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Airbus H225 Continues To Overhang Offshore Operators

by Mark Huber

 - November 21, 2017, 10:53 AM

Era Group posted a third-quarter 2017 loss of $81 million, driven largely by a $117 million impairment charge taken in the period, primarily based on its fleet of nine company-owned Airbus H225 helicopters. Era is currently in litigation with Airbus concerning the grounding of its H225s in the aftermath of an April 2016 crash of a CHC H225 near Turoy, Norway, that killed all 13 aboard.

Era and others are suing Airbus Helicopters for economic damages related to that grounding and the reluctance of its energy sector customers to resume flying the H225 once international aviation regulators lifted that grounding over the last year. The company revealed that it has written down the value of its H225s to approximately $4 million each and spent nearly $2 million in the third quarter on related litigation against Airbus that it initiated in November 2016. “We cannot predict the ultimate outcome of the litigation, and we may spend significant resources pursuing our legal remedies against Airbus,” Era CEO Chris Bradshaw said. “It's a big issue for us.” 

Separately, earlier this month Bristow Group reached a $130 million “cost recovery” agreement with Leonardo and Airbus, believed related to the former's inability to deliver AW189 super-medium twins for its UK SAR contract in a timely manner and costs from the latter related to H225 groundings in the aftermath of the Norway crash. Bristow, which operates 27 H225s, refused to provide details of the “cost recovery,” but it is widely believed that the majority of it relates to the H225. During a recent conference call, Bristow also revealed that it had deferred $62 million of its UK SAR AW189 payments from FY2018 to FY2020.

Era’s Bradshaw said the $117 million charge was directly triggered by the company's belief that “there will not be a broad-based return to service of these helicopter models in the offshore oil-and-gas industry” and that the book value of its H225 fleet exceeded its fair market value, based on reports from third-party appraisers. Bradshaw said the company's H225s could conceivably find a home in the heavy-lift utility market.

“There's a well-established market for those types of missions that's currently being serviced by older-generation aircraft, and the 225s could be a good alternative for those missions,” he said, adding that placing the company's H225s into long-term storage has saved resources. “There's not a significant amount of cost associated with their current status today.”

Era said its quarterly loss would have been only $6.2 million without the impairment charge. Era's third-quarter revenues were $61.4 million, up from $57.9 million in the second quarter. The company said the revenue increase was due to 15 percent better utilizations in oil-and-gas operations, however operating expenses also increased during the period primarily due to higher-than-usual maintenance costs, mainly as a result in an increased frequency of engine overhauls. Third-quarter revenues were down $3.6 million compared with the year-ago period, which the company ascribed to reduced air medical, SAR and U.S. light helicopter operations.