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Helicopter Market

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SUMMARY: Bombardier “B” shares closed at $0.89 today, a reverse stock split is badly needed to avoid the stock being ejected from Canada’s benchmark S&P/TSX composite index. A reverse stock split would reduce the number of shares and increase the stock price accordingly, so as an example a 5:1 reverse split would reduce the TSX:BBD.B outstanding shares from 1.933 billion to 386.6 million shares and increase price to 5 x todays’ price to $4.45 all else being equal. Sounds good ? well only 25 months ago (January 17, 2014) Bombardier the stock was at $4.51 at the current share price decline, another reverse share split would be needed by the end of February, 2018 ! So, I expect that a Bombardier reverse share split will have to be at least 15:1 ($12.00 to $13.35 range) to avoid future problems after the split (e.g. CHC Group). If it were not for bad news these days, there would be no news out of Bombardier. On December 8, 2015 CHC Group stock (NYSE:HELI) hit $0.234 per share, they did a 30:1 reverse split on December 11, 2015 to avoid delisting on the NYSE, and the stock immediately went to $6.55 (7% discount after the reverse split from an expected at par price of $7.02 ) and they are now out of the ‘penny stock’ category. Today (February 4, 2016), CHC Group stock (NYSE:HELI) hit $2.10 per share, or better put, $0.07 per share without the 30:1 reverse split ! it’s all just “smoke and mirrors” to hide horrible stock devaluations by company’s in serious trouble (today’s CHC Group market cap is only $8.35 million for a $1.7 billion a year, 233 helicopter operation), so things can get worst for Bombardier even after a “cosmetic” reverse share split. These are dark days for Bombardier and the offshore helicopter market and their OEM’s as well.

Well, I have been right about the Bombardier shares (TSX:BBD.B) becoming “penny stock”, said it along time ago, the writing was on the wall, but no one really paid attention to my blog and it has stayed a penny stock since January 27th when it hit $0.99, today it hit $0.89 and a continuing slide to … Continue reading

SUMMARY: Oil Prices continue their slow downward slide with no end in sight ($US 30 per barrel in 2016 is possible) as supply exceeds demand and oil inventories at record highs (3 million barrels a day in 2Q/15). While airlines are having a very profitable year with average fuel costs down 34%, the offshore helicopter operators are hurting, as exploration is pretty much halted and production slowly being reduced. The top 4 offshore operators (Bristow, CHC, ERA and PHI) are reporting decreasing revenues and falling stock prices as they struggle to cope with new market realities after many years of high growth. The OEM’s are starting to feel the pain, Sikorsky (sold by UTC to Lockheed Martin), AugustaWestland and Airbus Helicopters will have deteriorating orders and deliveries as the heavy and medium helicopter segment starts to stagnate. CHC Group sees its stock become a penny stock only 20 months after its IPO at $10.00, now NYSE:HELI at $0.40, yes 96% loss in value, as its “creative” accounting creates a loss of $794 million (- 46.5% net profit margin YE 2015), $1.016 billion loss in 4 years (inc. $985 million in Goodwill and Asset Impairement write-downs) ? stock now 4 months away from being de-listed from NYSE ($US 1.00), IPO investors litigating and yet private equity power house Clayton, Dubilier & Rice buys 600 million CHC Group convertible preferred shares at $1.00 (with conversion price of $US 7.50 per share) ? when all other investors are bailing out from HELI shares ? The next 2-3 years will be very difficult for the offshore helicopter market, operators and OEM’s and it won’t be very pretty for some, as a major shakeout is coming.

As oil prices continue their slow path below $40 a barrel to a possible $25 to $30 a barrel in 2016, not everyone in aviation is happy about this. The DOW dropped 531 by 531 points on Friday, China’s stock market drops 8.5% today and the TSX down on Friday by 263 on news of … Continue reading

SUMMARY: After 86 years United Technologies Corp. (UTC) says good bye to $US 7.5 billion a year Sikorsky Helicopters as it sees a ‘rough’ future for its helicopters, and sells it for $US 9.0 billion to Lockheed Martin (which will benefit from $US 1.9 billion in tax benefits). With no wars to fight right now, the US Dept. of Defense (USDoD) is slashing its budget, and military helicopters are on its list, at the same time low oil prices have created a soft market from offshore helicopter operators (80% of Sikorsky’s commercial market), and in a perfect storm Sikorsky’s 3 main products (UH-60 Blackhawk, S-76D and S-90) struggle for new orders as backlogs diminish. Sikorsky has lots of new projects for the future like the S-97 Raider and the JMR Technology Program Demonstrator, but right now things are not good, 2014 showed revenues of $US 7.5 billion but only a $219 million net profit (2.92% profit margin), how Lockheed Martin will revive Sikorsky is a mystery (the global military and civilian helicopter market is worth $US 30 billion a year but in decline today), unfortunately many of the 15,264 workers at Sikorsky will be affected soon. The sad reality is that the large helicopter segment, cannot make money on commercial orders alone (only 30% of Sikorsky’s sales), the industry needs global conflicts (aka “wars”) to drive military sales (aka “military industrial complex”), unfortunately without war there are no profits in the large helicopter segment. Sikorsky is not alone, Airbus Helicopters and AgustaWestland are seeing the same and even Bell Textron now, as it is about to enter this segment with its new and largest helicopter yet, the Bell 525 Relentless, timing could not be worst. The USDoD is off course happy to see Lockheed Martin buy Sikorsky, and it will be interesting to see how this acquisition transforms the company over the coming years as it is a stranger to the civilian commercial market, and I am sure we will see more M&A activity in the aerospace industry in the next 1-2 years as US military spending comes down even further, and USDoD contract dependent companies struggle to grow and maintain profitability.

After several months of reviewing its options for its Sikorsky helicopter business, United Technologies Corp. (UTC) (UTX.N) has decided to sell the 86 year old division to Lockheed Martin Corp. (LMT.T) for $US 9.0 billion ($US cash and $US 8 billion in new debt) and $US 1.9 billion less due to tax benefits. In one … Continue reading

ABSTRACT: Canadian Coast Guard (CCG) buys 7 Bell 412EPI’s for $C 155m by a sole source contract with Bell Helicopter that was to create jobs in Canada, 20 days later Bell announces 300 layoffs in Mirabel plus the news it will produce the new $1.2 m Bell 505 JetRanger X in Louisiana, and not in Mirabel where Bell JetRangers have been produced since 1986. The Bell 412EPI CCG order follows another CCG order worth $C 172m in May, 2014 for 15 Bell 429’s. The Canadian Government has forked out $C 327 million of Canadian taxpayers money in 12 months for 22 Bell helicopters, and Canadians got NO competition, NO tangible discount, NO new jobs, NO new production and NO industrial offset program, but we got layoffs and a snuff on the Bell 505 program, whose the genius behind this deal ? oh yes of course, Public Works and Government Services Canada (PWGSG). Bell says it has to layoff due to “global commercial orders and deliveries in the medium market continue to be significantly below forecast”, don’t believe it, 178 commercial deliveries in 2014 was one its best years ever, Bell’s problem lies in not having a helicopter in the growing and lucrative large commercial helicopter segment and having relied too much on military orders (62% of its revenue), now the US Department of Defense is significantly decreasing its budget, and Bell is worried, just like UTC’s Sikorsky division, finally no wars and these OEM’s struggle ! proof that the military industrial complex is still very real, some businesses need and want war to make profits, sad no ?

Though it has received little notice, last week’s announcement by Bell Helicopter (one of 5 subsidiaries within Textron Inc., NYSE:TXT), that it will layoff 300 workers at its Mirabel, Quebec plant and another 800 will be “downsized” globally. ————————————————————————————————————————————————————————————- Seven of these new Bell 412EPI helicopters will be join the Canadian Coast Guard (CCG) starting … Continue reading