HELICOPTER FIVE-YEAR PURCHASE FORECAST
Category: Helicopter Sales Forecasts
Helicopter Five-Year Purchase Forecast
Sales of 3,500 new civil helicopters forecast through 2011
Honeywell’s ninth Turbine helicopter for sale Civil Helicopter Purchase Outlook projects deliveries of roughly 3,500 new civil use helicopters during the five-year period 2007-2011, 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 60 percent of all new civil rotorcraft sales during the five-year forecast period. This year’s survey queried 919 chief pilots and flight department managers of companies operating over 2,400 helicopters worldwide.
Some key findings revealed by the annual survey of civil helicopter operators’ purchase expectations are:
• Estimated Civil helicopter deliveries were up nine percent in 2006 and are expected to rise strongly in 2007, as helicopter manufacturers increase production to satisfy strong demand for new aircraft for sale.
• Civil helicopter sales during the five-year period 2007-2011 are predicted to be up to 40 percent greater than in the five-year period 2002-2006.
• Global demand could exceed 8,000 new civil helicopters during the 2007-2017 period.
“Honeywell Aerospace’s 2007 survey has identified aircraft avionics capabilities, performance and power, and direct operating costs as the top criteria operators consider when selecting new helicopters,” explained Vicki Panhuise, vice president, Honeywell Commercial and Military Helicopters, Honeywell Defense and Space. “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 and lower operating costs. Survey results have improved four years running, and OEMs report strong sales activity supporting our view that helicopter demand has great long-range prospects in a growing global economy.”
Near-term increase in demand is supported by ongoing strong worldwide demand for corporate, EMS, law enforcement and utility helicopters, expanding African and Asian economies and continued strength in oil producing regions.
“The 2007 outlook projects annual turbine helicopter delivery levels exceeding 700 units in the near term, with survey based indications that latent demand could drive rates even higher if capacity limits are not encountered,” Panhuise continued. “The improved 2007 outlook is also boosted by potential new OEM entrants offering affordable high value platforms stimulating demand and drawing new operators into the turbine segment.”
Purchase Expectations Survey
The ninth worldwide survey of civil helicopter operators’ future purchase plans supports much stronger demand for new aircraft over the next five years. Purchase expectations rose about eight percent measured on the basis of specific new Helicopter purchase plans in 2007 over 2006 levels. In terms of fleet replacement and addition percent, the 2007 results were up nearly five points.
The survey continues to show that there was little trade-up expectation among the world operator base. More than 80 percent of new purchases will be made to replace older aircraft in the same size/capability and price class. Only about 11-12 percent of operators plan to trade-up to more expensive and capable machines.
Buyer interest continues to improve overall and there is no indication that a demand decline is likely to occur in the near future.
For the past five surveys, over half of all European purchase expectations have been for twin-engine models. This year’s findings show 53 percent 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. Nonetheless single engine models were nearly as strong for the second year in a row at 47 percent of expected purchases compared to an average of around 30 percent prior to 2006.
In North America, where there are no current or pending regulations requiring twin-engine aircraft, 70 percent of planned purchases are for single-engine airplanes for sale. In Latin America, 57 percent of planned purchases are for single-engine models. In both regions this share has remained relatively stable in recent years. Operator preferences in Asia, The Middle East, Africa and Oceania strongly favor twin-engine machines with a 65-75 percent share in the 2007 survey.
North America continues to provide the greatest share of demand for new helicopter sales, accounting for 42 percent of planned future purchases, a similar share to last year’s outlook. Buying plans were up modestly in this year’s survey compared to 2006, with most of the improvement traced to increased purchase plans for general utility applications.
Survey responses indicate that North America will predominate in the purchase of light single-engine helicopters. On average more than 70 percent of future new aircraft purchases in this region are expected to be light singles, and no regulatory activity is on the horizon which would likely change this.
Aircraft avionics capabilities, operating costs, aircraft age, performance, payload, cabin volume and engine power were the most frequently mentioned factors by North American operators as to their reasons for planning to purchase new aircraft.
The survey shows an improvement in European purchase expectations, recovering to nearly 20 percent fleet replacement/expansion rate in 2007 over 15 percent in 2006. A broad pattern of stronger buying plans slightly 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 has gained in the past two years.
Survey responses suggest that about 16 percent of world new turbine-powered helicopter sales will occur in Europe during the next five year period, almost identical to the share recorded in the 2006 survey.
European operators cite regulatory requirements and avionics capabilities as the top reason for acquiring a new helicopter. Other important factors are cabin size, performance, operating cost reductions and payload needs. The general utility and corporate use categories were most frequently mentioned by European respondents.
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 36-37 percent of their current fleets during the next five years for replacement and fleet addition. This compares to 20 percent in Europe, 22 percent in North America and 30 percent in Latin America.
Over the next five years, we estimate that up to 22 percent of total world new helicopter sales will be to customers in Asia-Pacific, Africa and the Middle East.
About 65–75 percent of future demand in these regions is expected to be for multi-engine craft. As in other regions, operators cited avionics capabilities, performance and power, payload and lower operating cost plus warranties as key reasons for replacing current helicopters.
In Asia-Pacific, close to 30 percent of expected purchases will be for corporate applications. In Africa/Middle East, oil and gas exploration applications were most frequently mentioned at over 53 percent, followed distantly by corporate uses at 23 percent.
Latin American expectations, meantime, fell more than 10 points in this year’s survey after posting a record level in 2006. Even though overall buying plans in the region are still relatively high, the drop in purchase expectations as a 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.
This region is expected to account for about 15 percent of expected five year world demand for new helicopters, off around 10 percentage points from the 2006 survey projection. Approximately 57 percent of expected new aircraft demand in the region is for single-engine piston helicopters.
Once again, avionics features, performance and lower operation costs are driving the plans to purchase a new model. Latin American operators continue to cite improved economic conditions especially in Brazil and Mexico.
Trade up Patterns
Projected trade-up patterns remained remarkably consistent compared to previous survey results, with operators electing to replace aircraft with the same size class currently operated about 82 percent of the time. Trade-ups to larger helicopters and trade-downs to smaller aircraft were chosen just 11 percent and seven percent of the time, respectively.
The strong propensity to trade within segments (rather than trading up) supports longer ownership intervals for aircraft purchased new. Average age at which current aircraft are replaced ranges between 12 years in the U.S and Canada, Europe and Asia up to 14-17 years in Africa and Latin America.
Corporate and law enforcement remained the leading applications for which operators said they would purchase new helicopters in the 2007 survey. The corporate segment, the largest use category, totaled 26 percent of the projected new turbine helicopter sales.
Substantial demand exists for new corporate use helicopters in nearly all world regions. Over 70 percent of all demand in Latin America is for corporate-use machines.
Turbine Helicopter Utilization Rates
Overall, respondents reported using their turbine-powered helicopters between 400 and 550 hours during the past 12 months. This varies by region, with the highest utilization rates in Africa, Middle-East and the lowest in Europe.
Compared to the 2006 survey, reported usage rates recovered in North America (+15 percent); slipped in Latin America (-6 percent); and increased in Africa/Middle-East (+3 percent) and in Asia-Pacific (+28 percent). Usage in Europe was virtually unchanged. Easing fuel costs experienced during 2006 may be a factor in the utilization rebound as well as the Asian construction boom, and global oil exploration activity.
Survey data clearly indicates that on a global basis, the vast majority of operators plan to use their aircraft at least as much as, or more than they did during the past 12 months. In North America and Europe, 95 percent 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 93-96 percent range.
Based on survey responses and the fleet distribution in each region, Honeywell projects flight hours will remain at relatively healthy levels assuming fuel costs remain near current levels or fall, with some 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.
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Note: This is an edited version of Honeywell’s forecast. The 2007 Turbine Powered Civil Helicopter Outlook is based on Honeywell’s fourth quarter 2006 customer expectations survey, an assessment of consensus forecasts, review of factory delivery rates and analysis of future new helicopter introductions. The 2007 outlook excludes military demand for civil helicopters resulting in a "pure" civil number. This year’s Purchase Expectations Survey queried 919 chief pilots and flight department managers of companies operating nearly 2,400 helicopters worldwide. The 2007 outlook presents a snapshot of the helicopter business at a point in time and does not reflect unforeseen events. 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.