Enter Lockheed

The civil helicopter sector could be in for a shake-up following the news that Lockheed Martin has emerged as the preferred suitor to purchase Sikorsky.

Consolidation on the military side is hardly surprising given the dearth of major procurements currently under way, and Lockheed’s decision to annex the maker of the Black Hawk will place it on a firm footing for the coming decades, particularly once CH-53K production profits start accumulating.

The move is likely to have some dramatic implications for the commercial helicopter sector as well, given that this side of Sikorsky’s business was never very well served by the manufacturer sitting under the umbrella of United Technologies (UTC).

When it sat down at the family table, Sikorsky’s annual net sales of $7.5 billion as one of the largest rotorcraft OEMs was largely overshadowed by the achievements of big brother UTC Building & Industrial Systems, which generates some $30 billion a year.

While every good executive knows that their primary job is keeping shareholders happy, it sometimes seemed Sikorsky was more concerned with the bottom line each year than investing in order to better position itself to capture a greater share of future global civil helicopter sales.

A notable example was Sikorsky’s treatment of the Schweizer line following its purchase of the latter company in 2004. While this certainly brought some key manufacturing capabilities, Sikorsky had no real interest in continuing the S-300 and S-333 lines, given the margins involved were insignificant compared to the sale of one S-92, for example – and were truly paltry for parent UTC.

In this respect Sikorsky’s competitors take a wider view, preferring to have a more comprehensive product portfolio that spans a range of weight classes.

Bell’s development of the 505 Jet Ranger X, for example, is intended to recapture a segment of the market it once held with the Model 206 and allow the company to widen its current customer base.

Of course, Sikorsky’s attitude towards the civil rotorcraft market is no doubt clouded by the much larger proportion of revenue (75%) it garners from military production.

It will be intriguing, therefore, to see what tack Lockheed Martin takes in this respect and how much it embraces the development of the civil product range it finds itself the custodian of.

While Sikorsky’s commercial helicopter business has suffered recently, as the drop in oil prices has cut into demand for new aircraft in the support and exploration roles, this has allowed Lockheed to make the acquisition at a low point in the economic cycle.

Lockheed Martin boss Marillyn Hewson recently told investors that while the oil and gas segment has been under ‘recent pressure’, it was expected to recover in the future and to add value to the corporation’s business.

Hewson described Sikorsky as an ‘excellent fit’ within the corporation’s Mission Systems and Training business, arguing that ‘together, we will offer a stronger portfolio of helicopter and systems engineering solutions to our global customers as we accelerate the pace of new technology’.

Furthermore, with around 50% of Sikorsky’s annual revenue derived from export customers, the purchase aids Lockheed Martin’s oft-stated goal of expanding international revenues.

Given there is an established base of S-92s and S-76s in service in more than 40 countries, this also hands Lockheed a healthy sustainment business.

The company’s challenge now is to deftly leverage its existing relationships from providing military equipment to governments around the world to increase sales of its civil helicopters.

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