Safran Helicopter Engines CEO Franck Saudo describes the current helicopter market as “superb” and the “best I have seen for close to the past ten years” in all market and geographical areas. But in the next breath, he acknowledges “severe supply-chain headwinds,” calling them “the number one challenge of our company in 2023.” And he doesn’t see the situation getting any better in the foreseeable future.
Saudo is not alone in his assessment. Virtually every OEM, supplier, and recruiter connected to the rotorcraft industry interviewed by AIN going into this year’s Heli-Expo voiced nearly identical concerns, lamenting shortages of raw materials, finished parts, and qualified personnel. Companies are addressing the challenges in a plethora of ways, including increased vertical integration and overtime on the manufacturing side, more parts stocking on the supply side, and a concerted industry effort to expand and improve the available labor pool.
Operators and owners are being advised to schedule major maintenance, such as aircraft and engine overhauls—and even minor inspections—well in advance of actual need. The same advice applies to those seeking new aircraft and aircraft financing and leasing. Yet, none of the efforts appear sufficient to fully ameliorate the current state of affairs to take anywhere near the full advantage of the robust, post-Covid helicopter market. As a result, aircraft downtime and prices for almost everything continue to raise problems.
“The Covid pandemic produced significant delays in global, regional, and local aviation supply chains," said Zac Noble, the Helicopter Association International’s (HAI) director of flight operations and maintenance. "Social distancing meant that manufacturing processes slowed, and transportation challenges presented empty shelves and few spare parts to shops around the world."
"The market is quite tight. That's across the board: Search and rescue, EMS, offshore wind, oil and gas, utility, and marine pilot transfer,” said Jaspal Jandu, CEO of helicopter lessor LCI. “It's tight everywhere.” The resulting price increases are fueling bidding wars on helicopters rolling off lease and available for lease, driving up prices, Jandu said. “Operators are speaking to us one, two, even two and a half years in advance” of when they need a helicopter, he explained.
The likelihood that OEMs will significantly boost production to alleviate scarcity across all categories remains low, according to the experts. “I think they’re [the OEMs] strapped for resources,” said Jason Zilberbrand, president of aircraft valuation and consulting service Vref. Zilberbrand doesn’t see supply and prices getting back to normal until 2024, at the earliest, fueled in large part by labor shortages. “They [OEMs] can’t get stuff up fast enough and the stuff that they’re getting out is having more issues post-delivery,” he said.
OEM chief executives acknowledge the supply chain problem. Bell’s Mitch Snyder said supply chain concerns have forced the company to “branch into new spaces” and be “very deliberate about being vertically integrated in certain places.” Supply chain kinks prompted Bell to create a new senior executive position—v-p of global supply chain—to manage the issue.
Kurt Robinson, CEO of Robinson Helicopter, said lingering post-Covid supply chain constraints limited output and expressed frustration over the wait for some of the longer lead-time components not made in-house, such as bearings.“A lot of it was as we saw the production needed to increase, [we were] trying to get not only the parts that we already ordered but also increase the quantities that we needed,” he told AIN.
In the face of this environment, some suppliers are moving to alleviate uncertainty by stocking an abnormally large number of parts. Atlanta-based Rotorcorp is doubling its inventory of Robinson Helicopter parts in response to continuing supply chain disruptions and rising costs, which it anticipates will extend into 2024. Rotorcorp said prices for some scarce components, such as Lycoming engines, had risen between 25 and 30 percent, and the wait for key parts can run from eight to 12 months.
Legacy system parts shortages could also force operators to make expensive upgrades, warned Jeff Stubbs, Rebtech’s senior v-p of operations and systems technology. “Aviation took a pretty sizeable lump during the pandemic; spare parts are rare and when they are available, one has to jump. We are seeing an increase in avionics obsolescence due to sub-vendors closing. Key subcomponents are no longer available,” he explained.
LCI’s Jandu sees the supply problem exacerbated by owners and operators who ran their helicopters harder and longer during Covid, and/or substantially delayed fleet replacement plans by up to three and even four years. Jandu said such practices have created a “bow wave” of demand that is quickly approaching. “You can delay the purchase cycle but at some point, the hull gets too old, you start reaching service limits, or the end-user demands more safety features that the old units can't accommodate,” he said.
Pressure also will continue on used helicopter prices. HeliValues CEO Jason Kmiecik thinks OEMs will remain cautious about raising production in the face of economic uncertainty. “Given that behavior, odds are the used market will remain tight for newer and current production models,” he explained.
Longer term, replacement of existing aircraft will drive almost three-quarters of new demand over the next 20 years, with just 26 percent attributed to organic growth, according to Airbus Helicopters’ head of marketing David Prevor. This is an inversion of past trends, he said.
Despite these difficulties, HAI's Zac Noble sees the situation moving closer to normal at this year's Heli-Expo. "We are emerging from these lagging issues," he said. "Our mission segments are all returning to pre-pandemic levels, so I think the companies that came to the show this year are going to find many buyers and sellers.”