Story ID: 324
Milestone Diversifies as Offshore Continues Recovery
By: Jerry Siebenmark
Caption: Milestone Aviation originated $1.5 billion in helicopter lease transactions last year.
Word Count: 577
Helicopter lessor Milestone Aviation’s top executive looks to the rotorcraft leasing market in 2019 as “a recovering but challenged market,” president and CEO Greg Conlon told AIN at Heli-Expo 2019. And Conlon doesn’t see a return to the offshore industry’s seemingly insatiable appetite for helicopters before the downturn in oil and gas prices.

“We saw examples where certain end users had a need for maybe three or four helicopters,” he said. “They leased five or six, just in case. As things got tougher, oil went down to the $30s [per barrel] from the $80s or $100, they looked at everything. And now they’re coming back and saying, ‘You know what? We’ve figured out how to operate three helicopters, not five. We’ll do two crew changes a month rather than three. Once you do those types of things, even if oil goes back to where it was, you have some of the systemic efficiencies that you don’t unlearn.”

Conlon’s remarks come after the Dublin, Ireland-based lessor (Booth B5204) closed out 2018 with $1.5 billion in aircraft lease transactions. Of that, $900 million was for new leases and lease extensions of its own inventory of helicopters that numbers more than 300 and is valued at $5 billion.

“The key to all this is transitions,” he said. “You really have to focus on, as a leasing company—we’re not a bank, we’re an asset management leasing company—transferring these aircraft from operator A to operator B, and you need to do that in the most cost-effective, efficient, and short period of time as possible. And if you can’t do that when you have roughly $1 billion of assets that’s rolling off every year, you’re going to find yourself in a tough spot.”

The remainder of its lease transactions last year, almost $600 million, was new capital Milestone used for what it called key strategic projects, including the purchase of 21 Leonardo AW139s and five Airbus H145s for Saudi Aramco’s fleet renewal plan, as well as H145s and Leonardo AW169s for helicopter emergency medical services (HEMS). 

What once accounted for as much as 80 percent of Milestone’s business—leasing of helicopters for oil and gas exploration—is now about 50 to 60 percent, Conlon explained. “Because you’re really not in a great place if you’ve got 80 percent of your book in one area,” he said. “That’s just not a prudent way to run a financial company.” 

The unit of GE Capital Aviation Services has turned to other sectors for diversification of its portfolio since the downturn, such as in VIP and HEMS. “We’re seeing more growth in search and rescue,” Conlon added. “That’s a bigger piece, both municipal work, and private-party work.”

Demand for new helicopters in the offshore sector should resume longer term but not with the same exuberance as before. “We think there’s growth in the space, over the five-, 10-year period,” he said. “We think there is going to be continued oil and gas exploration.”

But the need for new equipment will be tempered by a more cautious market with fresh memories of the last downturn. “In our view, I think it’s more 'let’s soak up the demand that’s there and once that’s stabilized, then we can talk about the new stuff,'” Conlon said.