Offshore operating giant Era Group has admitted it may have to cancel two-thirds of its orders for new aircraft as a result of the continued downturn in the oil-and-gas sector.
The operator currently has orders for nine AgustaWestland AW189s, three Sikorsky S-92s, and five AgustaWestland AW169s, representing a total commitment of US$174.5 million. The AW189s and S-92s are scheduled to be delivered between 2015 and 2018, while no delivery dates for the AW169s have been determined.
Era also has outstanding options to purchase up to 10 additional AW189s and three S-92s. But, as it reported its third quarter results Wednesday, Era said it may terminate $127 million of those commitments — and had already signed a contact amendment that included a reduction in the number of firm commitments and a deferral in delivery dates and deposit payments.
“We remain in dialogue with our long-term partners at the helicopter manufacturers and expect that those commercial conversations will result in additional contract modifications that will further reduce our near-term capital commitments by deferring additional helicopter delivery dates,” the operator said in a statement.
Era took delivery of the first S-92 in its fleet in September, which was subsequently placed in service in October, but said it continued to experience excess capacity in its medium helicopters, and expected excess capacity in its heavy helicopters (of nine Airbus Helicopters H225s) to increase beginning in the fourth quarter of 2015.
In its third quarter results, the company reported a net income of $0.9 million — as compared to 2014’s third quarter net income of $4.3 million.
“The third quarter proved to be a very challenging one as conditions further deteriorated in our key geographical markets,” said Chris Bradshaw, Era Group’s president and chief executive officer. “As the WTI crude oil price dropped from approximately $60 per barrel at the end of June to below $40 per barrel in mid-August, our customer base responded with renewed emphasis on cost reduction measures, which negatively impacted our operating revenues.”
“We believe the challenging industry conditions prevalent in 2015 are likely to continue for the next several quarters. We operate in a dynamic industry, and cost management is an ongoing process. We began adjusting our organization and cost structure with a management realignment and reduction in force in October and November 2014, and our focus on realizing cost savings has continued throughout 2015 and included all aspects of our business. Last month, we began an additional round of cost control measures, including further headcount reductions.”
Images courtesy and copyright by Oscar BERNARDI.