Analysts and investors are buzzing about Bristow Group's (<a href="https://seekingalpha.com/symbol/VTOL" alt="Bristow Group Inc.">NYSE:VTOL</a>) impressive projected EBITDA growth, clocking in at over 20% for the next two years. The excitement is understandable. Bristow is capitalizing on a surging offshore energy market, snapping up lucrative government contracts, and strategically upgrading its fleet. But amidst all this fanfare, a subtler, potentially more significant shift is taking place, one that could reshape the economics of offshore helicopter operations for years to come: the rise of the super-medium helicopter.

Buried in the <a href="https://seekingalpha.com/symbol/VTOL/earnings/transcript/1190892" alt="Q1 2024 Earnings Call Transcript">Q1 2024 transcript</a> lies a clue to this seismic change. Bristow announced a significant order for AW189 helicopters, highlighting the aircraft's ability to "service most of the missions that the traditional heavy helicopters like the S-92 have serviced to date at a meaningfully lower operating cost." This isn't mere cost-cutting; it's a fundamental change in the way offshore operations are approached.

For decades, the S-92 reigned supreme in the heavy helicopter category, capable of transporting 19 passengers plus crew. But its dominance came at a price. The S-92 is expensive to operate, with high fuel burn and maintenance costs. Now, enter the AW189, a "super-medium" helicopter that challenges the very notion of what constitutes a "heavy" mission.

Bristow's bet on the AW189 is more than just a fleet upgrade; it's a strategic pivot towards a more sustainable and cost-effective operating model. The transcript hints at this, noting the AW189's "lower CO2 emissions", a crucial factor for environmentally conscious energy companies striving to meet ambitious Net-Zero targets. But the financial implications are equally profound.

By opting for super-mediums like the AW189, Bristow can offer competitive rates while simultaneously boosting profitability. Consider this: traditional heavy helicopters typically command a 25% or higher premium in the current market compared to legacy contracts. If Bristow can capture a significant portion of this premium while operating a more cost-efficient fleet, the potential for margin expansion is enormous.

Furthermore, the S-92 is facing a looming supply crunch. The earliest models, delivered in 2004, are nearing their 30,000 flight hour lifespan, a unique and somewhat inflexible retirement threshold in the helicopter industry. As these aging S-92s exit the market, the demand for super-medium alternatives like the AW189 is poised to explode.

Bristow is uniquely positioned to capitalize on this trend. It currently operates the world's largest fleet of AW189s, with 21 aircraft already in service and another 5 scheduled for delivery. The recent order for 10 more, with options for an additional 10, underscores Bristow's commitment to leading this shift towards super-mediums.

The impact of this transition on Bristow's financials could be significant. If, for example, Bristow manages to replace even 25% of its S-92 fleet with AW189s over the next 5 years, and assuming a conservative 10% reduction in operating cost per flight hour for the super-medium, the company could realize annual cost savings in the tens of millions of dollars. This, combined with the potential for capturing higher rates in a tight market, could translate into a substantial boost to EBITDA.

The move towards super-mediums isn't just about financial gains; it's a response to a changing world. Energy companies are increasingly focused on sustainability, demanding lower emission solutions. The AW189, with its lower fuel burn, aligns perfectly with this demand.

It's also worth considering the broader implications for the offshore helicopter industry. As Bristow, the global leader, embraces super-mediums, others are likely to follow suit. This could lead to a more competitive landscape for super-medium manufacturers, potentially driving down aircraft acquisition costs and further enhancing the economics of these platforms.

In the end, Bristow's embrace of the AW189 may be the most significant takeaway from the <a href="https://seekingalpha.com/symbol/VTOL/earnings/transcript/1190892" alt="Q1 2024 Earnings Call Transcript">Q1 2024 transcript</a>, a quiet revolution that could have a far greater impact on the company's long-term success than even the impressive projected EBITDA growth. It's a bet on a future where offshore helicopter operations are not only more profitable but also more sustainable, a future where the super-medium reigns supreme.

Projected Adjusted EBITDA Growth

Source: <a href="https://seekingalpha.com/symbol/VTOL/earnings/transcript/1190892" alt="Q1 2024 Earnings Call Transcript">Bristow Group Q1 2024 Earnings Call Transcript</a>

"Fun Fact: The Sikorsky S-92, a mainstay in the offshore helicopter industry, is nearing its planned retirement age. The earliest models, now 20 years old, are approaching their 30,000-flight-hour lifespan, creating a unique opportunity for newer, more efficient helicopters like the AW189 to take their place."