Helicopter Business Review
The New York Times

A Sikorsky helicopter at a plant in Connecticut. Jeffrey P. Pino,
senior vice president of Sikorsky Aircraft, estimates that industrywide
sales of helicopters for commercial use will hit $1.5 billion this year.  

Pilots and Makers of Copters Defy the Aviation Slump

Published: November 30, 2004

Harry J. Murphy keeps a hair-raising pace as a helicopter pilot. At 3:30 a.m. on a recent Monday, he transferred a cardiac patient to Lehigh Valley Hospital, his home base in Allentown, Pa., and barely had time to refuel his helicopter before he was called to a vehicle rollover.

Yet that bustle underscores why - in an aviation world of bankrupt airlines and despondent employees - the helicopter business is a relatively happy and optimistic niche. Mr. Murphy earns a base salary of only $65,000 after nearly a quarter-century on the job, but he and his fellow chopper pilots relish the variety and excitement, which by comparison makes flying a 727 seem like driving a bus.

Indeed, Mr. Murphy and his colleagues at the Keystone Helicopter Corporation, which runs the service for the hospital, recently voted not to unionize.

Larry Murphy, a pilot for Keystone Helicopter, has a busy schedule. He said the supply of qualified pilots was tight.

As airlines that rely on fare-shopping passengers struggle to survive, helicopter companies that can charge $10,000 for a single medical airlift are thriving. With the business on the upswing, manufacturers, after suffering through a post-Sept. 11 slump, are churning out copters again and competing intensely for a new spate of military and commercial orders that could reap them at least $6 billion, probably more.

A reason for the boom is that helicopters are getting comfy. Traditionally they were deafeningly loud, jarring, often regarded as unreliable and - perhaps undeservedly - unsafe. But technological advances have made helicopters plusher and quieter, giving them a newfound cachet as one of the newest coveted corporate toys.

Companies that maintain and overhaul helicopters say their phones are always ringing. Flight schools report a rise in students hungering to take over as the Vietnam-era helicopter pilots - the military mavericks who make up a large part of the civilian helicopter pilot force - start to retire.

Companies that provide medical evacuation services say that hospitals, looking for ways to grab profitable patients, have driven their business up 8.4 percent this year. And as a relatively well-heeled population ages, an inevitable increase in accidents and heart attacks could drive it even higher.

"Face it: more aortas are going to burst as more people age," said Steve Towne, chief executive of Ranger Aerospace, which owns Keystone and employs 145 pilots.

Nor is medical evacuation the industry's only sweet spot. Helicopters, which can take off and land almost anywhere, are often the only way to patrol borders, to check traffic, to transport logs from deep in a jungle, to install a microwave tower on a mountaintop. Thus, in an era when even successful airlines like JetBlue are enduring a drop in earnings, the helicopter industry as a whole is emerging as the little engine that could.

"Regional jets, corporate jets, they have explosive growth one year, none the next," said Roy Resavage, president of the Helicopter Association International, the industry's trade association.

"We grow at a steady 3 to 4 percent clip," he said. "It's the tortoise and the hare."

In fact, the industry is more harelike this year, and if technological advances could make helicopters faster and more affordable, the industry could really take off. But even now, the new spurt has brought fresh challenges to American helicopter makers, as foreign competitors vie for military business that the Americans pretty much had on their own.

The military is still the biggest customer, and the Bush administration has grown more willing to entertain bids from European competitors like Eurocopter and Agusta, even for the presidential helicopter. "The helicopter industry is no longer the last refuge of hard-core nationalism," said Richard Aboulafia, a vice president of the Teal Group, an aerospace market analysis firm.

But increasingly, commercial sales are making up the slack, as new guidance systems, quieter interiors and other technological changes make modern helicopters more useful for transporting people and equipment alike. Jeffrey P. Pino, senior vice president of the Sikorsky Aircraft subsidiary of the United Technologies Corporation, estimates that industrywide sales of helicopters for commercial use will hit a hefty $1.5 billion this year - relatively small next to the $5 billion or so the military will spend, but still a potential return to the industry's headier days.

According to figures published by the association, sales of helicopters for civilian use peaked in 1980, when 1,366 helicopters were sold. The nadir was in 1993, when recession-battered companies bought just 258 new helicopters. Helicopter sales again rose steadily until the combination of recession and post-Sept. 11 flying jitters crippled them in 2001 and 2002.

But the pace is again quickening. Last year American companies bought 325 new helicopters, and helicopter plants are operating near capacity this year.

"No question, the market for helicopters and pilots is getting better," said Douglas W. Nelms, a former army helicopter pilot who is now managing editor of Rotor and Wing, a helicopter industry magazine.

For medical evacuation services, business is simply booming. Helicopters are the most efficient way for hospitals to bring a steady stream of patients from across a wide geographic area and thus keep beds full. For an accident victim or someone with a heart attack, they are the fastest way to get to a life-saving trauma, burn or cardiac center. And while helicopter services charge thousands of dollars, insurance companies will often pick up part of the cost. And increasingly, hospitals are pooling resources to pay the rest of it. Keystone, for example, picks up patients in five states and transports them to Lehigh Valley and Hahnemann University Hospital in Philadelphia, which split the cost of Keystone's contract.

Another kind of helicopter ambulance service is also springing up. Instead of working under contract to hospitals, they operate as freelancers, responding to emergency calls from 911 services, the police or patients themselves. CJ Systems Aviation, for example, has a fast-growing business in responding to emergency calls with its own medical team and billing the patient for as much as $10,000 afterward.
"There's risk, since you can't be sure how much the insurance company will pay, but the margins are still better than when you bid competitively for a hospital contract," said Lawrence J. Pietropaulo, president of CJ Systems. The company, based in Pittsburgh, had just six helicopters five years ago. Today, it has 105, with 6 more on order. Its revenue last year was about $140 million.

Outside the medical arena, growth is steady, but not meteoric. The CHC Helicopter Corporation, based in Vancouver, British Columbia, derives nearly three quarters of its $670 million ($570 million) in annual revenues from offshore oil operations, and it was optimistic enough to order 15 helicopters from Sikorsky this year. But, Chris Flanagan, a CHC spokesman, stops short of trumpeting a boom.

"Offshore projects require tremendous lead time and planning, so the move to more helicopters just doesn't happen quickly," he said.
If helicopter manufacturers ever break the price and speed barriers, though, most experts say new uses for helicopters will take off. For now, a helicopter that carries just eight passengers can cost $8 million to $10 million, while one big enough to carry 19 can exceed $16 million. Moreover, the fastest copters rarely exceed 145 miles per hour or range much farther than 450 miles.

But once helicopters fly at 250 miles an hour, they will compete with scheduled commuter and private jet services. If that happens, the demand for machines, and for people to fly them and fix them, could boom.

Competition for good pilots is already heating up. At the end of last year, 29,176 pilots were certified to fly helicopters, gliders and recreational planes, according to the Federal Aviation Administration, down from 29,913 in 2002.

Mr. Murphy notes that Keystone used to easily find pilots with 10 years of experience and 2,000 hours of flight time; today, someone with 10 years of experience and half that flight time is a real catch. "You can't call it a shortage, the pilots are still qualified, but the supply is definitely tighter," he said.

Unions have made inroads at a few helicopter services, and Keystone, which is nonunion, recently agreed to pay time and a half for overtime. But over all, salaries can still be as low as $25,000 for the pilot of a small news helicopter, and only the chief pilots who transport executives for Fortune 100 companies routinely make into the six digits.

Still, even the low pay is not keeping helicopter pilots grounded.

"Jet pilots see clouds and airports, we see the country and the final destinations," said Darren Lucas, a flight instructor and co-owner of Dutch Country Helicopters, a flight school that operates out of Lancaster Airport in Pennsylvania. "That variety will always remain a huge lure."

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