A Retrospective of 2016 and Looking Ahead at 2017

Our editor had an opportunity to sit down with Rick Angelo, Global Director of Strategic Marketing for Honeywell Aerospace.  A 20-year veteran of the Aerospace industry, Angelo has worked in a number of Marketing Research, Strategy and Business Development roles for Honeywell, Bell Helicopter and Heli-One.

After a volatile year due to a decline in new aircraft deliveries, Honeywell’s Strategic Marketing Director for Commercial Helicopters sees stronger OEM and operator collaboration as the key to growth in 2017. 

Editor: Can you reflect upon 2016 in terms of overall civil helicopter industry performance for the OEM and Aftermarket side of the business and then discuss some key business developments within Honeywell?

Angelo: Specific to the OEM side of the business, 2016 proved to be another challenging year where new OEM deliveries decreased by approximately 25%. 

 The medium & heavy classes contracted the most in terms of percentage.  In fact, new aircraft deliveries which are greater than 10,000 Lbs. Maximum Gross Takeoff Weight (MGTOW) declined by 38% compared to 2015, nearly double that of aircraft less than 10,000 Lbs. MGTOW.

Much of this decline was fueled by oil price volatility despite a 52% increase in Brent Crude Oil prices.  Surprisingly, only 8% of the installed commercial helicopter fleet is within the Oil & Gas sector; however, the Oil & Gas sector is the largest acquisition party for aircraft greater than 10,000 Lbs. MGTOW.

In order to move inventory, we observed aggressive OEM discounting.  Lastly, we saw a constant struggle for OEMs to hold production rates constant or positive as their backlogs were lacking.

Specific to the Aftermarket side of the business, we saw many operators choosing to defer retrofitting, modifying and/or upgrading their aircraft until they saw empirical evidence that the market was stabilizing; which unfortunately did not happen in 2016. 

At the end of 2016, there were 1,450 aircraft up for sale on the second hand market which represents nearly 7% of the installed fleet.  We learned that active global offshore rig counts in service were down over -27% year over year as well as nearly 60 Oil & Gas companies filing for bankruptcy in 2016.  At the aggregate level, we believe industry flight utilization decreased; in rare instances, we learned that a few fleet operator’s flight utilization decreased by as much a 40% as compared to 2015.

Editor: What was the overall industry impact to Honeywell?

Angelo:  Despite all industry leading indicators representing a challenging 2016, Honeywell continued to invest in our products and services and secured a number of strategic wins.

In late 2016, Honeywell entered into an agreement with Air Methods to outfit its fleet with the Sky Connect Tracker III satellite communications and tracking system.  This agreement was in direct support of the HEMS (HAA) FAA Mandate. 

The Eagle Copters 407HP, powered by the HTS900 engine is gaining momentum globally in the utility missions sector and operators are seeing great results – specifically for powerline and firefighting missions.

In addition, we completed nearly 30 Supplemental Type Certificates (STCs) for Aftermarket products and ADS-B Out solutions including Sky Connect Tracker III, Aspire 200 HDR and Health and Usage Monitoring Systems (HUMS).  The products/STCs offer FAA mandate compliance solutions that improve safety and enable operators to have high speed connectivity which allows for full differentiation.

Lastly, Honeywell continues the journey in being safety advocates within the aerospace industry by raising operator awareness as to the top causes of accidents/incidents.  In fact, Honeywell offers safety solutions for 80% of the causes of commercial helicopter accidents/incidents.  At the end of the day, it’s our collective job to drive safety improvements within the rotorcraft industry; and the first step in driving this is raising the awareness levels.

Editor: Where do you see opportunities for growth in 2017?

Angelo:  We anticipate stabilization within the civil helicopter market.  Our leading indicators point to a year where 25% plus declines will not persist for a third consecutive year. We foresee stabilization and/or growth as it relates to aggregate OEM build rates/deliveries, oil price recovery, resale values, aircraft appraisals and flight utilization.  While there are varying levels of optimism throughout the industry, our industry peers, OEMs, suppliers and operators are seeing a consistent level of stabilization within their respective leading indicators and unprecedented contraction levels have subsided.

Honeywell will continue to invest in our safety solutions and differentiating products and services. We anticipate the completion of several STCs which will further increase the breadth of platforms that are able to install our existing retrofits, modifications and upgrades. 

A continued effort to further mature our new product pipeline is paramount and we have a concerted effort to bring the right products to market at the right time.  All of the product expansions (STCs) and product developments (new products) are well underway and leadership recognizes the importance of performance and entry into service timing.  Lastly, we will continue to collaborate with our OEMs and operators to ensure a positive year.  2017 will be an exciting year as the industry should stabilize and we further mature our portfolio for the future.

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