Insights from Bristow CEO Jonathan Baliff at Helitech
On 14t October 2014 at Helitech in Amsterdam, Jonathan Baliff, discussed an objective of reducing the range of types in the company fleet and an approach of increasing risk sharing with more availability focused contracts with the helicopter manufacturers:
We will purchase our aircraft in larger numbers, so we will have fewer types, and we will buy aircraft where there is sharing of availability risk. We will pay for this and there are hundreds of millions of dollars of profit for OEMs that execute this risk sharing through life of the asset. OEMs realise that the real value is in selling razor blades rather than razors.
This reflects both the problems in recent years with certain aircraft types being temporarily restricted from operations due to airworthiness problems and the logistic support challenges for other manufacturers as usage of their fleets has increased to cope.
However he also commented that the helicopter industry needs to have the equity to cope with any future rise in interest rates or toughening economic conditions.
The reason we have $700 million in cash is both to reassure clients that we can survive in tough conditions and so we can take advantage of opportunities in the market.
This is particularly relevant as oil prices fall an oil majors look to cut costs. One wonders if this will put pressure on some of the smaller operators and result in more mergers and takeovers (NHV recently merged with Blueway) even though demand remains high. In fact some smaller operators may suffer because demand is high and the larger, better financed operators have big, long term order books, restricting the remaining supply.
In the last 5 years Bristow has increased its use of leased helicopters, at a time when the helicopter leasing industry has started to expand rapidly with a host of new players. In turn the big players, such as GECAS, have taken an interest in the sector (GECAS have just announced the purchase of Milestone, having been hinting at interest in the sector before the Singapore Airshow at the start of the year). At the same time as Baliff addressed Helitech, Bristow released a technical financial paper advocating a move from a focus on return on capital to a value added metric which better accounts for the use of leasing and encourages efficient operation with the equity reserve to weather financial storms.
UPDATE: Baliff’s full presentation is now here, which started with comments on the Joint Operators Review and the formation of HeliOffshore, (whose foundation Aerossurance discussed in June). Baliff also recently described to Rotor and Wing a way forward he described as the 4 Cs:
- Clients: the need to be even more focused on their strategic needs
- Culture: both in relation to the company’s Target Zero culture and its core values
- Continuity: specifically maintaining the continuity with his predecessor from July 2004 to July 2014, Bill Chiles and what Baliff terms Chiles’ Target Zero “legacy of safety” and also in terms of business continuity in the face of threats such as Ebola
- Communication: two-way communication internally and externally
UPDATE 13 January 2015: Bristow World published an interview with Baliff.
UPDATE 22 January 2015: In this article John Briscoe, Bristow’s Senior Vice President and Chief Financial Officer, comments on the financial outlook: Bristow Takes Long View of Oil Price Slide.
Briscoe says:
We are not deferring deliveries and we haven’t cancelled any orders. In fact, we still have demand for more equipment. Our customers are still seeing additional opportunities and they are still talking to us about those, even within the framework of a challenging crude oil price.
UPDATE 20 August 2015: Vertical Magazine publish an interview with Jonathan Baliff.
For offshore helicopter industry and safety culture development expertise, contact Aberdeen based aviation consultancy Aerossurance at enquiries@aerossurance.com
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