Waypoint Finds Strength Through Diversification as It Celebrates 5 Years

April 30, 2018
Source:  Vertical

Waypoint Leasing celebrated its fifth anniversary earlier this month with high hopes for future growth, having spent much of its existence enduring one of the most challenging market headwinds the industry has ever seen.

The leasing company now has 45 employees and offices in almost every continent, as well as about $1.6 billion in assets, including more than 150 helicopters.

In January, it announced several major changes at the executive level, including the appointment of Hooman Yazhari as CEO (replacing Ed Washecka), and the promotions of Alan Jenkins from COO and CFO to president, and Allan Rowe from head of commercial to head of sales and relationship management.

Rowe, who was one of company’s founders, told Vertical that the downturn in the oil-and-gas sector has been the single biggest challenge the company has faced, but that its expertise in the rotary-wing world has helped it overcome this.

“I think one of the benefits to having a very technically-proficient team with a lot of people that have come from the helicopter industry . . . has been our ability to take aircraft back from customers, repurpose and transition those aircraft from one industry to another, from one lessee to another lessee, or one geographic location to another,” he said.

He added that the downturn has also illustrated some major benefits to leasing — as opposed to owning — aircraft.

“When there is a downturn, you can hand back an aircraft, and the leasing company can repurpose it and put it back with someone else,” he said. “So it’s a bit of moving risk around off the balance sheet.”

Yazhari, who joined Waypoint after serving as CHC Helicopter’s general counsel and chief administrative officer, said the changing nature of offshore transport contracts — as well as those in other operating sectors — mean leasing can be a more efficient deployment of capital.

“What this downturn has shown is that if you are an operator, you have a 25-year commitment to an asset at least,” he said. “But if you look at the contracts, especially in the oil-and-gas sector, it’s three years, maybe five if you’re lucky in this market. EMS [emergency medical services] is eight years, maybe 10. . . . As an operator, your balance sheet may not be optimized to carry the kind of weight that a financial company or leasing company does.”

Despite an uptick in the number of leased aircraft in the market over the last five years, Rowe said there is a still a great deal of opportunity for leasing companies in the helicopter industry.

“The market is still incredibly underpenetrated from a leasing standpoint,” he said. “In 2013, the number of helicopters leased in the market globally was in the low double digits — less than 15 percent. And if you look at any other asset class, whether it be containers, engines, fixed-wing airplanes, shipping — in some cases it’s above 50 percent. So generally speaking, in the market, there’s still an incredible amount of room for growth.”

He said this would take the form of replacement cycles for legacy aircraft; general market expansion into new industries, such as offshore windfarms, and harbor pilot transfers; and growth in the emerging markets of China and India.

“We’ll continue to support oil-and-gas — that’s still an important market — but diversification away from oil-and-gas and focused outside of oil-and-gas was always part of our strategy, and continues to be going forward,” said Rowe.

An example of that diversification was on display during HAI Heli-Expo 2018 in Las Vegas, Nevada, in the form of Waypoint’s Medium Utility Helicopter (MUH) program. The program sees off-lease Leonardo AW139s reconfigured for utility operations by Calgary, Alberta-based Eagle Copters.

Part of Waypoint’s strategy is diversification away from oil-and-gas, and this diversification was on display at HAI Heli-Expo 2018, in the form of Waypoint’s Medium Utility Helicopter program. Skip Robinson Photo

“A used 139 is very cost-competitive with a new utility medium twin, like a [Bell] 412EPI, with substantially better performance,” said Rowe. “We’re still in the midst of finalizing our conversion, [but] we’ve got multiple interested parties, and that spans across the gamut from firefighting to onshore oil-and-gas support activity and personnel transport.”

On a similar basis, the Leasing company is having success finding homes for Airbus H225s that were previously used for offshore transport with parapublic organizations such as the United Nations and NATO.

“A lot of those groups traditionally have operated Russian-manufactured helicopters,” said Rowe. “With a better product, and a lot of support from Airbus and European governments, we’re seeing a shift away from reliance on Russian helicopters.”

Looking forward, Yazhari said recent stability in the price of oil is the “first step” in the right direction towards a recovery in the offshore sector.

“You will need that stable environment which allows deepwater customers to make the kind of investments that they need to,” he said. “The anecdotal evidence from the industry is that everyone is feeling more optimistic than they did this time last year.”

He said a major change in the industry over the last 12 months is an acceptance that the industry needs to look more carefully at the way business is done in the offshore market.

“Through simple steps like standardization of aircraft, longer term contracts — which allow companies to deploy capital without the risk of the return horizon being too short to be workable — and potential consolidation, the industry can continue to strengthen after the challenges of the last years,” said Yazhari.