Graham Warwick/DALLAS
WHEN BUYING A house, the adage goes, the requirements are "location, location and location". When operating a helicopter, it seems, the concerns are "cost, cost and cost". Certainly all the news, and views, at the Helicopter Association International (HAI) Heli-Expo '96 in Dallas, Texas, in February, underlined the industry's pre-occupation with cost.
"Cost is the biggest threat to this industry," says Bell Helicopter Textron chairman Webb Joiner, who announced a range of initiatives at the show, from a freeze on spares prices, through reduced insurance premiums for Bell operators, to the launch of a new light twin-turbine helicopter, with a price substantially lower than that of rival aircraft.
Lamenting a poor year for US sales, American Eurocopter president David Smith says: "Customers rejected new helicopters [in 1995]...they traded technology for the purchase economics of used aircraft."
Verdicts on 1995 range from Joiner's "excellent year", to Eurocopter vice-chairman Gerard Chauvallon's "horrible year" apparently influenced by their respective companies' market position. Eurocopter's market share slipped slightly in 1995, to 39%, while Bell's increased, to 51.5%. Bell is expecting an even better 1996, as it begins delivering new Model 407 light turbine singles and 430 intermediate twins. Eurocopter, despite deliveries of its new EC 135 light twin beginning in the middle of the year, is forecasting a flat 1996.
Bell is not alone in being optimistic. McDonnell Douglas Helicopter Systems (MDHS) had its "best year" in 1995, says senior vice-president Dean Borgman, and he believes that 1996 "...will be even better". Robinson Helicopter and Schweizer Aircraft saw deliveries increase in 1995, and are projecting higher sales in 1996. Enstrom Helicopter and Sikorsky Aircraft report lower sales in 1995, but nevertheless anticipate an upturn in 1996.
EUROCOPTER PESSIMISM
Eurocopter's was the most pessimistic voice to be heard at Heli-Expo '96. Even Allison Engines, which in 1995 revised its ten-year forecast of new turbine-helicopter sales sharply downward, has reversed itself and is now projecting a substantial increase in deliveries over the next ten years. Allison chopped almost 2,000 helicopters from its 1995 forecast because of Pentagon plans to "dump" 3,000 surplus US Army machines on the civil market. This year, it has increased projected sales by almost 3,000.
Allison now expects the civil market to begin expanding in 1997, as operators begin to replace helicopters bought in the last industry boom of 1977-82. "This replacement market has been anticipated for some time," says Tommy Thomason, vice-president, small aircraft engines, "but is now expected to occur because each of the manufacturers is beginning to offer...new or improved helicopters which are quieter, smoother and provide lower operating costs than the existing fleet."
Thomason is quick to emphasise that Allison's forecast "...is of market potential, and will not be realised unless the helicopter manufacturers continue their downward pressure on acquisition and operating costs". He is echoed by Eurocopter's Smith, who says, "New sales are up to the manufacturer. There are more potential buyers than ever before, but the buyers are defining the purchase price. If they do not find it in a new helicopter, then they will buy a used aircraft."
Smith's viewpoint appears to be supported by figures for the US market produced by industry analyst Andy Aastad. He calculates that only 57 new turbine helicopters were delivered to US operators in 1995, down from 97 in 1994. A further 37 were sold to brokers, of which some might end up in the hands of US operators, but 1995, nevertheless, represents a real decline in new-helicopter sales, he says.
In contrast, used sales skyrocketed, from 872 in 1994 to 1,088 in 1995, boosted by more than 360 military-surplus helicopters. While an increase in used-aircraft transactions indicates an increase in operator activity, the proportion of military-surplus aircraft in the equation worries the HAI.
"Frankly, we're hurting," says HAI president Frank Jensen, speaking for the airframe manufacturers and spares suppliers who lost sales in 1995 because of the ready availability of surplus aircraft and parts.
Enstrom, for one, blames military-surplus helicopters for the drop in sales of its piston and turbine singles, from 17 in 1994 to eight in 1995. Enstrom's helicopters sell mainly for law enforcement, a market which was flooded with surplus helicopters - mainly Bell OH-58s - in 1995. Jensen cites the "crazy" case of the Washington DC police, which, despite already operating three helicopters, asked for eight OH-58s. "If they all hovered at once, they'd keep the rain off the area," he jokes.
Another market hit was heli-logging, with Kaman Aerospace scaling back plans for production of the K-MAX external-lift helicopter to just six a year in 1996 and 1997. Although Kaman says that it has customers competing for every $3.5 million K-MAX it builds, there is no doubt that the easy availability of military-surplus Bell UH-1s has forced a rethink of its production plans. Now that ex-US Army Bell, AH-1 attack helicopters are being modified for heli-logging and fire fighting, the external-lift market is likely to continue to be dominated, by surplus aircraft.
The propensity of operators to buy used helicopters is symptomatic of the industry's obsession with cost. Manufacturers offering new technology at higher cost have struggled to sell their aircraft. Sales of MDHS' pioneering tail-rotorless MD 520N have been slow, although, significantly, several police forces have elected, despite limited budgets, to re-equip with the helicopter because of its quietness.
BREAKTHROUGH PRODUCT
Deliveries of the tail-rotorless MD Explorer boosted MDHS's fortunes in 1995. The company delivered 39 civil helicopters, up from 35 in 1994, including 12 Explorers, and is optimistic of delivering 60 in 1996, equally divided between the Explorer light twin and MD 500/600 light singles. The tail-rotorless MD 600N, a stretched 520N, promises to be a breakthrough product for MDHS, which has firm orders for 22 aircraft. Certification and first deliveries are planned, by the end of 1996.
The 600N takes MDHS into a new market, competing head on with the Agusta A119 Koala and Bell 407. Agusta launched the Koala on to the US market at Heli Expo '96 with an order for six from aeromedical operator Omniflight Helicopters, part of a larger, $30 million, deal including three A109K2 and three A109 Power twins. The Koala is a single-engined derivative of the A109, powered by a 745kW (1,000shp) Pratt & Whitney Canada PT6B-37. At 2,720kg gross weight, the A119 sits at the top of the turbine-single market.
Bell's 407 is a classic example of cost consciousness at work. The 407 is a substantially upgraded 206L-4 LongRanger, with four-blade rotor, up-rated engine and wider cabin, yet the acquisition and operating costs are virtually unchanged. Deliveries began at Heli-Expo '96, and Joiner says that Bell has a backlog of more than 160 full-deposit orders - suggesting that the company has, indeed, successfully tapped the long-anticipated 206-replacement market by offering more performance at the same price.
The company now wants to repeat that feat in the light-twin market, and issued a challenge at Heli-Expo '96, to Agusta, Eurocopter and MDHS, by launching the Model 427, priced at just under $1.9 million. Bell says the 2,720kg 427 will compete directly with the $2.35 million EC 135 and $3.6 million Explorer. "Payload will be the same as the Explorer's, and more than the EC 135's," the company says. The aircraft is a stretched 407, with a bigger rotor, new transmission and two engines: "We wanted to keep it under $2 million," says Bell.
South Korea's Samsung Aerospace will meet some of the under-$100 million development cost, will manufacture the fuselage and tailboom and will assemble 427s for sale in South Korea and China. Slow sales of the 206LT TwinRanger probably influenced Bell's decision to drop plans for a twin-engined 407T, and opt instead for the "substantially redesigned" 427. Just 20 206LTs have been delivered, Joiner admits.
Another slow seller, so far, has been the Bell 430 intermediate twin. Certification is imminent and the company has only seven firm orders, but Joiner is confident of selling this year's 18-aircraft production run, and of increasing production in 1997. There will be "no problem" selling the $3.68 million 430 once demonstrators are available, he says.
MARKET POSITIONING
MDHS is already positioning the Explorer to enable it to compete against the Bell 430, particularly in the aeromedical and executive markets, and says that it plans to meet the challenge from the Bell 427 with the $1.25 million MD 600N. Although the Explorer is lighter than the 430, at 2,720kg compared with 4,080kg, weight increases are in the pipeline and a stretch may be on the horizon. MDHS says that it has firm orders for 66 Explorers.
Eurocopter, meanwhile, says that it has firm orders for 12 EC 135 light twins. Certification is scheduled for May, with deliveries beginning in July, but the aircraft is not expected to influence sales significantly until 1997, when Eurocopter is hoping for an upturn in the market. In the longer term, the European manufacturer's hopes are pinned on the EC 120 light turbine single, which is scheduled to enter production in 1998.
The EC 120, being developed jointly with companies in China and Singapore, is intended to replace the many Bell 206s and MDHS MD 500s now in service. The EC 120, EC 135, a commercial version of the NH Industries NH 90 tactical helicopter, and the re-engineering of Eurocopter to improve profitability by at least 30% will result in a company which "...will be stronger than ever in 2000", says Chauvallon.
Although firmly based on fact, Eurocopter's pessimistic view of the near term is at odds with those of US manufacturers. Schweizer plans to increase production by 40% in 1996, to 70 piston and turbine singles. Sikorsky is to increase production of the S-76 medium twin by 30%, to 24 aircraft. Even Robinson expects to improve on its 1995 total of 179 R22 and R44 piston singles. Only time will tell who's forecast is right.
Source: Flight International
