Story ID: 137BristowAIN0717
Bristow Morphing into Regional Provider 
By: Mark Huber
Caption: Continued losses prompt restructuring.
Word Count: 626

The world's largest commercial operator of helicopters is getting smaller. Bristow Group announced a major corporate restructuring recently that will divide the company into two regional hubs, slash administrative overhead and shrink the Houston headquarters staff. The move came two weeks after the company posted another large quarterly loss amid declining revenue across the board—not just in its offshore energy sector—and the stock price collapsed to $6.55 on May 31 from $14.62 on May 23.

Bristow CEO Jonathan Baliff said the company is “shrinking to fit” the current market and that the latest moves are part of a broad strategy targetingcost efficiencies, portfolio and fleet optimization encompassing OEM cost recoveries and capital expenditure reductions, and revenue. The economy measures follow $200 million in cost controls already in play.

Bristow acknowledges a need to move quickly to stay afloat. “Our financial results for the quarter and really for the year were unacceptable,” Baliff said. For the quarter ended March 31, it lost another $78 million, compared with a loss of $25.3 million in the same period a year ago. Operating revenue was also down, falling by $51 million from the year-ago quarter, down to $323.6 million from $375.26 million. Bristow attributed the results to a combination of factors: “the decrease of our oil-and-gas operations’ margins as a result of the continued offshore oil-and-gas industry downturn, with certain contract work ending during the quarter being partially offset by the one-time benefit of $11.1 million from a contract termination payment. The March 2017 quarter and Fiscal Year 2017 results were also impacted by costs incurred resulting from the grounding of the Airbus H225 fleet, the impact of the depreciation of the British pound sterling and significant non-cash tax charges.”

While oil-and-gas weakness played a significant role in the decline, Bristow's diversification strategy also disappointed. Most notably, revenue from the UK search-and-rescue contract fell 29 percent from the year-ago quarter, dropping from $62.1 million to $43.9 million. Bristow is cutting back on efforts to pursue U.S. government contracts. Baliff explained, “Diversification does cost money. We will not have the cost structure to pursue that as much.” While Bristow's liquidity improved from the quarter ended on December 31 last year, its current expense rate suggests it could be out of cash before the end of next year in the absence of more borrowing, revenue and economies. If those latter three factors align, Bristow predicts, “We expect liquidity as of March 31 next year will still be in excess of $200 million.” However, Baliff warned, “This is going to be a long slog.”

Bristow's restructuring hinges on the creation of two regional hubs: Europe and the Americas. The European hub covers Africa, Asia, Australia, Norway, the UK, Turkmenistan and the Middle East (EAMEA). The company’s Americas hub covers the Bristow Academy, U.S. Gulf of Mexico, Suriname, Guyana, Trinidad, Canada and Brazil.

Restructuring the company into these two hubs and a commercial-support division is expected to reduce general and administrative costs initially by 12 percent. Bristow has named Alan Corbett vice president of EAMEA. Corbett will be responsible for operations and commercial development in those areas, namely Bristow's fixed-wing operations, Airnorth and Eastern Airways. Rob Phillips has been named vice president Americas, responsible for operations and business development efforts in the region. He will also have oversight of all operational infrastructure support activities.  

Baliff said reorganizing the company into regional hubs is not only about cost-cutting, but also responds to customer demands for sharper regional focus and greater efficiencies that have taken rise during the energy downturn, and that Bristow's old global structure could not always deliver competitively. 

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