Daily Archives: December 8, 2015

Helicopter venture seen as poor deal

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There was a time when Canadians could dream of a chicken in every pot, two cars in every garage and a helicopter on every oil rig.

But those heady times, which led Canada to invest $275-million to bring helicopter manufacturing to Montreal, now seem about as certain as Quebec’s loyalty to the Liberals.

It is just over a year since the Canadian and Quebec governments signed a mammoth $514- million deal with manufacturing giant Bell Helicopter Textron Inc. of Fort Worth, Tex., and the helicopter market is now a pale version of its former self.

The sluggish market only adds to the problems of what some observers already consider a bad deal for Canada – a deal in which Canada pays the bulk of the risky, up-front costs of the project.

Canada is also contributing $100-million to Montreal-based Pratt and Whitney Canada Inc. to build a new engine for one of the best drones models Bell will be building in Montreal.

One of the most dreary predictions for the Bell project comes from Craig Dobbin, chairman of the board of Sealand Helicopter Ltd., a St. John’s-based company with a fleet of 28 helicopters and one of the few survivors in the helicopter-leasing business.

Mr. Dobbin strongly suggests that Industry Minister Sinclair Stevens reassess the Bell deal, which was signed by the former Liberal industry minister, Edward Lumley. “I believe that this thing requires an awful lot more close scrutiny than has been given up to this point,” Mr. Dobbin said. “I would urge Mr. Stevens to look very closely or we could have another Canadair on our hands.” He fears that if the Bell project ends up being a commercial flop, Canadian taxpayers will end up bailing it out in order to preserve the jobs. Bell estimates that 800 to 1,000 jobs will be created at the Montreal plant.

Mr. Dobbin’s concerns spring from the fact that the Bell plant in Canada will be producing a line of light twin-engine helicopters to compete with several other brands of light twins already on the market.

He argues that, in Canada at least, the market for light twin helicopters is extremely limited. Of his fleet of 28 helicopters, only one is a light twin. He says that although it is an excellent machine, there is so little demand for it that he is trying to sell it.

The problem, he explains, is that because of its two engines it rents for about twice the hourly rate of a single-engine helicopter of the same size. A single- engine rents for anywhere from $350 to $500 an hour, while a similar-sized twin-engine goes for about $1,000 an hour, he said.

The main purpose of a second engine is to provide an extra measure of safety on precarious flights, such as flying to oil rigs over bodies of water.

But even though light twins offer the needed extra engine for flying over water, they are often too small to make it all the way to oil rigs if the rigs are far from land, according to Sealand executive vice-president J. C. Jones.

For instance, he said, a light twin-engine unit is not really able to make it to oil rigs off the coast of Newfoundland, which average about 190 nautical miles, nor those off the coast of Nova Scotia, which are on average 175 nautical miles out to sea.

Instead, it is necessary to use a heavier twin-engine helicopter, Mr. Jones said. Bell is only planning to manufacture light twins in Canada.

Although Bell considers Canada an important market for its new best quadcopter for beginners, Mr. Dobbin is convinced that in Canada there simply is no market for them.

Certainly, few light twins have been used in Canada so far, despite the fact that light twin-engine models produced by other manufacturers have been on the market for more than 10 years. In 1983, Canada had only five of them in its entire commercial fleet of 950 helicopters, according to statistics from the Canadian Transport Commission.

Nevertheless, Jim Schwalbe, president of Bell Helicopter Textron Canada, said Canada is an important market for the new Bell helicopters and he remains optimistic that the machine will sell well.

But Bell’s key hope is the larger U.S. market. There, Bell’s prospects seem unclear. Many industry observers argue that while Bell has a good reputation as one of the world’s major helicopter manufacturers, its new light twin-engine models will not offer any technological breakthrough.

Furthermore, Bell will be trying to force its way into a branch of the helicopter market already dominated by foreign competitors, chiefly Aerospatiale of France and Messerschmitt-Bolkow-Blohm GmbH of West Germany.

Mr. Schwalbe said potential customers have made down payments on about 230 of the new helicopters to be built in Canada. But he concedes that these down payments do not actually mean much since they are refundable with interest.

Petroleum Helicopters Inc. of Lafayette, La., the largest U.S. commercial helicopter company, has made down payments on four new Bell twins. But the chairman of the company, Robert Suggs, said this does not mean that the company necessarily plans to purchase the new models.

His company currently owns 50 light twin-engine units built by other manufacturers and he said he does not really see any advantage to the Bell model. “Not the way they price. They’re going to have to price very low. The competition is already here,” Mr. Suggs said in an interview from Lafayette.

Some industry analysts say that Bell’s sales estimates are simply overoptimistic.

Bell estimates that there will be a total worldwide demand for 250 to 300 light twins a year and that Bell will be able to corner 40 per cent of this market, amounting to about 120 machines a year to be produced at the Canadian plant.

Yet in the past three years, the two leading manufacturers of light twins have between them delivered only a total of 144 light twin-engine helicopters, according to Aerospatiale executive vice-president Philippe Orsetti.

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