Eurocopter begins 2012 with positive outlook

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Eurocopter begins 2012 in a relatively comfortable position. It has largely - albeit with question marks remaining over defence spending - weathered the financial crisis that saw orders in 2009 and 2010 fall off a cliff. Under chief executive Lutz Bertling the airframer has developed into a more rounded operation, less like the Franco-German-Spanish mish-mish of its early years. Since Bertling took the helm in 2006 turnover has grown at an average rate of 7.3% per annum, and in 2011 it hit €5.4 billion ($7.15 billion).

Headcount sits at 20,000 ­people - swollen by last year's acquisition of Vector Aerospace - and in 2011 it manufactured a little over 500 helicopters. Although small compared to the cash-cow that is Airbus, whose 2010 revenue was €29.9 billion, it is growing at a rate above the average of any other EADS company.

eurocopter x3 - eurocopter

 © Eurocopter

It boasts, as you might expect, that it is now "firmly established as the global leader in the ­helicopter market".

While the likes of AgustaWestland, Sikorsky and Russian Helicopters may take issue with that statement, Eurcopter claims a 43% share of the market in the civil - including parapublic - segment and 21.5% in defence.

However, its share of the ­market for military rotorcraft does lag behind the two biggest players. In 2011, Sikorsky was the global leader with a 29% market share, followed by Russian Helicopters with 23%. However, Bertling is seemingly at ease with his company's third place.

The three largest defence ­markets - China, Russia and the USA - are effectively "closed" to it, he says. And although ­Eurocopter has had some success in the United States - winning the US Army's 345-unit Light Utility Helicopter contest with its ­UH-72A Lakota - the larger ­orders, and those last few ­percentage points of market share between it and Russian Helicopters, will remain out of reach. Of course, there may be another reason for Bertling's relaxed approach. According to Eurocopter's forecast, defence helicopter deliveries are set to spike in 2015, as the recent phase of orders work their way through the system. But once these aircraft are in service the replenishment cycle won't kick in again for another 20 years. The global market for military helicopters may currently dwarf the civilian sector by 3:1, rising to 3.3:1 in 2015, but this will not last long. Eurocopter forecasts the value of the defence market will be on a downward trend post-2015, with the civilian segment continuing to show modest growth. By 2025, it says, civilian sales will be worth €7 billion, and ­defence €6.5 billion.

"Therefore we must put greater focus on the high-performance civil side if we want to be prepared for the market of the [20]20s," says Bertling.

Investment has therefore ­centred on its X3 high-speed technology demonstrator and the X4 ­- the latter to replace the EC155 Dauphin.

Eurocopter's 2011 capture of maintenance, repair and overhaul (MRO) provider Vector Aerospace added another key area to the business. Turnover from its support and services operation now comprises 43% of Eurocopter's revenue. It is also a manufacturer-agnostic operation, with significant interests in both rotary- and fixed-wing repair. More crucially, however, is that services provide a steady stream of income. "It is very profitable and more resilient to the financial crisis - it carries on as long as helicopters are still flying," says Bertling.

For all its emphasis on ­diversification, however, key to the company's short-term success is to make sure the production of two new models - the EC175 and EC145 T2 - along with several others - can be ramped-up.

That, though, is not without its potential pitfalls. The resilience of its supply chain is a clear worry, particularly as others - notably Airbus and Boeing - are attempting to raise production at the same time.

"Although we are ramping up now, that comes after two years of ramping down. In 2011 we had 457 [orders], but in 2010 it was more like 350 - down from 700 to 800 in 2008. We strongly ramped up then and rapidly decreased in 2009-2010," says Dominique Maudet, Eurocopter executive director, France. In the interim, suppliers have either broadened their customer base to include the big civil airframers or "have gone bankrupt". Maudet says that Eurcopter has the resources to acquire or invest in financially stretched suppliers, but is quick to point out "it's not our strategy, more a recovery plan".