by Raymond Jaworowski, Forecast International.
The long-term business potential of Sikorsky Aircraft is bright, despite the fact that parent firm United Technologies Corp (UTC) is reviewing the possibility of selling Sikorsky or spinning it off into an independent firm. As reasons for a possible divestiture, UTC management has cited uncertainties regarding the military helicopter market as well as Sikorsky’s lower profit margins compared to other UTC units.
However, despite an anticipated downturn in the military helicopter market, Sikorsky’s long-term potential in the world rotorcraft industry is substantial. With a solid business foundation based on production of H-60 Black Hawks and Seahawks for the U.S. armed forces and foreign customers, Sikorsky is the leading Western manufacturer of military rotorcraft and is expected to remain so for at least the next 15 years and likely beyond.
Besides H-60 series production, Sikorsky is developing the CH-53K for the U.S. Marine Corps. In addition, the company won two important U.S. military contracts in 2014: a U.S. Navy contract to develop and produce an S-92 variant as the new presidential transport helicopter, and a U.S. Air Force contract to develop and produce a Black Hawk version as that service’s new combat rescue helicopter.
According to data from Forecast International’s Platinum Forecast System, Sikorsky is projected to build 1,658 military helicopters during the 2015-2029 timeframe – a market share of 19.3 percent. This is second only to Russian Helicopters among the world’s rotorcraft manufacturers. The value of this production is estimated at $42.7 billion (in constant 2015 U.S. dollars), a 22.6 percent market share.
Pressures on defense spending are impacting military helicopter acquisition in the United States and various other countries around the globe. Nevertheless, select opportunities for military sales will still be available, particularly in Asia, Latin America, and the Middle East. Sikorsky is well-positioned to take advantage of many of these opportunities. For the longer term, Sikorsky is teamed with Boeing on the SB-1 Defiant, one of two design concepts downselected last year for participation in the Pentagon’s Joint Multi-Role (JMR) technology demonstration program.
The JMR effort is intended to demonstrate technology to support the Pentagon’s Future Vertical Lift (FVL) program. The goal of the FVL program is to develop and produce a new rotorcraft family aimed at future U.S. utility, attack, scout, and maritime helicopter replacement needs. Service entry is planned to occur around 2035. The FVL contract will be awarded via an open competition. However, as JMR participants, the Sikorsky/Boeing team could be well-situated to take the eventual prize.
It is difficult to overestimate the importance of the FVL program to rotorcraft manufacturers. The winner of the FVL contract will be in a position to dominate the future military rotorcraft market.
Though the bulk of its business is in the military side of the market, Sikorsky also has a relatively small but growing civil helicopter business. The company builds the S-76D intermediate twin and the S-92 medium/heavy-lift helicopter for the civil market. The civil side of the ledger will become increasingly important to Sikorsky as demand in the military market cools off.
Another important segment for Sikorsky as it faces the future is the helicopter aftermarket, including product support and services, upgrades, modifications and the like. With a large and growing active fleet of Sikorsky helicopters around the globe, the potential for garnering significant aftermarket revenue from its own products alone is substantial. These opportunities will likely grow as users look to keep fleets viable in the face of declining budgets.
Forecast International inventory data show that, in addition to new production, the thousands of Sikorsky helicopters currently operating in military air wings are a lucrative aftermarket for Sikorsky. Currently, more than 4,000 Sikorsky helicopters operate in a military capacity worldwide. The average age of these aircraft is 20 years old. The United States military has the largest share of Sikorsky helicopters, numbering 3,073 with an average age of 20 years. Other large inventories include South Korea (133), Turkey (100), Colombia (75), and Saudi Arabia (68).
Among the various Sikorsky models, the H-60 series helicopters, whose designations include HH-60, MH-60, S-70, SH-60, and UH-60, have the greatest aftermarket potential in terms of sheer fleet size, since nearly 75 percent (2,628) of the 3,525 H-60 helicopters in operation are more than 10 years old. In addition to the normal maintenance, repair and overhaul (MRO) work normally performed on aircraft, these older units are also candidates for a range of retrofit and modernization work, primarily related to avionics, airframe, or weapons system upgrades.
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