The Waypoint team is really looking forward to Helitech International in London. It’s always a good time to catch up with friends and colleagues in our industry, but this year I think it will be a real opportunity to gauge the market temperature to see if the mood since HAI, where we saw initial signs of modest optimism, has continued to improve?
Are we seeing that change in the tide? I think we are, to an extent, albeit with several really scary geo-political trends which could, literally in some cases, blow the industry back off course.
The first is an initial increase of activity in the pivotal oil and gas sector. Right now, we seem to be in a market where the oil price is fluctuating within a more stable band. So, while we are way off the $100 a barrel, the combination of more predictability alongside heavy cost cutting from the Oil Majors means that there are a smattering of viable potential projects which can be greenlighted within a tightly controlled budget. Don’t forget that one dollar spent on capex today gets you two dollars’ equivalent of boom year capex spend. Of course, this passes more risk down to the helicopter operators who have seen an increased pressure on rates as every part of the project supply chain shares the pain of cuts.
It’s this heightened risk that drives the second trend. There is a growing understanding in the operator community that the risk of having to pay for AoG aircraft at the end of a contract can be efficiently transferred to Waypoint through a sale-and-leaseback. Our strategy is to have a diverse fleet by age, so we are keen to add quality older helicopters alongside our ongoing new deliveries to serve our markets with cost effective solutions over future economic cycles. Having recently received new funding, we can continue to develop our traditional approach by adding further capacity and funding flexibility.
When I worked in banking, there was an old proverb: the way you become a pessimist is by lending to optimists. So, I want to be relatively cautious in my outlook. For me, however the key fact is that we work in a cyclical industry, so there will be a change which takes us out of this prolonged downturn. So wisely working towards that upturn is not optimism, but true pragmatism. The true purpose of lessors is to provide liquidity across the cycle – and that, in our industry is where our core assets will be productive for forty or fifty years, is paramount.
Make sure you drop into our stand (F80) at Helitech International and say hello!
Author: Clark McGinn, SVP of Sales & Relationship Management at Waypoint Leasing