Milestone Continues Buying Binge

HAI Convention News » 2013
March 5, 2013, 5:00 PM

Leasing company Milestone Aviation continued its buying binge here at Heli-Expo yesterday, announcing firm orders for 30 new Sikorsky S-92A and S-76D helicopters and options for 24 more. Both Milestone and Sikorsky declined to place a total value on the order and options. Deliveries run from now through 2017.

The multi-year order consists of firm orders for 23 S-92As and seven S-76Ds and options for 14 S-92As and 10 S-76Ds. “We’re all-in with Sikorsky,” proclaimed Milestone CEO Richard Santulli. Milestone currently owns 79 helicopters and the order, if fully exercised, would add 54 to that total. This excludes orders placed by Milestone and previously announced with other OEMs.

Milestone began in 2010 with $550 million in capital and now has a portfolio, mainly of medium and heavy helicopters used to support the offshore oil and gas industry, worth more than $1 billion. Orders recently placed by the company would nearly double the value of its aircraft holdings.

Santulli said the company is in the equity markets “every day. We talk to banks and insurance companies daily,” he said, but did not commit to re-entering the public capital markets to meet Milestone’s financing requirements.

“We didn’t take any undue risks with these orders,” Santulli said. “In fact, we keep on bothering them [Sikorsky] for more S-92s, but they had [no more additional] to give us in 2013 and 2014.”

Offshore Industry Demands

He said the changing nature of the offshore oil business, drilling deeper wells at greater distances from shore, had changed the nature of the helicopter business supporting that industry and created more leasing demand. “Markets that used to be served by helicopters costing $10 million to $12 million now require helicopters costing $28 million or $29 million. It is really a question of the balance sheet and the ability of the operators” to come up with the necessary cash requirements to buy new and larger helicopters. “We go in and effect partnership with these operators, providing the capital to help them grow their businesses,” he explained. “But if you look at the size of the deals today, it’s a much bigger asset play. We’re very optimistic about the need for heavy and medium helicopters going forward. Drilling is not coming in closer to shore; it’s going farther out and you need bigger helicopters.”

However, Santulli said the current offshore oil boom should not move OEMs to recklessly increase helicopter production to meet the needs of a rarified market. “The biggest mistake OEMs make is to increase production in good markets and then they get killed when the market drops. You have supply chain issues,” he said, citing his knowledge of the corporate jet industry, where he was a pioneer in fractional ownership as founder of NetJets.

Sikorsky CEO Mick Maurer echoed Santulli’s sentiments. “We’re being very cautious about the ramp [in production] and we are also diversifying who our customers are; it’s the oil market but the S-92 also is a pretty good utility helicopter for paramilitary, coast guard, homeland security and search and rescue.

“We are trying to make sure we’ve got enough irons in the fire in terms of different parts of the market,” he concluded, in the event one segment experiences a down cycle. “We probably do err on the conservative side when ramping up. It’s a big deal when you are making too many of these and are caught short.” o

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