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Jul
26
2012
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Posted 12 years 121 days ago ago by Admin
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Robinson Helicopter Market Update – New Helicopter Demand Returning
By Andres Kerllenevich
Three years ago, I wrote an article entitled “The State of the Used Robinson Helicopter Market.” At that time, the factory was laying off workers and holding a huge inventory of cancelled orders, and the used market was severely depressed. Anyone who has lived through a recession knows that the economy is cyclical. However, at that time, it was very difficult to see the light at the end of the tunnel.
In the years since, the cancelled order inventory has been replaced with lead times and the used market has stabilized. RHC is hiring again and buyers looking to purchase a new R22 or R44 must wait several months.
For the first time in years, I am getting the types of calls that I used to receive regularly: a buyer who wants a new R44 now and is willing to pay top dollar for it. I am also seeing buyers placing new orders and waiting for them to be built. It appears that, while the economy has certainly not fully recovered, the market for Robinson Helicopters has firmed up significantly.
The Pre-Recession Market
Prior to the economic collapse, dealers would regularly order new helicopters, for inventory, with the intention of re-selling them when they were completed. The market supported full list pricing for helicopters with immediate availability so when customers looked for an R44, with immediate delivery, they could locate a dealer with one who would then re-order a new replacement helicopter. Thus, there was a “pipeline” of new helicopter delivery positions and equilibrium existed between that “pipeline” and buyers seeking immediate delivery.
The Past Three Years
The economic collapse completely destabilized that equilibrium. The credit crisis, combined with drastically reduced demand, resulted in many order cancellations and a huge cancelled order inventory. The little demand that remained was more than satisfied by cancelled order inventory which took two years to sell off. Even after the cancelled order inventory was cleared out, the depressed used market prices made buyers stay in the used market (and made dealers insecure about their ability to profitably resell new helicopters purchased for inventory). This caused the “pipeline” to empty out. For this reason, in my business, used sales far outnumbered new sales during this period.
Today
While used helicopter prices have not recovered to pre-recession levels, they have stabilized to the point where, combined with the fuel bladder SB, the prospect of a main rotor blade replacement AD, crankshaft replacement, and the ever present twelve-year inspection, the reduced cost differential between new and used helicopters makes new helicopters more attractive.
In addition, my business has seen demand for new R44s, with immediate availability, spark back to life. In the past three months, I have seen five new R44s sell at, or near, list price. I am also now receiving regular calls for new R44s with immediate delivery from buyers prepared to pay full list price.
The import of this is significant. For the first time in over three years, it again makes sense for dealers to buy R44s for inventory knowing they will be able to resell them at a profit. Dealers can, therefore, now, replenish the “pipeline” of new helicopter delivery positions.
This is a very positive development for RHC, its dealers, and the industry as a whole. Strong new helicopter pricing results in a stable market in which dealers can stock inventory and buyers can buy with confidence, all bolstered by a strong used market. As the saying goes, “a rising tide lifts all boats.”
New vs. Used
The decision of whether to buy new or used requires analysis of many factors. A used helicopter purchase allows for immediate delivery, lower purchase price, and lower insurance premiums. However, purchasers of used helicopters must plan for potential required modifications (ie: fuel bladders, MRB replacement, and crankshaft replacement) as well as the twelve-year inspection and higher maintenance costs. In addition, used helicopters require due diligence (ie: title work, inspections, travel, etc.) and may have their warranties expired.
Buying new, on the other hand, comes with a higher price and/or longer waiting time but it avoids all of the above issues as well as allowing for the buyer to choose colors and options and enjoy that intangible “new helicopter” experience.
Regardless of which option a buyer chooses, it is good news that buying a new helicopter is, again, a viable option.
Andres L. Kerllenevich is a factory authorized Robinson Helicopter Dealer and broker who operates the website R44Sales.com. He can be reached at [email protected] or at 904-342-0630.