AIN Staff

Buying activity on the corporate side of the market has come to an abrupt and unwelcome stop at Sikorsky in the last six months as companies seek to conserve cash and ride out the economy’s troubles. Still, massive contracts for Sikorsky’s military helicopters are helping to keep the black ink flowing, even as some governments scale back spending. Marc Poland, Sikorsky vice president of commercial programs, talked with HAI Convention News about the current state of the market.
How is the economy affecting your business base and demand? On the government side, every country is in a different circumstance, but certainly worldwide there is a conservatism of spending that is different from what it was a year ago. While that hasn’t imparted a catastrophic drop by any means, activity is slowing a bit.
On the commercial side, it’s been a bit more dramatic response to the credit markets. Within the commercial market I would divide it into three fundamental segments: corporate, offshore oil and other government-slash-paramilitary applications. On the corporate side it has all but stopped. Very few companies are out today buying new aircraft–helicopters or fixed-wing–for the corporate fleet. I don’t think that comes as any surprise to you, but the bizjets and top-end helicopters are basically selling to the same customer base–the Fortune 100 companies–and they’re all in a very conservative spending mode these days for obvious reasons. 
The offshore oil market, however, continues. The modernizing of the worldwide fleet is still a mandate the oil companies have given to their operators in the interest of improved technology and more productivity. So that market is still alive–perhaps not as vibrant as it was a year ago–but still very much alive. 
And third, the paramilitary market, largely driven by search-and-rescue missions that are migrating from government operation to more privatized operation either in direct service to governments or to oil companies that have decided they need a little bit more search-and-rescue capability than they previously have had under their direct control. That market, I would say, remains healthy and alive.
How large is the backlog of orders you have yet to fill, and specifically with regard to the corporate market? The overall company backlog is around $13 billion–that includes only that which is firmly funded and on active production contract. On the corporate side, I’d say the backlog has compressed over the last six months from about 18 months in terms of order-to-initial delivery allocation down to about an eight-month backlog. The bad news there is that’s quite a compression, but the good news is it’s still a positive number. From our side, as long as it stays above five or six months, our business is largely uncomplicated or uninterrupted by that compression.
How many order cancellations have you received since the economy hit this downturn? Actually, very few. In most cases our customers have chosen to ride out the downturn. In other words, they’ve said this isn’t the right time to take delivery of an aircraft if it’s acceptable, if it can be negotiated–and it always has been acceptable–and they’d just like to move their delivery from, say, a June 2009 delivery to a January or February 2010 delivery. I don’t include those sorts of postponements in a cancellation total. To now more specifically answer the question about cancellations or “redirections”– meaning those that are moved to a smaller product–actual cancellations are down in the six- to 10-aircraft range. And I give you a range because there are some that are under discussion on any given day and the number will change. How about the oil and paramilitary markets? Have there been order cancellations on that side of the ledger? There have not been any cancellations on the search-and-rescue side. In fact, we’re expecting some order activity in the next six months that will significantly grow that segment. The backlog there tends to be driven more by the buyers’ procurement schedule than our manufacturing schedule. When you get the large governments and paramilitary organizations involved, they have their own timelines for selection. 
Switching to oil, it’s been a very tense market in that the interface between the oil companies and the operators that serve them. There is a drive toward modernization, which means new equipment, and simultaneously a reduction in budgets for operating costs. Clearly, when the oil companies are forced to sell oil at less than $50 a barrel, their tolerance for operating expense is wildly different than it is when it’s north of $100 a barrel. So there’s great economic pressure on the operators, but at the same time pressure to buy new equipment. They’re caught in the middle and having a bit of a tough time satisfying all the interests of their customers. That said,&nbsp; activity does continue and there are still oil companies driving new procurements.

Industry Perspective: Sikorsky

Buying activity on the corporate side of the market has come to an abrupt and unwelcome stop at Sikorsky in the last six months as companies seek to con

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