Honeywell International Inc.
) predicted a buoyant five-year outlook for the global helicopter
industry, with considerable demand from high-growth regions such
as Latin America and China balancing the steady growth in Europe
and North America.
Honeywell anticipates that 4,800-5,500 civilian helicopters will
be delivered during 2014-2018. According to the 2014 Honeywell
survey, mounting large fleet operator demand will compensate for
a moderate softening in new helicopter purchase plans, ensuring
persistent strength in projected demand in the succeeding years.
Key Demand Drivers
When evaluating usage trends across segments, the oil and gas
industry took the centre-stage, recording an annual average of
roughly 720 hours per aircraft, followed by law enforcement at
over 400 hours per year. Tourism, emergency medical services and
general utility had annual usages of approximately 375-400 hours.
Corporate segment operators had lowest average use at just over
300 hours per helicopter per year.
With recession hurting demand in the aviation sector, the oil and
gas industry has emerged as the likely savior for global
commercial helicopter manufacturers. As energy companies seek to
exploit more remote reserves, demand for medium-sized and heavy
helicopters is expected to increase significantly.
Helicopter replacement cycles and increased operating hours in
the law enforcement and oil & gas industries contribute to
sustained demand in those sectors. With utility helicopter
purchase interest inching upward and new platforms scheduled to
enter operations in the upcoming years, overall demand looks well
set to increase compared with 2013.
Latin America continues to lead in new purchase rates, with
nearly 32% of respondent fleets scheduled for turnover with a new
helicopter addition or replacement. The demand for civil,
turbine-powered helicopters over the next five years in the U.S.
and Canada are expected to rise 26%, which aggregated with Latin
America, is expected to account for half of the total global
demand. Europe's share closely trails with 23%, with the
Asia-Oceania region representing 19%, while Africa and the Middle
East recording under 8% growth.
A considerable part of a decline in European demand is
attributable to a large slump in Russian buying plans in the
coming years. With regard to the emerging nations, China's
numbers were the strongest in the 2014 survey, while Brazilian
expansion plans looked quite stable and Indian respondents
reported more conservative purchase plans.
With the highest fleet of replacement numbers, Latin America
looks set to surpass Europe and affirm its place as the world's
second-largest regional market, following North America.
Operators who plan to purchase a helicopter within the next five
years stated the key decision drivers to be the maturity of their
current aircraft, contracted replacement cycle and expiration of
warranty. Honeywell appears well-equipped to cater to the
operators' needs relating to new installations as well as fleet
The light single-engine helicopter maintained its outstanding
popularity, with the intermediate/medium twin-engine helicopter
coming a close second as it won favors with 33% respondents. The
light twin helicopter class seized 26% of total operator purchase
plans in the 2014 survey. Heavy multi-engine helicopters are
expected to ride high on continued expansion plans from the oil
and gas sector.
Per the survey, the models that achieved the maximum operator
approval are AW139, Bell 407, Bell 412, EC120, EC130/EC350 series
and Sikorsky S-76.
Honeywell's fleet operations are set to expand this year, with
primary contributions from operators in Latin America, Asia and
Europe. The company has continually invested in technological
upgradation to provide increased power, reliability and fuel
efficiency to helicopter operators.
Honeywell's Enhanced Ground Proximity Warning System (EGPWS) has
nearly eliminated controlled flight into terrain (CFIT),
improving situational awareness in helicopter operations. This is
imperative given the fact that the helicopters spend most of
their flight time operating at low altitudes in all kinds of
weather conditions and often in rough terrain to perform critical
operations like search and rescue, homeland security and law
enforcement along with oil and gas operations.
Honeywell's access to advanced safety systems such as Health and
Usage Monitoring Systems (HUMS) and Sky Connect Tracker III have
proven successful in addressing requirements of helicopter
operators. These offer enhanced systems that diminish CFIT and
mechanical failures, increase situational awareness and reduce
the frequency of pilot error.
Honeywell currently holds a Zacks Rank #3 (Hold). Other stocks in
the industry that look promising and are worth a look include
Hutchison Whampoa Ltd
), each carrying a Zacks Rank #2 (Buy).
HONEYWELL INTL (HON): Free Stock Analysis
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3M CO (MMM): Free Stock Analysis Report
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