While China remains the top rotorcraft market in Asia-Pacific—adding twice as many helicopters as the next biggest region—questions remain about how healthy the business in that country really is, Asian Sky Group (ASG) reported. China’s rotorcraft market has been “clipping along” with an annual growth rate of 8 percent.
“The problem is that the China market is not as healthy as it seems, with over 80 helicopters either in storage or still in crates as far as ASG can determine,” the analyst firm noted, saying it appears that 68 are in storage and another 14 still in crates. These helicopters were delivered and orders fulfilled, placing the financial risk further downstream with owners and operators. However, the helicopters count as part of the mainland China fleet since they are registered.
The concern is that the possibility exists that the aircraft will be turned back into the market for sale, either weakening new orders or driving down residual values. ASG further questions whether this may erode other orders still in backlog or whether the OEMs will buy back the stored units.
Concerning ASG are the mission configurations of the helicopters in storage: 38 are equipped for EMS operations, 17 for utility, and two for law enforcement, while 11 are VIP helicopters. This raises the question of the viability of these markets, ASG said.
“The situation with the Bell 505s exemplifies the problem today and for the future: 110 were ordered, 32 have been delivered, and 18 are flying, but 14 are still in crates," ASG said. "Is this just a consequence of the pandemic? Or will buyers materialize as we move further into 2021 and 2022 so that we can crack open those crates?”
As for the market in 2020, ASG reported that 4,385 civil turbine helicopters were in operation by year-end with 78 additions in the year, marking a 1.8 percent year-over-year growth rate. But noting that 8.8 percent of the mainland China fleet is in storage, ASG said that if it “deletes those helicopters from the fleet, then growth in the Asia-Pacific region for 2020 was actually nonexistent, just 0.2 percent instead of 1.8 percent with the Chinese fleet contracting by 1.8 percent. That is called moving the needle.”
Since 2014, the growth rate in Asia-Pacific has been about 3.6 percent year over year with the addition of 830 aircraft. Demand peaked in 2018 but showed signs of slowing in 2019 and fell further in 2020.
ASG said the fleet is expected to continue to grow but at an annual rate of 0.5 percent.