Story ID: 319AirMethodsHE15
Air Methods Puts Money Into Safety
By: Mark Huber
Caption: The air-medical and heli-tour operator flies more than 400 helicopters at 186 bases in the U.S.
Word Count: 1186
Air Methods is doubling down on its safety investments. The company recently signed a 10-year deal with FlightSafety International to install four full-motion Level D-qualified helicopter flight simulators at an expanded Air Methods learning center that will open in 2016 in Denver. 
  
The Airbus EC135 simulator currently being used by Air Methods at FlightSafety’s Dallas learning center will be installed first, with simulators for the Bell 407GX and Airbus AS350B3 and EC130T2 to follow once FlightSafety completes the design, development and manufacture of those simulators. The learning center will also offer classrooms and customer service areas, and it will be expanded in the future to accommodate additional full flight simulators.
  
The four helicopter models represent the majority of the more than 400-strong Air Methods helicopter fleet at both its air-medical and tourism divisions, company CEO Aaron Todd told AIN. Todd noted that last year “represented another year of safe operations” for the company. “We always count our blessings when our employees and patient passengers get home safely, and that is not by chance. We have invested heavily in training, technology and safety systems. We are encouraged by the continuous improvement in our safety record and we continue to work hard and stay humble.” 
  
Air Methods’ improved safety record in 2014 is part of a recent overall industry trend nationwide, according to figures on U.S. civil helicopter accidents released in January by the U.S. Helicopter Safety Team. Total helicopter accidents nationwide posted by all Part 91 and 135 operations dropped by 11 percent to 130 in 2014 compared to 146 in 2013. Fatal accidents fell by 30 percent to 21 in 2014 compared to 30 in 2013. Compared to 2005 (the year before the International Helicopter Safety Team was established), total accidents are down 30 percent, from 185 to 130.
  
Overall, Todd said 2014 was a good year for Air Methods. “We’ve had a good, strong, healthy year with good earnings growth. We have enjoyed healthy flight volume and have seen good success from our base expansions and our hospital outsourcing activities. This is the first year we have operated on a consolidated basis with Blue Hawaiian and we are very happy and encouraged how our expansion into the tourism sector has progressed.” 
  
Air Methods acquired air tour company Blue Hawaiian Helicopters for $66 million in December 2013. It acquired air tour company Sundance Helicopters of Las Vegas for $44 million in 2012. 
  
Air tourism was expected to generate revenues of $115 million for Air Methods in 2014, roughly 11 percent of total company revenues, with the company’s market share representing more than 20 percent of the annual $500 million domestic heli-tour business. Todd said he was very happy with the existing air tourism management team. He added that the strategy of using the air-tour companies to stoke the pilot pipeline for air-medical operations is beginning to bear fruit. “We never expected it to be a massive migration, but we have clarified the advantages for pilots and mechanics who want to move into the air-medical sector and stay with Air Methods. That will continue to create loyalty with the workforce,” he said.
  
However, air-medical continues to provide 86 percent of company revenues and the picture for that in 2014 looked good, with both revenues and net income improving during the first nine months compared to the same period a year before. However, per-patient revenues slipped slightly during the third quarter from the same period a year ago, to $11,972 from $11,988, for community-based transports. This drop occurred even though the volume of those transports increased by 7 percent over the previous year period, thanks largely to the opening of 13 new bases. The company now operates from 186 bases nationwide. 
  
Todd blamed the per patient revenue dip on the impact of Obamacare, which resulted in a decrease in the number of privately-insured patient transports, down slightly to 32.6 percent from 34.2 percent in the same period a year ago. 
  
“Speaking to the third quarter there was higher hope that we would see improvement in the percentage of patients that we transport who have private commercial insurance through the exchanges or other commercial insurance providers,” Todd said. “We just haven’t seen that to date. We have seen a movement from the uninsured category into the Medicaid category, but that has minimal benefit to the company. Other healthcare providers have not seen that improvement either. Their improvement has been largely from the migration into the Medicaid category.” 
  
Medicare and Medicaid together constitute 56 percent of Air Methods patient-transport revenues, but typically reimburse at a lower rate than private insurance. Todd noted that it is taking longer and requiring more processing to collect from private insurers. “In the third quarter of 2013 we averaged about 2.3 payments before we closed out an individual’s commercially insured account. Now it is taking about 2.8 payments. So there is more paperwork, more documentation, more review and procedures that are being engaged.” 
  
Todd said Air Methods was just beginning to capture the benefits of lower fuel costs, noting that the company’s fuel bill is approximately $40 million per year. He added that while the distressed new helicopter sales market provides opportunities, this won’t necessarily encourage Air Methods to buy more new helicopters than previously planned. “The availability of civil aircraft has not been an issue for several years. I think it is fair to say that the manufacturers are hungry at this time for many reasons, but it is not influencing our decision as to how many aircraft we are going to place on order. But it is influencing us as to whether we are willing to commit with one manufacturer for a multi-year order. I think as you consolidate your purchasing power and agree to enter into multi-year commitments, there is greater flexibility to improve the cost to procure and maintain a fleet.” 
  
Air Methods’ bias is to purchasing new single-engine aircraft, Todd said, estimating that 90 percent of the new helicopters it has ordered in the last three to five years have been in this category. He said the company will continue to convert leased aircraft to owned aircraft and would shy away from leasing as a means of acquiring new aircraft. “We have a strong bias not to lease aircraft. When you lease an aircraft you transfer the bonus depreciation tax benefit to the lessor,” he noted. 
  
Finally, Todd said that the company’s United Rotorcraft division (Booth 2154) will continue to pursue government contracts for aircraft modifications, but he noted the inherent difficulties of that market both for military and civilian customers. “We want to build that backlog and expand the order book every year, but it is a challenging environment relative to the Defense Department’s budget restraints. The regulatory challenges associated with the certification of new-product-design and retrofit activities is not getting any easier, but we are very happy with the progress we are making.”
  
United Rotorcraft recently received FAA STC approval for the first installation of an air-medical interior in an Airbus Helicopters EC130T2, the first of 10 new EC130T2s scheduled to join the Air Methods air-medical fleet.