PPI Zulu wrote
Babcock. Neat trick: Win big contracts (at a loss) making yourself look 'order book attractive'. Sell $30m annual losses and on-going leasing costs to whomsoever wants the market share and is willing to take on the debt.
Whoever is brave enough will be hoping that the economy of scale of their already existing operation will enable them to thin-out most of the HQ function overheads and possibly real estate and leave just the bare contracts.
Interesting, where did you get the $30m loss figure? I think it may be more. But with a relatively small number of helicopters in the oil and gas division of Babcock, just thinning out HQ functions will never deliver the kind of savings CHC will need to make. We know there has been a race to the contractual bottom by the helicopter operators, right now most are making operating losses, clearly evident by the published financials we can see.
There is little prospect of a turnaround until current contracts are re tendered at realistic prices, which is itself a challenge, maybe the industry consolidation will inject some financial realism into the helicopter operating business. The first job is for the helicopter operators to counter the oil and gas company expectation that every tender leads to a price reduction.
Any marketing and commercial department can win a cheap job, its been an easy life for the marketing and commercial teams for the last 10 years or so. The helicopter operator marketing and commercial teams are going to have to learn a new skill set to re define oil company expectations, raise prices back to where they need to be so the helicopter business can make a return.