helicopter market has always been very cyclical, and the perceived strength of the marketplace will often depend on the specific needs of a region — and the opinion of who you talk to.
“The trend we're seeing in Canada is for hydroelectric powerline work, whether patrol or working on the towers, they're going with Cat A twin-engine aircraft,” said Steve Dettwiler, president of Maple Leaf Helicopters Canada, a brokerage service based in British Columbia. “Some operators are using the MD 902 Explorer, others the [Airbus] EC135. There are lots of [Airbus AS350] AStars available, but for Cat A [performance requirements], you'd have to go with an [Airbus] AS355NP TwinStar.
“We're seeing the Bell LongRangers being sold off and replaced by the AS350 B2 and B3 series,” Dettwiler continued. “When it comes to the B3e [H125], most Canadian operators are interested in the ones that have dual hydraulics. For forest service work, there's the inclination to go to twin-engine on the Bell mediums.”
Airbus machines are certainly in demand, and it might be a better financial and operational decision to search the used market rather than buy new, according to Jason Kmiecik, president of HeliValue$, producers of The Official Helicopter Blue Book.
“The lights twins — EC135s, 145s — there's a big market for those,” he said. “In the U.S., Metro Aviation and Air Methods have pretty much grabbed everything [in terms of those types] that was for sale or is about to come online for sale. In today's market, you could buy two used aircraft, fully retrofit them with brand new interiors and avionics in both aircraft, and you're at about the price of one brand new aircraft.
“There are plenty of transactions happening on those aircraft all over the place,” Kmiecik continued. “Some of them have actually started going up in value — the AStars and some of the newer 407s — because there's just starting to not be that many out there for sale.”
Finding a deal
But, as with any marketplace, there are bargains to be found.
“There are some really good deals out there,” said Dettwiler. “As an example, we've got a Bell 212 for sale for $1.5 million, which is a good price for a 212. [The market] does go in cycles. Right now there are a lot of aircraft available for sale, which drives the prices down. You can get into a nice little JetRanger probably for $350,000 to $400,000.”
There's also a bit of an underground marketplace where transactions happen quietly, with a handshake, explains Kmiecik.
“You'll see the sales happen,” he said. “They were never listed online. They sell to the operator next door or somebody's buddy. The smaller, cheaper aircraft are garage transactions.”
And speaking of those smaller machines, Kmiecik believes that the operators who still love Schweizer helicopters are going to be happy with the company's new owners, Schweizer RSG.
“Their plans are to go full production again,” he said. “So I think there's going to be a comeback of Schweizer.”
While Kevin Mawhinney, helicopter technical advisor at Jet Support Services, Inc. (JSSI), doesn't think much has changed in “the day-to-day, ins-and-outs of the industry,” he does see a trend developing in the “larger-medium” sector.
“I think you're going to see more people move into this segment with machines that fill that niche,” he said. “For example, the [Leonardo] AW139 has really filled a need, and we're seeing a lot of interest in it.”
He points to the multi-role capability of the AW139 as being a driver for new operators. “I think it fills a niche that no other machine was filling before.”
Super Pumas airborne again
And what about all of those Airbus H225 Super Pumas that have been languishing on helipads around the world? They're now in demand, according to Kmiecik — but for utility work, not offshore.
“What we're seeing now is supply is actually shrinking,” he said. “Aircraft that were once for sale are now pulled off the market and are back to work with the original lessees or new people.”
With the shift in deployment of Super Pumas from offshore work to utility missions, Kmiecik said that there's a bottleneck getting the parts that operators need to change the primary mission of their helicopters.
“The 225 is becoming the utility machine, the go-to machine now,” he said. “The problem is the supply of utility parts with Airbus — cargo hooks and stuff like that. They can't get them in stock fast enough to ship out to the people who need them. There's aircraft waiting on the ground right now for parts so they can get out on a contract.”
Kmiecik said that some operators have recognized the value in the 225 and have focused their acquisition strategy on the type. “It's a lot of aircraft with a lot of lifting for the price.”
Dettwiler also knows of companies that targeted an opportunity by buying up inventory of specific types. “We sold 14 SA 315B Lamas in the past few years to a company in Scandinavia, who's basically stockpiling all the Lama inventory from around the world and supporting the existing Lama operators. But it's going to come to an end. Airbus would prefer to sell the H125/AS350 B3e,” he said.
Operating costs
Brandon Battles, vice-president, Conklin & de Decker, has been researching and analyzing helicopter operating costs for over 30 years. With his years of experience, Battles has seen the cyclical changes that the industry has faced.
“I think we've all seen it through our careers - oil and gas is bad right now, but another operation that uses helicopters might be very strong,” he said. “The firefighting folks are probably having some pretty good years, from a business point of view.
“I'm noticing now that it's not just the acquisition cost that's important anymore, it's also those operational costs that they'll be encountering over the long ownership of that aircraft,” he added.
Kmiecik echoes that thought.
“Pretty much everybody's complaint is to try to get operational costs cheaper for these aircraft, especially for the S-92,” he said. “It's a very expensive aircraft to operate, and with what they're making each month on their contracts, it's getting very tight to be able to make a profit at all on them.”
While some of the focus on operational costs may be driven by corporate acquisitions and industry consolidation, Battles believes that operators at all levels have become more attuned to the business side of the equation, in some ways resulting from the economic downturn of 2008.
He said that operators may have planned to acquire a helicopter and keep it for perhaps 10 years. After that, they may look to sell it to avoid major inspections or the required replacement of life-limited items or other significant maintenance.
“They had a plan but when the economy changes and they can't sell the aircraft for as much as they planned, now they must continue to operate it and wrestle with some of the higher costs that are associated with an older aircraft,” said Battles. “Maybe because of that experience, people are considering the maintenance and operating costs more than they used to.”
What's next?
Kmiecik's analysis of the super-medium market suggests that machines like the Airbus H175, Leonardo AW189 and the upcoming Bell 525 are going to face challenges in making an impact on the market.
“In general, the super-mediums haven't lived up to expectations that everybody thought was going to happen,” he explained. “And that's because the S-92 has dropped in value, so where it's actually cheaper to rent a S-92 than it is to buy a brand new super medium.
“Capital is drying up in the space,” Kmiecik continued. “There's not many people that are willing to go out and buy a $15- to $35-million helicopter anymore for offshore when we've got so much supply still in the market right now that is sitting idle for sale.”
And Kmiecik is pretty blunt in his assessment of what needs to happen in the oil sector to ensure that helicopter operators can continue to provide service.
“I think over the next six months to a year, you're probably going to see some change in the attitude of the oil companies,” he said. “There has to be a change because they're forcing everybody into bankruptcy. I think that people are now telling them ‘no' on certain requirements that they're setting on tenders, like age requirements for aircraft. I think that they're going to have no choice but to start helping out the people who are keeping them in business.”
https://www.skiesmag.com/features/opportunity-knocks-a-look-at-the-used-aircraft-market
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Do Soldiers Dream Of Electric Trucks?
While Tesla won't be building heavy tanks, the Army Futures & Concepts Center says moving lighter, wheeled vehicles from fossil fuel to electric drive could streamline supply lines – and save lives. By SYDNEY J. FREEDBERG JR. WASHINGTON: In wartime, the cost of gas is often partly paid in blood. Hundreds of US troops have died and thousands have been wounded fighting to move supplies in Afghanistan and Iraq. Against an adversary with long-range missiles like Russia, the carnage among convoys would be worse. The bulkiest cargo and often the most needed (along with bullets and bombs): fuel. If you could dramatically reduce the amount of gas the US military consumes, you could reduce the logistics burden a great deal. Fewer fuel convoys on the road would save money in peacetime and lives in wartime. But how do you get there? With electric vehicles, answers Lt. Gen. Eric Wesley, head of the Futures & Concepts Center at Army Futures Command. “Tesla is building large [semitrailer] trucks,” he told reporters in a wide-ranging roundtable yesterday. “Battery costs have gone down precipitously over the last 10 years,” he said, recharge times have dropped, and ranges has grown longer. What's more, electric motors have many fewer moving parts than internal combustion ones, making them potentially easier to maintain and repair. “The entire automotive industry is migrating towards this idea of electrification,” he said. “We're already, I would argue, late to the need.” Not only do electric motors not need gas, Wesley said. They also can generate power for high-tech combat systems – sensors, command networks, even laser weapons and robots – that currently require dedicated auxiliary power units or diesel generators that burn even more fuel. Imagine a squad of soldiers recharging their jamming-resistant radios and IVAS targeting goggles in their vehicle between missions, or a mobile command post running its servers off the same truck that carried them. The Hard Part Electric motors can even help frontline forces sneak up on the enemy, he said. They run much quieter and cooler than internal combustion engines, making it much harder to hear electric vehicles approaching or spot them on infrared. The Army's cancelled Future Combat System would have included a family of hybrid-electric vehicles. Even the ambitious FCS program didn't try to build all-electric tanks. Now, Wesley isn't talking about electric tanks, just trucks. “Right now, we don't see the technology, on the near-term horizon, being able to power heavy vehicles,” he said. That's because even the latest batteries still provide less power per pound than fossil fuel. (Engineers call this “energy density”). So, for example, the replacement for the Reagan-era M2 Bradley troop carrier – likely to weigh about 50 tons — is going to need an internal combustion engine or at least a hybrid diesel-electric one. But the vast majority of Army vehicles are wheeled, from supply trucks to the JLTV, an armored 4×4 replacing many Humvees: That weight class, up to 10 or even 15 tons, can move on electrical power alone. Wesley had planned to kick off his electrification drive with a panel discussion at last month's AUSA Global Force Symposium in Huntsville, Ala. (I would've been the moderator). But that conference got canceled due to the COVID-19 coronavirus, so he's rolling it out to the press instead. His staff is working on an in-depth internal study for his boss, the four-star chief of Army Futures Command, Gen. John “Mike” Murray. There are a lot of thorny problems to work out, Wesley acknowledges. The big one: Where do you generate the electricity in the first place? In a war zone, you can't just pull into your garage and plug into a charger overnight. “We can't just go buy an electric vehicle. We have to look at the supply chains,” he said. One option the Army's considering, he said, is miniaturized, mobile nuclear power plants – something the Pentagon is now researching and says should be safe even after a direct hit. While Wesley didn't discuss other alternatives, the fallback option is presumably burning some fossil fuel to run a generator, which then charges batteries or capacitators. “We're writing a draft white paper proposal for Gen. Murray and the Army to look at this holistically,” Wesley said, “[and] we are building up a proposal that we will publish here in early summer that is going to describe a recommendation for how the Army transitions toward the future.” “My expectation is that it's about a 10-year horizon right now to do something like that which I just described,” he said. “If that's true, then we have to have a transition plan for the Army to move in this direction.” Extended excerpts from Lt. Gen. Wesley's roundtable with reporters, edited for length & clarity, follow below. He also discussed how Army units have to evolve for future multi-domain operations: more on that later this week. Q: The Army's been interested in electric vehicles and alternative fuel for some time. What's new here? A: We were going to have a panel on this to kick off [at AUSA Global Force]: a broader look at electrification and alternative fuel sources for the Army. We're writing a draft white paper proposal for Gen. Murray and the Army to look at this holistically. And we are building up a proposal that we will publish here in early summer that is going to describe a recommendation for how the Army transitions toward the future. Tesla is building large [semitrailer] trucks. UPS and FedEx are starting to buy these vehicles to learn how they move into that area. The entire automotive industry is migrating towards this idea of electrification, and there's a lot of good reasons for it. And as the entire industry goes to electrification, the supply of internal combustion engine parts is going to go down and therefore prices are going to go up. Battery costs have gone down precipitously over the last 10 years. Recharge times and range [have improved]. The trajectory that all of that is on, in the next two years, it'll be far more efficient to have an electric vehicle than internal combustion, so we're already, I would argue, late to the need. Q: What's slowed the Army down? A: The problem is bigger for the Army than it is for any corporation, industry, or family, because you have to have a means to move the energy and generate the energy at the right time and place. It's not that the Army is slow to move on this, we just have a bigger problem to solve, and I would argue that's what we have to do now. The issue is not whether we can build hybrid vehicles. That's easy. In fact, any one of us could go out and — as long as there's not a waiting list — buy a Tesla tomorrow and sell our Chevy Suburban. You plug it in at home, we've got the infrastructure. You don't have to change your supply chain or your way of life when you buy a Tesla. The Army, we can't just go buy an electric vehicle, we have to look at the supply chains. How are you going to have [electricity] sources for charging? If technology tells us that safe, mobile nuclear power plants, for example, something that goes on the back of a truck, are realistic, and if you add capacitor technology [to store the electricity], you can distribute that forward in varying ways. Q: Are we talking about electric-drive tanks here? Or just trucks? A: The Army hasn't said, we're going all-electric. Right now, we don't see the technology, on the near-term horizon, being able to power heavy vehicles, it's just too much of a drain on the battery. The Next Generation Combat Vehicle, it's still going to require you to have an internal combustion engine. But if we could reduce the fossil fuel consumption by transitioning our wheeled vehicles [to electric motors], you can reduce the volume of travel on your supply route to only [move] fossil fuels for the much heavier vehicles. Q: Could you make an electric version of something like the Joint Light Tactical Vehicle? A: The technology to power a vehicle of that weight exists today. We're talking [up to] about 10-15 tons; that technology exists now. If it exists now, you can anticipate that we're going to have to transition some of this in the next 10 years. And if that's true, then we have to have a transition plan for the Army to move in this direction. It should require a very detailed strategy and step by step pathways. It should include starting to build in hooks into our requirements [for new designs]. And then there are other experimentation efforts where we can learn about enterprise-level supply chain decisions. (Eds. note: We ask all fans of Phillip K. Dick to forgive us for the headline). https://breakingdefense.com/2020/04/do-soldiers-dream-of-electric-trucks