“Honeywell Aerospace’s 2007 survey has identified avionics capabilities, performance and power, and direct operating costs as the top criteria operators consider when selecting new helicopters,” said Vicki Panhuise, Vice President, Honeywell Commercial and Military Helicopters, Honeywell Defense and Space. “The decision to acquire new helicopters is driven primarily by the age of current aircraft which is usually reflected in an operator’s desire for better technology, more range, more power and lower operating costs. Survey results have improved four years running, and OEMs report strong sales activity supporting our view that helicopter demand has great long range prospects in a growing global economy.”

Near-term increase in demand is supported by ongoing strong worldwide demand for corporate, EMS, law enforcement and utility helicopters, expanding African and Asian economies and continued strength in oil producing regions.

In North America, law enforcement applications continue to receive high levels of interest with 35 percent of all mentions this year, exceeding all other planned use categories. Emphasis on security and police capabilities remains high. Availability of homeland defense funding at local levels contributes to the strength of this sector.

EMS applications held steady at 25 percent of planned new purchases in North America from 24 percent in the 2006 survey, and remain the number two end use category cited by the survey respondents for new helicopters in the region. Planned purchases for corporate use in North America fell slightly to 11 percent of the total in this year’s survey.

“The 2007 outlook projects annual turbine helicopter delivery levels exceeding 700 units in the near term, with survey based indications that latent demand could drive rates even higher if capacity limits are not encountered,” Panhuise said. “The improved 2007 outlook is also boosted by potential new OEM entrants offering affordable high value platforms stimulating demand and drawing new operators into the turbine segment.”
 

Purchase Expectations Survey

The ninth worldwide survey of civil helicopter operators’ future purchase plans supports much stronger demand for new aircraft over the next five years. Purchase expectations rose about eight percent measured on the basis of specific new Helicopter purchase plans in 2007 over 2006 levels. In terms of fleet replacement and addition percent, the 2007 results were up nearly five points.

The survey continues to show that there was little trade-up expectation among the world operator base. More than 80 percent of new purchases will be made to replace older aircraft in the same size/capability and price class. Only about 11-12 percent of operators plan to trade-up to more expensive and capable machines.

Buyer interest continues to improve overall and there is no indication that a demand decline is likely to occur in the near future. These findings are based on inputs from nearly 1,000 flight departments in North America, Latin America, Europe, Asia, the Middle East and Africa.

For the past five surveys, over half of all European purchase expectations have been for twin-engine models. This year’s findings show 53 percent of purchase plans falling in the multi-engine helicopter class. Regulations requiring twin-engine aircraft on flights over congested areas and other use limitations continue to shape the preferences of the European operators. Nonetheless single engine models were nearly as strong for the second year in a row at 47 percent of expected purchases compared to an average of around 30 percent prior to 2006.

In North America, where there are no current or pending regulations requiring twin-engine aircraft, 70 percent of planned purchases are for single-engine aircraft. In Latin America, 57 percent of planned purchases are for single-engine models. In both regions this share has remained relatively stable in recent years. Operator preferences in Asia, The Middle East, Africa and Oceania strongly favor twin-engine machines with a 65-75 percent share in the 2007 survey.

“Honeywell’s global demand projections now stand at over 8,000new Helicopter deliveries in the period 2007-2017 reflecting industry conditions that have never looked stronger in recent history,” Panhuise said.

Over 40 percent of New Turbine Demand Projected in North America

North America continues to provide the greatest share of demand for new helicopters, accounting for 42 percent of planned future purchases, a similar share to last year’s outlook. Buying plans were up modestly in this year’s survey compared to 2006, with most of the improvement traced to increased purchase plans for general utility applications.

Survey responses indicate that North America will predominate in the purchase of light single-engine helicopters. On average more than 70 percent of future new aircraft purchases in this region are expected to be light singles, and no regulatory activity is on the horizon which would likely change this.

Avionics capabilities, operating costs, aircraft age, performance, payload, cabin volume and engine power were the most frequently mentioned factors by North American operators as to their reasons for planning to purchase new aircraft.

European Fleet Replacement and Expansion Plans Recover

The survey shows an improvement in European purchase expectations, recovering to nearly 20 percent fleet replacement/expansion rate in 2007 over 15 percent in 2006. A broad pattern of stronger buying plans slightly favors multi-engine machines compared to last year. As we moved further beyond the implementation of the single engine operations regulations in Europe, the spike in planned orders and deliveries of twin engine helicopters has softened and interest in less costly single-engine models has gained in the past two years. Even so, 53 percent of five year planned European purchases are for multi-engine models. Survey responses suggest that about 16 percent of world new turbine-powered helicopter sales will occur in Europe during the next five year period, almost identical to the share recorded in the 2006 survey. European operators cite regulatory requirements and avionics capabilities as the top reason for acquiring a new helicopter. Other important factors are cabin size, performance, operating cost reductions and payload needs. The general utility and corporate use categories were most frequently mentioned by European respondents followed by EMS, fire fighting and law enforcement.


Asia, Pacific, Africa and Middle East to Replace or Expand up to 37 Percent of Fleet

On the basis of the equivalent percentage of fleet to be replaced or expanded, Asia, Oceania, Africa, Middle East together have maintained consistently high purchase expectations for the last five years. Operators in these regions expect to purchase new helicopters equal to 36 - 37 percent of their current fleets during the next five years for replacement and fleet addition. This compares to 20 percent in Europe, 22 percent in North America and 30 percent in Latin America. Over the next five years, we estimate that up to 22 percent of total world new helicopter sales will be to customers in Asia / Pacific, Africa and the Middle East.

About 65 – 75 percent of future demand in these regions is expected to be for multi-engine craft. As in other regions, operators cited avionics capabilities, performance and power, payload and lower operating cost plus warranties as key reasons for replacing current helicopters.

In Asia / Pacific, close to 30 percent of expected purchases will be for corporate applications, closely followed by oil exploration and support helicopters at 24 percent. Utility and law enforcement trail at 18 and 16 percent respectively. In Africa / Middle East, oil and gas exploration applications were most frequently mentioned at over 53 percent, followed distantly by corporate uses at 23 percent.

Latin American Purchase Expectations Declined

Latin American expectations fell more than 10 points in this year’s survey after posting a record level in 2006. Even though overall buying plans in the region are still relatively high, the drop in purchase expectations as a percentage of current fleet, coupled with the relatively smaller fleet in this geographic zone, brings Latin America’s total share of projected world new helicopter demand to just under Europe’s.

This region is expected to account for about 15 percent of expected five year world demand for new helicopters, off around 10 percentage points from the 2006 survey projection. Approximately 57 percent of expected new aircraft demand in the region is for single-engine helicopters. Once again, avionics features, performance and lower operation costs are driving the plans to purchase a new model. Surprisingly, oil and gas support did not show up as a strong potential application for new purchases. Latin American operators did continue to cite improved economic conditions especially in Brazil, and Mexico. Both economic policies and oil revenues are still mentioned as contributing to the improved outlook.

Civil Turbine Helicopter Survey Results

The 2007 Turbine Powered Civil Helicopter Outlook is based on Honeywell’s recently conducted customer expectations survey, an assessment of consensus forecasts, review of factory delivery rates and analysis of future new helicopter introductions. The 2007 outlook excludes uniformed military demand for civil helicopters resulting in civil figures which do include government and security force demand.

This year’s survey queried 919 chief pilots and flight department managers of companies operating over 2,400 helicopters worldwide. The survey detailed the types of aircraft operated and assessed specific plans to replace or add to the fleet with new aircraft.

The 2007 outlook presents a snapshot of the helicopter business at a point in time and does not reflect unforeseen events such as an unexpected economic downturn, sharp increases in fuel costs, a fuel crisis, imposition of heavy user fees or other unfavorable regulations / taxes that could affect results in future years. Demand for new helicopters is also highly price sensitive. Decisions by aircraft manufacturers to offer discounts or raise prices can significantly influence sales activity on affected models.

Demand by Helicopter Size Category

Light Single-engine Helicopters: Operators continue to express a strong preference for light single-engine helicopters in their purchase expectations, choosing this class of aircraft 51 percent of the time, roughly the same level seen for the last five years. Popular helicopters within this class include the Bell 206 series and 407, AgustaWestland A119, Eurocopter EC120, AS350/EC130 and MD 500 and MD600 series. Regionally, the light single class is highly popular in North America, cited in 70 percent of new purchase expectations. Latin American operators also reported a strong preference for this class of equipment with 57 percent of regional demand. In Europe, regulations requiring multi-engine aircraft limit the appeal of single-engine models. Prior 2006, the average share of planned single-engine purchases in this region had been 30 percent. In the 2006 and 2007 survey, this percentage jumped to 47-48 percent, driven by continued strong planned demand for the AS350 / EC130 series. Demand for single-engine models in Africa, Middle East, Asia and Oceania is relatively low compared to the Americas and Europe falling in the 25-37 percent range.

Light Twins: Purchase expectation groupings for new helicopters in the light multi-engine class are exemplified by the Bell 427 and 429, Eurocopter EC135, AS355, AgustaWestland A109 series, and MD 902. Expectations for the future purchase of aircraft in this segment during the next five years rose moderately to just over 16 percent compared to 15 percent recorded last year.

The largest regional demand for light twins will be in Europe, with a 30 percent projected share of total regional purchases. Demand for light twins remains small in North America (12 percent now versus 6 percent a year ago). Asia/Pacific and Africa / Middle East also recorded similar levels of interest in the 12-13 percent range. Most of the twin-engine interest outside Europe is for the next larger intermediate class of aircraft, reflecting a desire for more payload, performance, cabin volume and range.

Intermediate Twin Helicopters: New intermediate twin-engine helicopters as a class received strong purchase expectations, ranking second behind light single engine craft in share of buyer interest at about 29 percent. This result is similar to the last two years and reflects the very strong attractiveness this segment holds based on the balance of payload, cabin space, power, range and speed in this class. The most popular models mentioned included the Bell 412, and 430 models as well as the Eurocopter BK117/EC145, AS365 series, the EC155, the Sikorsky S-76 and AgustaWestland A139.

Heavy Lift Helicopters: Heavy lift helicopters continue to exhibit relatively low purchase expectation scores relative to the other classes of aircraft, with share of mentions rebounding to four-five percent in this year’s survey after a weak rate of under two percent in 2006. As discussed in our previous outlooks, this low level of demand is to be expected, both as a function of higher prices for larger helicopters as well as the more narrowly defined applications such craft typically serve. Additional demand for this class aircraft often comes from governmental or “parapublic” sources that this survey may not always reach. Geographically, the bulk of projected demand for heavy helicopters is concentrated in Asia, and Africa/Middle East with a 9-12 percent share of regional demand. Europe follows next with nearly three percent of buying plans focused on this equipment class.


Trade up Patterns
Projected trade-up patterns remained remarkably consistent compared to previous survey results, with operators electing to replace aircraft with the same size class currently operated about 82 percent of the time. Trade-ups to larger helicopters and trade-downs to smaller aircraft were chosen just 11 percent and 7 percent of the time, respectively. The strong propensity to trade within segments (rather than trading up) supports longer ownership intervals for aircraft purchased new. Average age at which current aircraft are replaced ranges between 12 years in the U.S and Canada, Europe and Asia up to 14-17 years in Africa and Latin America.

Demand by Primary Use of New Turbine Helicopters

Corporate and Law Enforcement: Corporate and law enforcement remained the leading applications for which operators said they would purchase new helicopters in the 2007 survey. The corporate segment, the largest use category, totaled 26 percent of the projected new turbine helicopter sales. Substantial demand exists for new corporate use helicopters in nearly all world regions. Over 70 percent of all demand in Latin America is for corporate-use machines, followed by Asia at 30 percent, Europe, Africa / Middle East each at 23 percent and lastly North America at just 11 percent.

Mentioned second most frequently as a use category for new aircraft purchases, new helicopters buying plans for Law Enforcement applications comprise 19 percent of total demand off from 25 percent in the 2006 survey. The most interest in Law Enforcement helicopters is in North America, accounting for 34 percent of regional demand.

EMS And Utility: Expectations for the purchase of new helicopters for EMS usage rose slightly from 14 percent of total demand last year to 16 percent in 2007. Expected demand for utility helicopters also rose from 11 percent of total in 2006 to 18 percent in 2007. The highest expected demand for utility helicopters occurred in Europe with about 36 percent of expected total future purchases in the region. European operator’s interest in acquiring new utility helicopters grew from 19 percent of planned purchases in 2006 to the 36 percent level in the current survey.

Asia and U.S. / Canada also recorded a good amount of interest in acquiring utility machines with 18-20 percent of regional buying plans slated for this general application.

Oil and Gas Support: The oil and gas production and exploration segment’s share of new aircraft nearly doubled to 14 percent compared to the 2006 survey level of 7.5 percent. Regional interest in new helicopters for this industry continues to be highest in Africa/Middle-East at 53 percent of that region’s demand followed by Asia/Pacific at 24 percent. Obviously high energy prices have stimulated additional activity and recapitalization plans in this sector.

Operators in other segments such as Television News, Tourism, Firefighting and Training continue to report projected requirements for new helicopters over the next five years at levels well below the applications discussed above. Overall, this business segment is projected to comprise six-seven percent of the new helicopter purchases anticipated in the 2007 - 2011 period.

Moderate Turbine Helicopter Utilization Rate Recovery

Overall, respondents reported using their turbine-powered helicopters between 400 and 550 hours during the past 12 months. This varies by region, with the highest utilization rates in Africa, Middle-East and the lowest in Europe. Compared to the 2006 survey, reported usage rates recovered in North America ( + 15 percent), slipped in Latin America (-6 percent), increased in Africa/Middle-East (+3 percent) and in Asia / Pacific (+28 percent). Usage in Europe was virtually unchanged. Easing fuel costs experienced during 2006 may be a factor in the utilization rebound as well as the Asian construction boom, and global oil exploration activity.

Survey data clearly indicate that on a global basis, the vast majority of operators plan to use their aircraft at least as much as or more than they did during the past 12 months. In North America and Europe, 95 percent of respondents expect their utilization to be the same or greater than the prior 12 month period. Looking ahead, nearly all Latin America operators polled indicated that utilization would remain steady or rise again this year. Estimates for aircraft utilization growth in Africa and the Middle East and Asia/Pacific operations run in the 93-96 percent range.

Based on survey responses and the fleet distribution in each region, Honeywell projects flight hours will remain at relatively healthy levels assuming fuel costs remain near current levels or fall, with some growth likely compared to last year depending on regional economic conditions. This assumes that no new legislation or regulations are enacted that would further restrict airspace access or create new economic burdens on operators.

Honeywell International is a $31 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell’s shares are traded on the New York, London, and Chicago Stock Exchanges. It is one of the 30 stocks that make up the Dow Jones Industrial Average and is also a component of the Standard and Poor’s 500 Index. For additional information, please visit www.honeywell.com

Based in Phoenix, Honeywell’s aerospace business is a leading global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, business and general aviation, military, space and airport operations.

Jafar said: "Despite a net surplus when the region is taken as a whole, the reality is that several Gulf countries today have a significant and growing gas deficit, including the UAE, Kuwait, Bahrain, Oman and Saudi Arabia as well as countries like Lebanon and Jordan."