Plenty lift left in the market
The civil helicopter market is surging, but with demand running high, manufacturers are battling to streamline supply chains and production lines to cut lead times
Fleet replacements and oil industry growth continue to be dominant drivers in the supercharged civil turbine helicopter sector, a market that shows no signs of abating by the end of the decade.
AgustaWestland, Bell Helicopter, Eurocopter and Sikorsky, the largest suppliers of helicopters, reported double-digit increases in deliveries of their civil rotorcraft in 2007 over 2006, and three of the four are forecasting similar if not increasing deliveries for 2008.
With unprecedented civil and military backlogs on the horizon - c8.5 billion ($12.3 billion) for AgustaWestland, $4 billion for Bell, c13 billion at Eurocopter and $8 billion for Sikorsky - manufacturers now find themselves in a race to optimize production and streamline the supply chain to reduce lead-times for new aircraft orders or risk losing sales to impatient customers.
Sikorsky is emerging from a five-year restructuring project aimed at increasing production, a task that would appear to be successful. In 2007, the company delivered 79 S-76C++ and S-92 helicopters, up from 52 in 2006, a 52% increase. Though 2006 deliveries were hit by a six-week strike at two plants, the predominant boost in production resulted from outsourcing major subassemblies and moving to a two-part build process, with the basic aircraft constructed in 100% common configuration at the Stratford, Connecticut location, and customisation for each helicopter moved to the company's Part 145 modification centre, Keystone Helicopters in Pennsylvania. "That allows us to be much more responsive," says Marc Poland, vice president of commercial programmes for Sikorsky. "We're not trying to re-engineer each product."
Cabins for the S-76 and S-92 are built by international suppliers and integrated by Keystone and, for the S-76, by Aero Vodochody in the Czech Republic. Sikorsky in July announced an agreement with Changhe Aircraft Industries, a subsidiary of Avic II, to develop the capability to build S-76s in China. Sikorsky's light helicopter arm, Schweizer, in 2006 signed an agreement with Changhe to assemble its piston-powered S-300 in China as well.
It is not clear what role China may play in the production of Sikorsky's newest light single-engine helicopter, to be unveiled next week at the Helicopter Association International Heli Expo annual trade show in Houston, from 24-26 February. The company says it has orders for 15 of the four-bladed turboshaft-powered helicopters in "non-FAA" configuration, though it will ultimately seek FAA certification. The rotorcraft will compete with the likes of the Bell 206, Eurocopter EC120 and Robinson's new R66.
Sikorsky is also taking more control of its destiny by acquiring manufacturing facilities abroad, including PZL Mielec in Poland in late 2006, primarily for its booming military helicopter production. "The Sikorsky philosophy is to own a significant part of our supply chain," says Steve Estill, Sikorsky vice president of sales. Supporting the design, build and support cycle is a distributed engineering workforce that grew by 500 employees last year, says Poland. Sikorksy has five remote sites for its engineers in the USA and globally. A new facility in India now provides engineering expertise for supplemental type certificates, design and manufacturing improvements.
In all, Sikorsky appears better positioned for the glut of new work that keeps coming, including orders of more than 100 for the S-76D helicopter, which the company expects to begin delivering by the end of 2009, replacing the current model, the S-76C++.
Estill says he expects large fleet replacement sales to the US military to continue for another 2-3 years. Most recently, the US government in December signed a five-year, $7.4 billion multi-service contract for 537 Black Hawk helicopters with options for 263 additional helicopters. Other emerging markets include privatised search and rescue (SAR). Estill says "several countries" are developing plans to outsource SAR, similar to the way that the UK's Maritime and Coastguard Agency (MCA) did last year. The service purchased four S-92s, complete with internal auxiliary fuel tanks, auto-hover capabilities and forward-looking infrared cameras, which will be owned and operated by CHC Helicopter.
Market leader Eurocopter is also the front runner in backlog. The company delivered 443 civilian helicopters in 2007, up from 335 in 2006, an increase of 32%. It expects to produce 550-600 helicopters next year, including military products, up from 492 this year, an increase of as much as 22%.
Key obstacles to meeting or exceeding its goals are the supply of engineers and the supply chain, says Eurocopter chief executive Lutz Bertling. "Our output is up 75% over the past four years, but we need to do another 50%," he said at a global investment conference in January.
To accommodate that growth, Bertling says the "complexity" of Eurocopter's supply chain must be decreased. As such, the company has launched a campaign to cut its 2,600 suppliers down to 300 by 2015, reducing the count 10-15% per year in part through more standardisation and global packaging. Bertling calls the short supply of engineers a "limiting factor on growth" and says the company "needs to get engineers onboard everywhere in the world".
In terms of outsourcing, Eurocopter already has a manufacturing presence in China through a joint venture with the China National Aero-Technology Import and Export Corp, Harbin Aviation and Singapore Technologies Aerospace to produce a version of the EC120 known as the HC120. It is also co-developing the 6t EC175 helicopter with Harbin, a subsidiary of China's AVIC II. The helicopter is due for European and Chinese certification in 2009 and enter series production in 2011, with assembly split 50/50 between China and France. Eurocopter predicts a market for as many as 800 EC175s over 20 years.
It is unclear what role the Chinese capacity will play in a new product Eurcopter plans to introduce at this year's Heli Expo, likely to be a light twin helicopter similar to the EC135 and EC145. The announcement will keep alive Eurocopter's practice of launching one new helicopter per year for the 16th consecutive year.
Airframer AgustaWestland does not plan to introduce a new helicopter this year but is developing two new models, a new medium-light twin multi-role helicopter to fill the gap between the AW109 Power and the AW139 and the AW149, a new medium-size multi-role utility helicopter for military and government customers that will emerge in prototype form next year. First prototype of the "XX9" medium-light is slated for flight testing in the 2010 or 2011 timeframe.
The company delivered 110 civil helicopter models in 2007 out of a total of around 180 civilian and military models. By 2010, AgustaWestland plans to deliver 260 helicopters in total. To accommodate the growth, the company is ramping up production at its Philadelphia final assembly facility with a new AW139 line and is accelerating the start date for fuselage and final assembly work in China. AgustaWestland has a licensed production agreement with China's Avic II to build fuselages as a supplier starting this year and to generate complete aircraft for the country's internal market by 2009 or 2010. AgustaWestland currently builds fuselages in Poland, Turkey and Italy.
Development of the company's unique 6- to 9-passenger BA609 tiltrotor in partnership with Bell Helicopter continues, with two prototypes flying - one in Texas and one in Italy. The companies have 77 orders and are targeting late 2011 for first deliveries. Neither company is disclosing the price of the aircraft.
Bell itself has launched perhaps the most extreme changes to its manufacturing plan in the name of more efficient production - it will cut four models out of its inventory after 2010 just as other manufacturers, namely Eurocopter and AgustaWestland, continue to diversify their offerings. "When we looked at the marketplace, we identified important trends in the market segments we serve," says Bob Fitzpatrick, Bell's senior vice president for marketing and sales says. "The data validated that the capabilities of our most popular models, along with our new product offerings, are well matched to meet market needs."
Bell delivered 181 civilian helicopters in 2007, an increase of 14% over 2006. Plans for 2008 are less ambitious - about 160 helicopters - as the company positions itself for a 50% increase in capacity growth by 2011. The company says it will certify its new light-twin, the Bell 429 Global Ranger, later this year.
"We will see deliveries come down a little bit in 2008, for two reasons," said Bell chief financial officer, Ted French, at a 7 February analysts meeting. "The largest piece of it is we are streamlining our commercial product offering. We are in the process of discontinuing the 430, 427, 210 and 206B models, so most of that reduction is coming out of those products. The other piece of the impact in 2008 is that we are also redeploying a portion of our drive system centre, where we make gears, shafts and transmissions for all our products to be able to support the ramp up on the defence side."
French says Bell wants to rationalise its commercial operation, but there will also be competition for capacity in the drive system centre in 2008. He says he expects Bell to show strong growth by 2010.