Civil Helicopters Market Intelligence

Covid-19 Impact on the Rotary Industry in APAC

by Global Sky Team

Covid-19 Impact on the Rotary Industry in APAC

The outbreak of the COVID-19 pandemic dramatically affected global economic activities,especially general aviation, which suffered losses due to a decline in activity. The COVID-19 impact, combined with a crash in oil prices, caused a slowdown in the general aviation industry from the second quarter of 2020.

In the Asia-Pacific region, the outbreak of COVID-19 had a huge effect on the helicopter market during the first half of 2020. Despite the shock, demand began to return in the second half of 2020, which led to the helicopter market rebounding.

To better understand the development of the helicopter market in Asia-Pacific, Asian Sky Media invited five helicopter operators, one OEM, and two lessors, to share their experiences during the first year of the COVID-19 pandemic and their expectations for the helicopter market in the next few years.

Operator Perspective

During the outbreak of COVID-19, many operators encountered difficulties in operation due to government regulations and travel restrictions. Nonetheless, operators forecast slow but positive growth in the helicopter market.

A total of five helicopter operators answered our survey. One is Qingdao helicopter – one of the earliest established helicopter operators to offer general aviation services in mainland China. Another is Chongqing General Aviation, a subsidiary of Chongqing General Aviation Industry Group, with business covering helicopter manufacturing, sales and maintenance, general aviation operation, and training. PHI is one of the world’s leading helicopter services companies with its main business in offshore and air medical services, whilst Asian Aerospace offers a variety of different services including charter, maintenance and FBO services. Last but not least is INAEC, which was the first Filipino-owned private airline with its main business focusing on offshore, charter and FBO services.

How did COVID-19 affect your operations and fleet in 2020?

Yu-Zhu Chen, Deputy General Manager of Qingdao Helicopter, mentioned four main areas that were impacted by COVID-19. First of all, the signing of contracts was affected by COVID-19 between February and March 2020 due to the delay of bid submissions, which indirectly reduced Qingdao Helicopter’s revenue. Nonetheless, the demand from its clients was quite stable. Second, the cost of cabin crew’s work shifts increased due to higher commuting and quarantine expenses, as well as the cost of purchasing disinfection goods. In addition, technical support from foreign experts either ceased or was postponed. Nonetheless, four more helicopters were added to its fleet as the need for multi-mission large-sized helicopters increased dramatically during the peak of the pandemic.

Min Liao, Marketing Manager of Chongqing General Aviation, said that whilst flight operations were lower, there were no changes to its fleet of helicopters.

Pierre Lavoie, Logistics Director of PHI, said that there were no real changes and most business remained the same as usual.

Piero Rodriguez, Director of Special Accounts at Asian Aerospace, said that the first weeks of the pandemic and national lockdowns in the Philippines were difficult because Asian Aerospace’s cabin crew and operation teams could not to the airport easily without certifications and travel documents. For the supply of helicopter services, operators still encountered difficulties as various health tests and government documents were required to travel and for helicopters to take off from the airport. On the other hand, demand started to increase as people got used to the new policies and regulations. “Among various services Asian Aerospace offered to clients, tourism flights were the most affected as most tourist destinations did not allow visitors during the peak of COVID-19 pandemic. In addition, corporate flights were slightly impacted due to the cost-cutting decisions made by our clients.” Said Piero.

Dexter Ampong, General Manager of INAEC, told ASM that helicopter on-demand charter decreased and INAEC’s aircraft management clients asked for discounts during the peak of COVID-19 pandemic.

How did you manage the impact of COVID-19?

Yu-Zhu Chen, Deputy General Manager of Qingdao Helicopter, told ASM that it decreased the number of work shifts amongst its staff. The company also brought in a new rule which required its employees to commute by air or charter car to try and minimize the opportunities for infection. Whilst this did mean that the company was able to maintain its daily operations, it also increased the company’s costs. Qingdao Helicopter also increased its purchase of disinfection goods to fight the COVID-19 impact.

Min Liao, Marketing Manager of Chongqing General Aviation, said that the company would follow its past steps to confront challenges and is dedicated to developing markets during the peak of COVID-19.

Pierre Lavoie, Logistics Director of PHI, stated that the biggest impact was COVID-19 testing for all of its passengers. “In addition, aircraft modification to put filtration in the air circulating systems and cleaning procedures of the aircraft post flights with approved products are the main measures for PHI to lower the infection risk.” said Pierre.

Piero Rodriguez, Director of Special Accounts of Asian Aerospace, revealed that Asian Aerospace set up new regulations to minimize the impact of COVID-19 on the business. “First of all, to make sure that our facilities were sanitary, and employees were safe and sound before the widespread of the COVID-19 pandemic, Asian Aerospace purchased disinfection equipment and goods to put in all of the aircraft, lounges, and offices. Also, our cabin crew, ground engineers, office staff, and sales employees take COVID-19 tests on a regular basis to ensure flight safety.

Besides, physical contact between our cabin crew and passengers is strictly prohibited to lower the infection risk. Eventually, Asian Aerospace offered accommodation close to the airport for the cabin crew and ground employees to avoid further contact with potential risks through public transportation, or crowded confined spaces.”

Dexter Ampong, General Manager of INAEC, stated that the whole company instituted protocols to prevent the spread of COVID-19 in working areas, whilst the company was still able to meet its operational and business demands.

What are your expectations for the helicopter market in the coming years?

Yu-Zhu Chen, Deputy General Manager of Qingdao Helicopter, gave ASM some of her own perspectives. Firstly, she said that the central government did not increase its budget for general aviation. Instead, the central government shrank its budget due to the COVID-19 pandemic. It is expected that the aviation industry will recover to pre-COVID-19 levels in 2023 and then grow rapidly. Additionally, the economically prosperous and advanced provinces saw a new type of demand for helicopters, which was passenger flights. Eventually, the overall forecast is stable as client’s needs of Qingdao Helicopter have evolved from general to specific needs.

Min Liao, Marketing Manager of Chongqing General Aviation, said “We believe that growth in the helicopter market will remain positive, but steady.”

Pierre Lavoie, Logistics Director of PHI, mentioned that the positive rebound from different issues such as oil and gas prices, as well as the COVID-19 pandemic would bring an upward trend for the helicopter market in Asia-Pacific.

Piero Rodriguez, Director of Special Accounts at Asian Aerospace, said that the helicopter market in Asia-Pacific should improve once documentation requirements and travel restrictions are lifted. He said that the time-efficiency of helicopters can dramatically shorten the travel time between two places, which is an incentive to potential clients. “The helicopter market in the Philippines has grown steadily. Once the economic situation and company operations recover to the pre-COVID-19 standard, people will definitely fly again.” Said Piero.

Dexter Ampong, General Manager of INAEC, said that “If the economy is not going to recover fast enough, helicopter demand will not reach pre-covid levels.”

OEM Perspective

Bell Helicopter, an aviation pioneer with strategic locations around the globe, also answered ASM’s survey questions.

How did COVID-19 influence your orders and deliveries of helicopters in 2020?

Caroline Wagner, Sales Strategy Manager of Bell, said that the uncertainty and fear around COVID-19 had a dramatic effect on orders in 2020 as Bell’s customers held back to manage the fallout from the pandemic. In terms of deliveries, she said that Bell Asia continued its daily operations throughout 2020 and managed to deliver new aircraft as well as provide its industry leading aftermarket service and support to its customers.

How did you manage the impact of COVID-19?

Caroline Wagner, Sales Strategy Manager of Bell, said: “Bell’s first priority is to ensure the safety of staff by adhering to and implementing the Singapore government’s safe distance regulations and other workplace safety measures to fight COVID-19. We created a pandemic team especially to ensure these measures were implemented and communicated clearly to all Bell’s employees. By doing so, we can focus on supporting our Asia-Pacific customers, who are mostly para-public operators, serving and saving people with their helicopters. In other words, Bell is proud to say that all of our employees were able to support our customers throughout the worst time of the lockdowns in the region.”

What is your expectation for the helicopter market in the coming years?

Caroline Wagner, Sales Strategy Manager of Bell, said that Bell continues to see positive long-term growth and demand for the helicopter market in Asia-Pacific. She said: “There are four segments Bell is particularly interested in and they all can be categorized as para-public, which means for the greater good of the public. These are EMS, Law Enforcement, Disaster Management, and SAR. As economies in Asia continue to grow and expand, people here will continue to expect their governments or private institutions to provide these essential services. These lifesaving services have gained a new level of priority given the increasing frequency of natural disasters such as typhoons and floods in the past few years. In particular, the Bell 429 is in active use with Law Enforcement in the region, such as the Indonesian Police, Philippines Police, and Royal Thai Police.”

Lessor Perspective

A delay in paying leasing fees due to operators flying fewer missions led to difficulties both for lessors and operators. Nevertheless, the helicopter market showed great resilience in the second half of 2020, which is a good sign for the coming years.

In total, two lessors in Asia-Pacific responded our survey. The first was LCI, a privately owned aircraft lessor founded in 2004. The other is CMIG, a leading global investment group headquartered in mainland China.

How did COVID-19 affect your leasing contracts in 2020?

Nigel Leishman, Executive Vice President & Global Head of Marketing at LCI, said: “At the beginning of 2020 there was optimism in the market, but that quickly changed in April.

Initially we prepared for the worst as we saw helicopter utilization fall. However, the market proved resilient and by the end of 2020 flight hours in most of our markets had returned to normal.” He mentioned that for offshore operators, helicopter operations were initially disrupted by restrictions placed on travel and border closures which had an impact on the oil and gas market. Nonetheless, its offshore operators put in place procedures and standards that allowed them to continue to provide safe and reliable services for their customers. In the meantime, demand for EMS services actually increased, and LCI has seen utilization in some markets reach historical highs as people travel locally or enjoy their holidays closer to home. Overall, the market has not been affected as severely as other sectors because helicopters continue to provide mission critical services.

Fang Xu, General Manager Assistant of Transport Leasing Department at CMIG, said that COVID-19’s impact on the economy and society around the world was out of CMIG’s expectation. He said that during the outbreak of COVID-19 in the beginning of 2020, nearly all of the general aviation corporations in agriculture, manufacturing, and the consumer services industry ceased their operations. “The unusual operation of operators caused leasing fee payment delays to CMIG and other lessors, which indirectly influenced operations of both lessors and lessees.” Said Fang.

How did you manage the impact of COVID-19?

Nigel Leishman, Executive Vice President & Global Head of Marketing at LCI, said that LCI’s business continuity plans quickly kicked into action and business managed to continue without too many issues. He said “Obviously, many of us had the disruption of working from home, which was tough for a close-kit team such as LCI. But we all spent more time on video conferences and overall, our internal and external communication has actually increased. As our team is global based, we are closer to our customers and other stakeholders to meet them in person where local regulations allowed.” He also mentioned that LCI continued to take new deliveries and transitions of the current fleet between lessees as LCI adapted to new processes including remote inspections, and closer cooperation with its partners to ensure deliveries can go ahead. This is the most important factor for LCI to smoothly go through the dark times in 2020.

Fang Xu, General Manager Assistant of Transport Leasing Department at CMIG, talked about methods to fight against COVID-19 both internally and externally. “Internally, we followed regulations set up by the government to arrange home office and work shifts for our employees to lower the infection risks due to the gathering of our employees. Besides, by constructing highly efficient online reviews and approval mechanisms over the Internet, we were able to continue regular operations within the company during 2020.” CMIG rapidly reacted to the possible dilemma that helicopter lessees might encounter due to the COVID-19 pandemic according to Fang. “On the one hand, we proactively communicated with our lessees to understand the potential difficulty paying leasing fees attributed to the COVID-19 pandemic. On the other hand, we negotiated with our financing banks to strive for delay payment by lessees. “

What are your expectations for the helicopter market in the coming years?

Nigel Leishman, Executive Vice President & Global Head of Marketing at LCI, said that 2020 demonstrated the importance of helicopters and LCI expects demand to increase, especially in larger twin-engine markets, where leasing is to take a larger share. Coming out of COVID-19, budgets will be tight, hence, an operating lease provides an efficient and attractive option for operator’s financing. Nigel said “We are seeing increased demand across all missions, including EMS where fleet renewal continues, and new markets are opening up. The oil and gas market is recovering and contracts which may have been delayed from last year are now being awarded. However, with the move towards renewables, we see increasing opportunities in markets such as offshore wind where we expect significant growth in established markets such as Europe and emerging markets in Asia and North America. These opportunities mean that there are more investors interested in the helicopter market. One of the most significant of these was with SMFL in Japan.” Nigel emphasized that given its proven track record, LCI is optimistic about opportunities in the helicopter market and are very much open for business.

Fang Xu, General Manager Assistant of Transport Leasing Department at CMIG, stated that the global economic center continues to shift eastwards and mainland China is playing a more and more important role in the global economic environment. “As the successful model to fight against the COVID-19 pandemic, the social economic order in mainland China has gradually recovered to pre-COVID-19 levels and China has started to lead global economic activities.” Said Fang. He believes that the overall economic recovery will boost the general aviation market, saying that “As the methods and experiences to control and prevent the COVID-19 pandemic become more and more mature, the helicopter market, especially leasing, will get out of the dark cloud and welcome a new round of development opportunities in the post-COVID-19 period.”

Conclusion

Asia-Pacific is expected to remain as the fastest growing global region for helicopters for at least the next five years. The region is considered to be a lucrative market mainly for domestic and regional helicopter aftermarket players. Although the COVID-19 pandemic seriously hit the helicopter market, the forecast still shows a positive sign, as most of the interviewees believe that the region will return to growth once the pandemic has subsided.

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