Milestone Aviation Group (Booth No. 7520) placed $306.5 million in orders during Heli-Expo for 35 new aircraft to be delivered between late 2017 and 2021. The orders are split between Airbus Helicopters and Leonardo and involve mostly light and medium twins.
The $211.418 million Airbus order covers 26 aircraft to be delivered between 2017 and 2021. It includes six H135s, 17 H145s and three H175s. The $95.15 million Leonardo Helicopters order covers six AW139s and three AW169s to be delivered in 2017 and 2018.
Milestone announced that two of the AW139s from its order book from Leonardo will be placed on lease with Norway's Norsk Luftambulanse to support helicopter EMS operations there. In July Norway's National Air Ambulance Service awarded Norsk Luftambulanse a six-year contract to operate all 12 HEMS bases in Norway.
Milestone CEO Daniel Rosenthal said the new order is part of the company’s strategy to move deeper into the light and medium twin space in the face of continuing weakness in the offshore energy market. "It's important to remember that oil and gas is still in a significant downturn, but the rest of the industry is doing okay," he said, noting that Milestone entered into leases on 23 light helicopters in 2016 for emergency medical services, predominantly light twins, "And we're really excited about it," he said. He added that the new order announced at Heli-Expo today "is a direct result of the demand we saw for light twins and mediums in the space in 2016 with our customers' order books, and we saw part of that demand coming in the U.S."
Despite the ongoing offshore oil and gas downturn, Milestone Aviation wrote $1 billion in leases and letters of intent in 2016. That $1 billion in leases covered 88 aircraft, including 39 re-leases of existing aircraft. "If you compare that to the rest of the industry, that is quite a significant number. Eighty percent of that was with new assets. So I view 2016 as highly successful,” he said.
Rosenthal credited that success to diversification. “We diversified and that was highly important for us. We diversified by fleet by mission and by customer, and we had great success in that in 2016. Then we also supported our existing customers, and that was highly important. You've seen that through the recent debt commitment to Bristow and CHC worth more than $400 million that we are really offering a full suite of products to support our customers."
Milestone’s fleet has grown to more than 230 helicopters worth $4 billion, plus debt commitments of approximately $400 million. The company has an order book of firm and option aircraft with an estimated aggregate purchase price in excess of $3 billion supporting more than 35 customers in more than 30 countries. Since being acquired by GE Capital Aviation Services in 2015, Milestone has expanded its product offerings to include not only leasing and related structures but also debt financing, engine leasing and fleet advisory services. "There are a tremendous number of resources that we can bring to bear through GE and a wonderful collaborative spirit within GE. It's up to us to continue to communicate that to our customers and keep on growing," he said.
Rosenthal doesn't see things improving in the offshore world anytime soon. "The challenge that the industry faced with the CHC bankruptcy in 2016 should not be underestimated. When we sold our business to GE in 2015 we had three dozen customers who had been in business for an average of 40 years, and there had never been a restructuring across our customer base. So this industry has changed dramatically."
In 2016 Milestone provided offshore operator CHC with restructuring financing that included modified lease terms on its existing leases and additional helicopters at market lease rates. In addition to the leased aircraft, Milestone will provide a new $150-million asset-backed debt facility for purchase or refinancing of aircraft. In February 2017 Milestone announced that it was providing $230 million in asset-backed debt financing to Bristow Group as part of a strategy to improve that company's liquidity.
Going forward, Rosenthal said, "The picture for the next few years is going to remain pretty dark when talking about offshore. You have a capital expenditure profile that peaked in 2013-14. Oil prices in the $50-to $60-range do not support the growth in offshore that we saw a couple of years ago given the impact of shale and other onshore [exploration] in North America and the rest of the world.
“In the offshore space you have tiebacks and greater efficiencies from existing wells that are good for the oil and gas industry but are not going to impact the offshore helicopter industry. By the time you get to growth in deep water, new exploration and production that drives an increase in helicopter usage we are years down the road.”
He added, that even when the oil and gas market strengthens, “you have oversupply in the heavy and medium space that has to get worked through. We are operating on the assumption that it is going to be a number of years before the industry truly bounces back, and frankly I don't know that we will get back to the levels that we saw in 2013 and 2014."