Slow global economic growth and continued volatility in the energy markets have led Honeywell International Inc. (NYSE: HON) to lower its estimate of global demand for civilian-use helicopters by about 400, to a new range of  3,900 to 4,400, for the five-year period 2017 to 2021. The 2016 estimate called for 4,300 to 4,800 global deliveries over five years.

Helicopter utilization rates are expected to rise significantly in North America and Latin America, with a moderate bump in Europe. But utilization is not the same as sales. In North America, for example, purchase plans are down 2%, which may not sound like a lot unless you know that North American sales account for 40% of all Honeywell’s helicopter sales.

The data were collected as part of the company’s 19th annual “Turbine-Powered Civil Helicopter Purchase Outlook.” In addition to higher usage, another key finding of the outlook is that customers’ purchase plans are lower in all regions.

Ben Driggs, president of Honeywell Aerospace’s Americas division, said:

The current global economic situation is causing fleet managers to evaluate new helicopter purchases closely, and that’s why we’re seeing a more cautious five-year demand projection compared with previous years. Even in a slow growth environment, Honeywell is well-positioned to help operators keep current fleets lasting longer with aftermarket upgrades and repairs.

Sales in Latin America during the period are forecast to drop 13%, sales into the Middle East and Africa are expected to drop by 8%, European sales are forecast down 3%, and Asia/Pacific sales are tabbed to drop 1%.

Among the BRIC countries (Brazil, Russia, India and China), sales are expected to drop by 11% compared with the estimates made last year. Brazil is forecast to see the steepest drop of any country, down 20%, due to the country’s recession.

2016 was among the worst on record for the global helicopter industry due to low oil prices, a domestic air ambulance industry that may have reached capacity, and continuing global economic uncertainty. Deliveries fell 16% year over year and billings plunged by nearly a third in the first half of last year, according to a report at Engineering.com.

Honeywell, which makes the engines used by several helicopter makers, is not the only company affected by the slowdown. Bell Helicopter, a division of Textron Inc. (NYSE: TXT), cancelled plans to build a new plant to manufacture a new rotorcraft. Other civilian helicopter makers like Airbus, Italy’s Leonardo, Russian Helicopter and Lockheed Martin Corp.’s (NYSE: LMT) Sikorsky division face similar headwinds for the same reasons.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.