Crown headaches for Sikorsky
Alexander Soule | Feb 04, 2011 |
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A Sikorsky-built CH148 Cyclone prototype helicopter lands in Nova Scotia.
Sikorsky Aircraft Corp. is set to commence deliveries of maritime helicopters long overdue to the government of Canada, with the manufacturer absorbing losses on the initial aircraft shipped but still promising profits over the lifetime of the deal thanks to a lengthy service contract.
Separately, a Sikorsky consortium could be facing insurmountable problems in a ballyhooed multibillion-dollar agreement with the United Kingdom for search-and-rescue helicopters, as reports surfaced that the U.K.-controlled Royal Bank of Scotland is withdrawing from the deal amid allegations of improper bidding tactics by a consortium member.
Stratford-based Sikorsky is the largest employer in Fairfield County, and remains the top performing division of United Technologies Corp. as fourth-quarter revenue rose 7 percent from a year ago to nearly $2.1 billion and operating profits totaled $239 million. Sikorsky delivered 74 large helicopters during the quarter and some 250 for 2010, as it contributed $6.7 billion in revenue to UTC’s total sales of $54.3 billion for the year.
According to UTC Chief Financial Officer Greg Hayes, the company is still in talks with the U.S. Department of Defense for an order extension totaling an additional 500 helicopters, which would furnish Sikorsky with years more of steady work in Stratford. Talks continue even as Sikorsky works on a heavy-lift helicopter for the Marine Corps and pursues a possible contract to provide armed scout helicopters to the Pentagon based on its X2 high-speed prototype.
And Sikorsky is finalizing an updated S-76 helicopter, which Hayes said the company will likely not begin deliveries on until 2012 and which it is counting on to reinvigorate commercial helicopter sales.
Even as it does so, Sikorsky is readying to deliver the first of 28 CH-148 Cyclone helicopters originally promised Canada in 2008, before contract delays Sikorsky says were the result of changes in performance specifications by Canada.
While the cost overruns will impact Sikorsky’s profit margins in the immediate future, Hayes said the program will still pay off in the long run.
“The initial helicopters are each going to go out with a $10 million check,” Hayes said, in a conference call with investment analysts. “The Canadians, they want these aircraft. We’ve done a lot to make sure the business is the best search-and-rescue helicopter out there. We think there’s still possibilities for international sales, too. So this will be a good program over the long term, but it’s going to be painful for Sikorsky as they deliver this first (helicopter).”
According to a report in the Financial Times, RBS pulled out of the Soteria consortium in Great Britain that includes Sikorsky, CHC Corp. and Thales. A year ago, Soteria was named the preferred bidder for a contract with the potential to approach $10 billion to take over the search-and-rescue helicopter operations of Great Britain. The country’s Ministry of Defense currently runs those operations using aging Sikorsky Sea King helicopters; through Soteria, Sikorsky would provide S-92 helicopters.
The company recently shipped two S-92 helicopters to Wood Dale, Ill.-based AAR, which is using them for utility airlift duties in Afghanistan where AAR is a military contractor.
The Financial Times reported that the Ministry of Defense may consider scrapping the original Soteria agreement and putting the privatization back out to bid, and that even if it moves ahead, the withdrawal of RBS as the consortium’s equity partner could be fatal for the Soteria bid.
The report did not specify how the cancellation of the current agreement would impact Soteria consortium members in any future bidding process