Bird’s Eye View of the Pre-Owned Market

Published On: October 1, 2018

While the market remains very much a so called “Sellers Market” (when the % of any given type of helicopter exceeds the threshold of 5 to 6% of the total fleet of the same type), we do see a slight decrease in the % fleet for sale now around 5 to 6% depending on the type which can be attributed in part to a higher number of transactions but also to fewer helicopters being placed ”˜on-market’.

Indeed, the market in the past few years has forced sellers to either accept greater depreciation in order to sell their assets and/or to remove their helicopters from the open market.

Despite online marketing tools, the pre-owned helicopter market is very opaque and more and more transactions are being made off-market which means without publicly advertising the assets online or on any structured market place. By doing so, sellers avoid showing long Average Days on Market of their helicopters. This also enables sellers to avoid un-controlled and non-mandated listing by unscrupulous brokers thus ensuring more consistent information flow, higher buyer confidence and ultimately a much better chance of selling assets at a better price.

The notion of exclusivity is tossed around and generally misunderstood. While there is a risk of complacency on the part of the broker, in the case of serious organizations, it enables much higher focus and resource allocation. Most importantly, it helps secure a much safer and better controlled environment in which go-to-market strategies can be tailored to specific customer requirements. Ultimately, it enables the buyer or the seller at the other end to have much better confidence and trust in the helicopter being considered. In short you avoid having several parties offering the same helicopter with different specs and different prices creating confusion, lack of trust and lack of interest.

Pre-Owned Market by Mission Segment

With around 9,000 units in operation in 2017,the Utility helicopter segment dominates the market and is the most resilient. Despite the growth of alternative technology including drones, helicopters still boast unique mission capabilities that cannot be replaced easily or at all (lifting, firefighting, cargo transport, power line maintenance etc). Requirements in emerging countries remain also very strong. As utility contracts are often highly competitive and short term, these require cost-effective and very flexible solutions well suited to pre-owned helicopters.

The Charter/Corporate/VIP segment (6,000 aircraft) which was less buoyant in the past few years with private owners exiting the market because of low residual values, a mostly unprofessional brokerage market, more and more stringent regulations hence increase in maintenance and overall ownership costs is now seeing a rebound. Corporate/VIP helicopters in some key markets such as China are still far form their true potential suffering from a negative image of uncontrolled wealth instead of the efficient business tools they really are. While main markets for VIP/Corporate transport remains North America and Europe, we have probably seen the bottoming out of this segment with private and corporate buyers now taking advantage of the historically low prices.

For the roughly 1,700 Offshore and SAR helicopters, global fleet utilization hit a low of 54% in the end of 2017. The sector is seeing the first signs of a pick-up but remains lacklustre. Lease of mainly medium or heavy twins is usually preferred to outright purchase especially for short-term offshore exploration and thanks to current lease rates. Sustainability of the leasing business as it stands is another discussion”¦

The life saving EMS helicopter segment (5,000 in operation today) continues to see growth with huge potential in emerging markets only dampened by the lack of infrastructure and adequate regulations. There is a very good business case for second or third HEMS helicopters to open new markets with reasonable investment and thus lower risk. The alternative is to reconfigure former EMS helis to other mission segments representing good opportunities but another set of challenges which need to be well planned and managed in order to succeed.

Pre-Owned Market by Helicopter Type

Light Singles represent the bulk of the market with roughly 60% of the pre-owned fleet with short turnaround time and easy reconfiguration. This type of helicopter is low maintenance, relatively cheap to purchase and also easy to transport and operate. A competitively priced single engine helicopter can be sold within 3 to 4 months on average. Demand is mostly for Airbus AS350/H215; EC/H130, Bell 206; 407 and now the 505 while the Leonardo A119 is seeing renewed interest. Robinsons R66 also trade actively.

Light Twins have longer average days on market than light singles but remain reasonably liquid. This is notably true for younger Corporate/VIP aircraft (less than 5 years and less than 1,000 hours) which also do well for EMS/SAR reconfigurations. Demand is mostly for BK/EC/H145; EC/HC135 for AIRBUS, Bell 429 for BELL, and AW109E/S/SP for LEONARDO.

Medium Twins see similar interest for VIP low time young models albeit with significantly longer time on market. We see also some pick-up for utility and offshore helicopters. Demand is mainly for Leonardo AW139 for VIP/utility/SAR and Bell 412 / 212.

The Super Medium segment is too young for the pre-owned market but we see some interest and a few transactions for AW189 and H175 that should gather momentum in the coming years.

The Heavy segment and notably the Super Puma market so badly hit by the oil price drop and the MGB crisis is finally seeing some light at the end of the tunnel. First transactions have finally taken place and prices seem to have bottomed out and the market to have agreed on their market values. While most industry professionals would agree that the SP and notably the 225 future is anything but uncertain for the offshore market mainly to the benefit of the super mediums, SAR and utility, firefighting missions have real potential. Must be noted that the 225 in Military or SAR configuration (same certification base as the civil version) is still doing extremely well. All-in-all, this segment may represent the best opportunity today with growing demand and very low prices. Must be noted the progressive opening up of government regulations to allow pre-owned helicopters in public tenders as they slowly realize the huge benefit and low downside this can represent vs buying only brand new at a time when many countries have serious budget constraints.

Way Forward

The driving factors to efficiently buy or sell a pre-owned helicopter is to elaborate a comprehensive, coherent and realistic go-to-market strategy driven by helicopter type and model, configuration/mission, location & airworthiness (status and authority), recent and upcoming maintenance, operational requirements, mission/market specific equipment mod/demod, acquisition price/budget and last but not least seller/buyer unique requirements.

There are unfortunately many unqualified actors on the market working contrary to any structured and controlled approach for the sale or procurement of used helicopters.

We also note the insufficient support from manufacturers for inter-mission convertability. OEMs must develop more simple retrofit kits and explain to new buyers why they should always include basic utility provisions for higher future resell values. Manufacturers must see their interest in not only manufacturing and selling brand new helicopters but also keeping pre-owned helis in operation.
Another big factor impeding the pre-owned heli market is the lack of reference or qualification of most appraisers unlike the more structured commercial airliner market.

All in all, we note a general lack of quality standards on the used market that need to be addressed by the various stakeholders rather then weighing mainly on the end user’s shoulders.

Today the best way to buy or sell an aircraft is to choose a professional company that can advise and bring real added value to the process and most importantly to be realistic and in tune with the market. Its easier to say what a customer wants to hear then to tell the truth, but the truth will be more helpful in achieving customer goals.

Rotortrade’s mission statement is to bring innovation and value to the pre-owned market for the benefit of helicopter operators and users, the heart and soul of our industry. Thanks to the co-development of Certified Pre-Owned programs with manufacturers such as Leonardo, PWC and Safran HE, Rotortrade is able to propose OEM warranty on selected pre-owned helicopters for greater peace of mind. Rotortrade is also making steady headway in bringing together exclusively a growing network of industry leading professionals that share the same values and see the opportunity in this mature yet inefficient market.

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