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Heli-Expo 2003: Rolls-Royce Releases Annual Forecast of Worldwide Turbine Helicopter Demand
DALLAS, TX, Feb 10, 2003 -– Rolls-Royce released its annual ten-year forecast of worldwide turbine helicopter deliveries. The forecast, which was presented at Heli-Expo 2003 by Alex Youngs, the company’s Director for Business Development – Helicopters, projects worldwide deliveries of turbine-powered helicopters and rotary-wing UAVs in all size classes, both civil and military, from 2003 until the end of year 2012.
For the second year in a row, Rolls-Royce has teamed-up with industry forecasting specialist the Teal Group to provide what both companies believe is the definitive turbine helicopter market forecast. This partnership allows the companies to pool their respective analytical tools, forecasting databases and industry surveys, thereby creating the most accurate survey available.
OVERALL SUMMARY
During the 2003-2012 period, some 10,407 turbine helicopter deliveries are forecast worldwide. This is a 5 percent increase over last year’s forecast, attributable to the onset of major military acquisition programs over the period, together with a shallower near-term downturn associated with the current economic downturn. On a unit basis, the split between civil and military sales is 50:50, although on a value basis, the split is 22:78.
CIVIL SUMMARY
Civil helicopter deliveries are projected to total 5,161 units during the next ten years, a 7 percent increase over last year’s forecast. This change is again associated with a forecast improvement in general economic conditions over the period, together with an injection of activity provided by paramilitary sales. Turbine singles (59 percent of deliveries) and light twins (22 percent) will dominate the market. Deliveries are expected to grow slowly over the period from a low of 497 units (compared to 480 in 2002) to a peak of 533 at the end of the period.
MILITARY SUMMARY
Our forecast projects a total of 5,246 military helicopter deliveries and major engine-related upgrades during 2003 - 2012, which is a 4 percent increase from last year’s forecast. This increase reflects the onset of the long-awaited re-equipment phase of the market and the eventual entry into service of rotary wing unmanned air vehicles (UAVs), offset by cutbacks in a number of big ticket programs. Approximately 47 percent of all unit deliveries will be multi-engine heavy rotorcraft, primarily troop transports and maritime patrol helicopters, with 24 percent being intermediate twins (chiefly light attack helicopters and tactical transports).
The new military rotorcraft shipment forecast indicates a 33 percent increase in military deliveries over the next five years, with demand levelling-off thereafter. The number of major engine-related upgrade programs is expected to triple over the period as key recapitalization efforts commence. Program delays, budgetary constraints and changes in some governments’ leadership have historically affected the approval and delivery schedules, and there still remains what is considered to be a ‘bow wave’ effect in the military rotorcraft procurement profile. The problematic nature of this effect to long-term forecasting is readily exemplified by recent delays and volume reductions associated with such programs as the RAH-66 Comanche and Eurocopter Tiger.
CIVIL HELICOPTER MARKET FORCES, ISSUES, AND CONCERNS:
1. A short-term contraction. To the initial surprise of many in the industry, deliveries during 2002 were almost identical to those in 2001, despite the impact of the economic downturn and the lingering effects of the post-9/11 travel restrictions. The reduction in private and corporate helicopter demand was offset by an increase in sales to paramilitary and emergency services. This effect is brought home by a simple comparison of the flat turbine helicopter sales during 2002 with the significant decrease in piston-engined rotorcraft sales during the same year, since the vast majority of paramilitary sales involve turbine models.
The tourism market is slowly beginning to recover, while the offshore market has continued to enjoy the level of activity with which it began the year. Although recent increases in the price of oil are largely speculative, based on concerns over the situation in the Middle East, this market is still expected to enjoy a period of stability as alternate (e.g. deep-water) sources of oil are explored.
The prospect of any substantial compensation payment to U.S. operators for the immediate effects of 9/11 – such as that proposed through the General Aviation (GA) Industry Reparations Act of 2001 – has all but vanished, with operators continuing to struggle with the knock-on effect of higher aircraft insurance premiums. GA relief bills continue to be debated, though any eventual pay-out is likely to be significantly smaller than that proposed in the immediate aftermath of the tragic events of 2001.
2. A long-term stable civil helicopter market. Despite the short-term effects on helicopter demand associated with the economic downturn and the associated concerns over the prospect for military action in the Middle East, the long-term outlook for the market remains positive. With the average age of turbine-powered helicopters in the West now reaching 27 years, the long-term prospects for fleet replenishment remain positive, stimulated by recent product introduction. Although the current economic environment appears to have delayed a number of new generation low-cost turbine rotorcraft projects, the likelihood of further product introduction during the second half of the decade remains strong.
Annual flight hours are projected to increase slightly over the period, with the average hours per helicopter projected to increase at a similar rate. This effect is partly attributable to the introduction of an ever greater range of through-life service offerings, together with the balance effect observation. As rotorcraft retirement and helicopters assigned to “inactive status” rates are considered, the demand for replacement (new) helicopters contributes significantly to the ten-year forecast picture.
3. The introduction of new helicopter models has continued apace over the past five years, with recent developments such as the Agusta A119/A109 Power, Bell 407/430 and MDHI MD 520/MD 600 joined by a new range of types including the Bell 427 and a comprehensive portfolio of new civil products from Eurocopter over the past decade, including the EC120, EC130 B4, EC135, EC145, EC155 and EC225.
While demand for single-engine and light-twin types remains strong, the market for intermediate-class rotorcraft has yet to take-off. Although the Agusta Bell AB139 continues to stimulate interest from a number of current operators of Bell 412-class helicopters, the aircraft’s certification date has slipped from 2002 into 2003. Sikorsky also appears to be reconsidering its plans for a near-term launch of the next-generation S-76D. Sikorsky has now successfully completed certification of the S-92 Helibus, though this program has also suffered a year’s delay. The fate of the Bell Agusta (BAAC) BA609 tiltrotor program continues to rest largely in the hands of the V-22 Osprey program, which is carrying the hopes of the tiltrotor community. The resumption of V-22 flight testing is therefore a positive sign for BAAC, which plans to commence flight testing of the BA 609 itself this year.
4. The offshore oil support market remains largely robust. The price readjustments introduced by the major fleet operators in 2001 appear to have had no serious effect on demand, with the results of the 2002 Rolls-Royce customer survey indicating a generally positive outlook amongst offshore operators.
Concerns over uninterrupted access to Middle East oil sources, plus the underlying discomfort of many of the major economies over their reliance on such sources, is encouraging exploitation of alternate sources such as deep-water reserves. While the current escalation of oil prices is largely a short-term speculative effect resulting from regional tensions and temporary supply problems, these concerns over long-term access to reliable oil sources is likely to sustain a higher price premium in the intermediate future.
5. The take-up of military surplus helicopters by the civil sector is likely to re-emerge as an issue for the industry over the coming years as the U.S. Army and several European military operators release large numbers of surplus aircraft onto the market. The costs often associated with refurbishing such craft tend to dissuade their use by all but the most dedicated operators, with public agencies (notably law enforcement units) remaining the most frequent recipients. That said, surplus helicopters remain a low-cost entry-level opportunity for many potential turbine rotorcraft pilots, with a dedicated ‘civil conversion’ industry for such aircraft having now emerged.
6. The corporate helicopter sector. The market for corporate helicopters has been subject to two opposing factors over the past year, with the economic downturn and the increased scrutiny associated with corporate ‘perks’ having been largely offset by greater interest in the corporate helicopter as a genuine time-saving business tool given the security-related delays associated with major airports. The latest generation of corporate helicopters offer a combination of luxury, speed and a smooth ride, together with comprehensive all-weather avionics suites which enable transit through major airways.
7. Helicopter fractional ownership programs and scheduled air services. Fractional ownership continues to represent a fast-growing feature in general aviation, having been a readily accepted alternative to aircraft ownership in the business jet market for decades. The market for fractional helicopter ownership has, however, yet to thrive, remaining a largely ‘niche’ market provided by operators such as Heliflite and Sikorsky Shares.
Scheduled air services using rotorcraft have proven to be a huge success where supported by local demographics such as captive markets, congested population centers and geographic isolation. Success stories in this sector include Helijet and British International, although the total volume of passenger traffic involved remains relatively small when compared to fixed-wing routes. Schemes to introduce such services to some of the world’s major business centers are likely to re-emerge as economic conditions improve.
Before such services can realize their full potential, however, three key issues remain to be resolved. Firstly, the underlying issue of noise disturbance, which limits the flexibility to operate in certain high population density areas, and therefore restricts the time savings offered by rotorcraft. Secondly, the question of limited helipad availability: industry bodies such as the Helicopter Association International (HAI) have regularly highlighted the recent downward trend in publicly-accessible helipads in the U.S.. This factor in turn focuses attention on the third issue, namely the willingness (or otherwise) of the world’s major airports to cater for an increase in the incidence of ‘unrestricted’ helicopter operations. This issue is gradually gaining more attention within the industry, though the pay-offs associated with such relatively low passenger volume alternatives to fixed-wing airliners remain something of a sticking point with airport managers.
8. Packaged support. Effectively representing a ‘halfway-house’ between traditional helicopter operation and fractional ownership, these ‘complete service offerings’ are becoming a popular method of realizing true ‘ease of operation’ rotorcraft ownership. Now offered by several of the major OEMs (e.g. Bell’s ‘360’ plan, Agusta’s ‘GSP’), these head-to-tail support concepts are likely to become the norm for smaller operators who lack their own extensive support structure, and who seek to maximize their ease of ownership.
9. Airborne law enforcement and public agencies. The airborne law enforcement and paramilitary industry has emerged as one of the growth markets following the increased focus on homeland security in the aftermath of 9/11. The creation of the U.S. Homeland Defense Agency is widely expected to lead to a substantial helicopter acquisition program to bolster the current fleet of border patrol helicopters, with the U.S. Coast Guard’s Deepwater program also gaining added importance.
Inter-agency co-ordination is likely to play a major part in these developments, favoring both task specialization and equipment standardization.
Airborne assets are widely recognized as combining unparalleled responsiveness with true force multiplier capabilities, and the importance of local airborne law enforcement systems as part of the broader security net has also increased, stimulating additional sales.
10. Emergency Medical Services (EMS). Despite emerging concerns over the sustainability of increases in medical-related expenditure worldwide, the EMS niche is currently enjoying positive growth, with re-equipment and new service introductions combining to stimulate the segment. The spread of EMS services to smaller and rural communities is stimulating continued demand for lower-cost single-engine EMS platforms, though larger twin-engine aircraft are likely to benefit from increasing pressure across Europe for additional safety-related legislation.
11. New technology continues to be a central linchpin to the future growth of the civil market. Recent technology introductions have included the advent of true integrated avionics suites offering ‘free-flight’ capable navigation; Global Positioning System (GPS) technology and differential GPS, which promises to make precision instrument approach and landing systems commonplace; and active vibration-reduction systems. Future technology developments are likely to focus on three key areas:
2002 CIVIL FORECAST VERSUS ACTUAL RESULTS
Although actual 2002 civil helicopter deliveries were not available at the time of press, preliminary information suggests that approximately 480-490 units were delivered, which is a near-identical level of activity to 2001. This is within 7 percent of the Rolls-Royce/Teal Group 2002 helicopter market forecast.
MILITARY HELICOPTER FORECAST
Military procurement forecasting is traditionally difficult to verify, due to the sensitivities involved in establishing actual deliveries and customers, not to mention program delays. However, by analyzing known requirements, declared programs, aircraft losses and fleet aging, it is possible to provide a realistically accurate estimate of anticipated demand.
Projected military helicopter deliveries for the 2003 -2012 period include 3,799 new-build aircraft and 1,447 major engine-related upgrades. This total of 5,246 units represents a 4 percent increase on last year’s forecast, indicating the onset of several major re-equipment programs during the period.
The substantial growth seen during the period – averaging 5 percent p.a. – raises obvious questions regarding the well-known ‘bow wave’ effect, i.e. projected orders failing to appear due to funding shortfalls, political reprioritization, etc.. While it is entirely possible that some factors may come to influence the acquisition programs projected to occur over the decade, many of these very programs have already been subject to extensive delay, and can thus no longer be postponed. That said, 2002 did witness a number of warning signals, such as suggestions from Eurocopter that the Franco-German requirement for the Tiger attack helicopter could fall from 427 units to 320 units, together with the restructuring and associated downsizing of the RAH-66 Comanche program. Such moves can to a degree be accounted for as fiscal ‘smoothing,’ perhaps based in some cases on a strategy of protecting programs through near-term reductions in the expectation of ultimately revisiting volume objectives in the long-run.
MILITARY HELICOPTER MARKET FORCES, ISSUES, AND CONCERNS:
1. The changing security environment. The global ‘war on terror’ and U.S.-led operations in Afghanistan have reinforced the role of the helicopter in the modern battlefield. Since the very nature of the battlefield can no longer be easily defined, but is instead likely to be closer to a military operation in urban terrain (MOUT), the tactical advantages of rotorcraft – i.e. rapid deployment, flexible mission planning and ‘swing’ tasking – becomes clear. Even before September 11th, there was a growing emphasis on tactical mobility, and this focus has only intensified since.
In addition to tactical transports, the renewed emphasis on multi-national ‘composite’ operations has also reinforced the need for easily deployable reconnaissance platforms, deep-insertion self-deployment capabilities and armed multi-role ground support assets. These capabilities are already designed into many of the new-generation of rotorcraft (e.g. the Boeing Sikorsky RAH-66 Comanche, EH Industries EH101 and Eurocopter Tiger, respectively), and are thus likely to be largely met by on-going procurement programs.
The other aspect of this new world order is a heightened emphasis on the need for border patrol. While clearly reinforcing the market for existing land-based utility types, this focus may also see two other developments occur: firstly, the increasing application of traditional maritime patrol helicopters in a broader ‘border protection’ role, utilizing multi-purpose sensor suites; and, secondly, an increasing interest in vertical take-off and landing unmanned air vehicle (VTUAV) assets to patrol those more isolated borders.
2. Fleet re-equipment. The coming decade sees the introduction of an almost unprecedented number of major new designs. While the 1950s and 1960s witnessed a veritable explosion of new programs, the coming decade is notable firstly for the expense involved in the replacement programs being undertaken, and secondly for the concurrent nature of many of these projects.
A number of key North American delivery programs are already underway, led by upgrade programs such as the CH-47F and UH-60M (q.v.). Three key new-build programs will also commence during the period, the first of these being the U.S. Navy’s MH-60S (formerly CH-60S) and MH-60R (formerly SH-60R) programs. These two Black Hawk-derived platforms will provide the Navy with a brand new rotary-wing fleet of almost 500 aircraft, substantially enhancing the service’s capabilities. The MH-60R was originally to have been a remanufacture program itself, but the economics of a new-buy program proved too attractive for the DoD to refuse.
The second DoD program scheduled to commence during this period is the Bell-Boeing V?22 Osprey, which is now back in the air following an extended period of engineering checks after a series of high-profile accidents. The U.S. Marine Corps and USAF Special Operations Command (AFSOC) both remain keen to add the Osprey’s capabilities to their fleets, and testing so far is reportedly going well, with AFSOC even contemplating an accelerated entry in service schedule. Total U.S. DoD requirements for the Osprey currently stand at 410 aircraft.
The third program due to enter service during the period is the Boeing Sikorsky RAH-66 Comanche, which now appears to be on a substantially surer footing follow its latest restructuring program. The introduction into service of the Comanche has been repeatedly delayed as the aircraft gained new roles in the post-Cold War era, and the latest review of the program was intended to ensure that the eventual end product will be fully suited to the new security environment. Under the new plan, the U.S. Army will begin fielding 650 Comanches from 2009, to be operated in parallel with a new generation of UAVs (q.v.).
The U.S. Army also continues to examine its longer-term transport requirements, with the Black Hawk-class Future Utility Rotorcraft (FUR) and Chinook-class Advanced Maneuver Transport (AMT) currently scheduled to emerge in the next decade.
Europe has already witnessed the recent introduction of two new aircraft types – the EHI EH101 and AgustaWestland WAH-64 Apache – but these programs pale in comparison to the volumes associated with the NHI Industries NH90 and Eurocopter Tiger. The NH90 – deliveries of which are scheduled to commence later this year – will soon become the backbone of Europe’s tactical transport and maritime helicopter fleets, with no other European program of its size likely to occur for many decades to come. The selection of the NH90 by Portugal and Greece has further highlighted the NH90’s position as the common tactical transport for European military operators.
A number of smaller but still significant programs remain to be selected, including the Spanish and Scandinavian attack helicopter requirements, Belgian transport requirement, and the British Support, Amphibious, Battlefield Rotorcraft (SABR).
A number of European nations are also re-equipping with new utility types (e.g. Agusta A109F, Eurocopter EC120, EC135), though the value of these orders pales in comparison to the larger machines already mentioned.
Other major worldwide programs occurring during the decade include:
4. Vertical take-off and landing unmanned air vehicles (VTUAVs). The market for VTUAVs is finally expected to come to fruition during the decade, driven by the successful operation of fixed-wing UAV types and by the increased emphasis on surveillance/strike in today’s ‘uncertain‘ asymmetric threat security environment.
The need for near-term deployment of VTUAV assets is already driving the U.S. Navy to reconsider its original decision to forgo production of the Northrop Grumman RQ-8A Fire Scout, which has impressed many with its capabilities during the past year of testing. The U.S. Army is also studying the Fire Scout, as are potential export customers such as the UK, Australia, Germany and Japan.
While the idea of armed VTUAVs is not new, the U.S. Navy having experimented with various armament options on the Gyrodyne QH-50, it is the successful use of Hellfire-armed Predator UAVs over Afghanistan and Yemen that has reawakened interest in this field. Northrop Grumman is already working to arm the RQ-8A Fire Scout, but the most important program in this segment over the coming decade will be the U.S. Army’s Unmanned Combat Armed Vehicle (UCAR) program. Four teams are currently performing twelve-month study contracts, with a downselect to two teams due this year. When UCAR enters service towards the end of the decade, it will be operating alongside the manned RAH-66 Comanche and AH-64D Apache, being tasked with ‘dull, dirty and dangerous’ missions and thereby realizing the ‘force multiplier’ concept. The U.S. Army’s UCAR requirement is currently estimated at 300 air vehicles over the next twenty years.
A plethora of additional VTUAV designs is now being offered, spanning from hand-launched micro-UAVs (MUAVs) to large unmanned battlefield transports. The U.S. Army’s Future Combat System (FCS) battlefield project is likely to drive much of this technology, including the development of ‘self-deploying sensor’ VTUAVs.
FORECAST METHODOLOGY
Rolls-Royce and the Teal Group both employ quantitative methodologies to model the civil and military helicopter markets. This enables the development of detailed, market-driven forecasts based on analysis of fleet activity, airframe retirements, known procurement programs and requirements, operational usage, and macroeconomic factors. This analytical research is reinforced by direct input polled from the world’s major airframers, owners and operators. The result is a powerful yet flexible set of models, and a forecast that is fundamentally sound from a market standpoint.
For forecasting purposes, we have classified the helicopter market as follows:
CIVIL:
Single engine - EC120, Bell 407, MD 500/600, etc.
Light twin (0-8,500 lbs.) - EC135, A109E, MD Explorer, Bell 427, etc.
Intermediate twin (8,500-12,500 lbs.) - EC155, Bell 430, S-76C+, AB139, etc.
Large multi-engine (12,500+ lbs.) - AS.332, S-92, EH101, etc.
MILITARY:
Light single engine - EC120, TH-67, RQ-8A, etc.
Light twin (0-8,500 lbs.) - A109M, EC635, etc.
Intermediate twin (8,500-15,000 lbs.) - Super Lynx, Tiger, RAH-66, etc.
Large twin (15,000-30,000 lbs.) - UH-60, NH90, AH-64, etc.
Heavy multi-engine (30,000+ lbs.) - EH101, CH-53, CH-47, etc.
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