UK: ENTERPRISE IN THE SKIES.
By Anita van de Vliet. Saturday, 01 April 1995
UK: ENTERPRISE IN THE SKIES. - With a mixture of inventiveness and pugnacity, Bond propelled itself from small beginnings to become one of the world's leading civilian helicopter operators.
Latest Stories from Management Today
With a mixture of inventiveness and pugnacity, Bond propelled itself from small beginnings to become one of the world's leading civilian helicopter operators.
'The thing I enjoy most,' says Stephen Bond, the engaging managing director of Bond Helicopters, 'is talking about the company.' His enthusiasm is easy to understand. Founded by Bond's father David, an ex-RAF pilot, in 1961, the company has progressed from tiny beginnings to become a world leader among civilian helicopter operators. Its success has been propelled by a commitment to its markets, inventiveness and pugnacity - a potent mix, one measure of which is the transformation of 3i's £37,000 investment in 1972 into an astonishing £20 million last year.
Yet although it is now quite a sizeable operation (1994 turnover: £87 million), it still has the sparky atmosphere of a small company - no corporate swank, no management jargon, no PR gloss. And while the sharp-witted, imaginative and immensely energetic Bond (still only 44) has clearly been the driving force behind the company's growth, he remains totally lacking in self-importance and pomposity, more likely to tell a story against himself than to take the credit, with a robust turn of phrase which is decidedly not that of Corporate Man.
The company is now (very modestly) headquartered in Aberdeen airport, whence its pillar-box-red helicopters roar off regularly with their precious cargo of crews and equipment to the oil rigs of the northern reaches of the North Sea. Originally called Management Aviation, it started life near Cambridge, using a small fleet of bubble helicopters primarily for crop-spraying. 'Dad and my two elder brothers [both pilots, like their father, but unlike Stephen and his younger brother Peter, who 'hated flying' and were only too glad later to join the company on the ground] developed the business around Cambridge because East Anglia was the main crop-spraying region,' Bond explains.
By the late 1960s, he says, it was clear to his father that the real potential for helicopter services lay in the North Sea. It was also, however, clear that such activities were out of reach for his tiny company. Flights over water require a twin-engined aircraft, in case one engine fails, and the ex-military helicopters used at that time were large and vastly too expensive, 'say, £250,000, compared with the £15,000 you would pay for a small bubble helicopter', he explains. 'We didn't have the financial resources for that league.'
But then, in 1972, the helicopter manufacturers, MBB, (descendants of Messerschmitt) announced a small, four-passenger helicopter with two engines, the Bolkow 105, at a price of £100,000. 'With the help of 3i we could just afford one,' recalls Bond, who by this time had been appointed a youthful sales manager. 'So then we went round the oil companies to win the long-term contracts we needed.' The North Sea market at that time was completely dominated by Bristow (until last year, the biggest civilian helicopter operation in the world, and still the biggest player in the North Sea) and British Airways Helicopters (later sold to Robert Maxwell, and renamed BIH); and the response Bond and his father encountered at the oil companies was not encouraging. Nobody had heard of either their titchy little company or their Bolkow 105; and by December 1972, as the six-month repayment holiday was about to run out, they had still not signed up a single contract.
Up to London they went, consoling themselves for the unrewarding battles of business life with an evidently hearty evening at Pruniers restaurant. (Bond describes the quantities imbibed rather less primly.) The next day Bond senior betook himself in gingerly fashion to explain matters to the bank, leaving an equally delicate Bond junior to try his best to sell the Conoco oil company a two-year contract. The familiar rejections, coupled with his hangover, pained the young Bond. In a last reckless throw, he proposed a three-month contract with no standing charge (unheard of in helicopter services), simply an hourly rate of £95. The deal was done; and the contract came into operation two weeks later, in January 1973.
'We've still got that contract today,' says the ebullient Bond, pushing his coffee mug to one side and tapping out a quick sum on his calculator, 'and today it's worth £5 million a year' - a figure that would have eclipsed the company's total turnover of just £400,000 back in 1973. By the end of the 1970s, however, it had built up to a turnover of £10 million and a fleet of 22 helicopters - no longer only the light Bolkow 105s, but also a number in the medium (capable of taking 10-14 passengers) and heavy (18 or 19) categories.
Bond, meanwhile, had become managing director in 1977, when his father died. 'Dad had made me deputy MD the year before [when Bond was just 25], really, because he wanted me to be his driver,' he says, disarmingly. 'His death was very sudden; and the word "deputy" was removed, and I became managing director, amid a certain amount of panic.'
The panic was misplaced. 'I had the big advantage of a marvellous team, also all in their mid-20s,' he says; and together they pushed forward the Bond approach of winning market share against very tough competition simply by trying harder to serve customers more precisely. Specifically, Bond points to his company's range of operating bases, helicopter types and charging systems.
Thus, while Bristow and BIH still have bases only in Aberdeen and Humberside, Bond made a point of setting up wherever the action in the offshore oil and gas industry was unfolding, operating at first out of Great Yarmouth and Humberside to serve the southern North Sea; opening up in Aberdeen in 1976 when the oil companies were developing fields in the northern sector of the North Sea; and adding a base in Blackpool to support Morecambe Bay in the 1980s.
Then, too, explains Bond, the company has consistently increased the range of its helicopter fleet, buying the best aircraft as soon as these became available - usually introducing new models ahead of its bigger and older rivals. It has also been instrumental in improving on the aircraft put on the market by the major manufacturers.
The much-heralded Sikorsky 76, for example, came out in 1980 as a medium-sized helicopter offering a more spacious cabin and greater range than the existing 365 model from Aerospatiale. The company accordingly took delivery of five - only to discover that, as Bond puts it, the '76 was a dog'. This sounds a harsh judgment, until you hear that the problem was an unreliable engine; and it was through collaboration with Bond that Sikorsky refitted the aircraft, using an engine from the Aerospatiale 365 and transforming it into a 'highly reliable machine'.
Indeed, so inventive and skilled is Bond's engineering division that, in addition to the Rotortech subsidiary separated out in 1977 to specialise in overhaul and rebuilds, the company has more recently set up its Technovations division, which the major manufacturers now use to develop prototypes on their behalf.
'This is very much something of the '90s: previously, the big companies used to be macho, and felt that they had to do it all themselves,' comments Bond, gleefully providing the following illustration. With the re-engined Sikorsky 76, the cowling for the new engine had to be modified, and ended up weighing 150 lb. 'We said it should weigh 50 lb. So Sikorsky spent millions of dollars, and came up with a cowling that weighed 105 lb.' The Bond team thought it could do better. Six months later, on a budget of just £50,000, it had produced one weighing just 55 lb. Today, you will not be surprised to hear that the company makes all the cowlings for this type of aircraft.
More broadly, the result of the company's constant investment and upgrading of its fleet was that, whereas the company's UK competitors had either two or three main types of helicopter, from the early 1980s on, Bond had six. Such variety is not a matter of useless corporate bravura, but of direct benefit to customers. 'You find that customers that are scaling down, for example, or moving their rig, would need shorter range aircraft,' he points out. Conoco, for example, has used six different types of helicopter over the years, as its needs have changed.
Bond has also made a point of going better than its rivals by providing flexibility and innovation in its charging system. In the late 1970s, the company introduced an all-inclusive service, supplying a helicopter of the type required for seven days a week without further ado, instead of the traditional system whereby customers chartered a helicopter and then additionally had to negotiate a back-up aircraft to cover periods of maintenance and parts replacement. 'The old system was great for the helicopter operators,' Bond agrees, 'but of no interest to customers', who wanted only to be sure of a helicopter at their disposal when they needed it.
Further improvements were to follow in the 1980s, when Bond offered customers the choice between charging by sole use of a helicopter - which is advantageous when the oil company's drilling and development programme is in full swing and the need for helicopter services is at a peak - or a 'pay-as-you-use' charging system, which would be more suitable when demand is lower. 'We were the only company to do this.' In the short term, the company did sacrifice margins, but it was soon able to mix and match companies and aircraft. 'Only companies with a large fleet and customer base can do this,' he points out.
The 1990s have seen yet another variation, offering a choice of aircraft types to suit changing needs through the week. Typically, an oil company would need to change 45 of its crew per week, which means three flights in a Super Puma carrying 15 crew members at a time. For the rest of the week, however, the company could use a medium-sized helicopter to carry just four or five passengers. 'So now we have the ultimate in flexibility, varying helicopter types and choice in charging,' Bond's managing director says triumphantly.
Throughout its history, the Bond group has foregone dividends and lavish salaries, reinvesting all profits back in the company. Not, however, that progress has always been plain sailing. This is a business requiring huge capital expenditure, and for a company which relies heavily on borrowings, the cash needs to keep on flowing to keep up repayments. Indeed, when the oil industry went into recession in 1986, Bond and his finance director prepared a 12-18-month forecast, which predicted that the company would go bust in April 1987. But an ever-supportive 3i led the company's debt rescheduling ('because 3i was leading it, the banks followed'); and although April 1987 did prove to be 'the pit, when our cash was at the limits', the company 'squeezed through' the summer of 1987, when the market picked up.
From then on growth really surged forward, from a turnover of £26 million in 1987 up to £32 million the following year, to reach nearly £50 million by 1990. This rate was clearly something more than just recovery from the industry downturn. Bond attributes it largely to the decision to move the company HQ to Aberdeen in 1986 - an unusual move, in the circumstances, as he explains. 'In 1986, when the oil price dropped from $40 to $10 a barrel, everybody went into suicidal mode. But the view we took was the reverse of everybody else's. While the other companies were looking abroad for new business, we thought, like it or not, we are in the oil industry, and even more so in a downturn, we've got to be where the market is. So while all our competitors were still looking at China and India [and BIH and Bristow remained based in Oxford and Red Hill respectively], we were here, picking up the vibes, at the pubs and functions [Bond is of a convivial disposition], talking to the drillers as the place was starting to buzz again.'
The vibes in the early 1990s, however, have signalled a change in policy. Although new fields are still being developed in the North Sea, new technology and task-sharing have meant that oil companies need to move fewer people, so Bond and his team turned their attention to international markets - particularly, although not very successfully, he says, the Southeast Asian region, the fastest growing market for offshore helicopter services. The group had the advantage that customers in the North Sea were often the same as in Vietnam (BP) or Thailand (Total), and that a number of top dogs in the international offshore oil industry hail from Aberdeen. But it found that its aircraft, kitted out to deal with the hostile environment of the North Sea and to meet UK regulations, were actually over-equipped (and thus heavier and more expensive) for the balmy skies and seas of Southeast Asia. Hence the decision in 1993 to buy Australia's largest operator, Lloyd Helicopters: 'Lloyd was an established business, in a very exciting domestic market, which also had the infrastructure to push into Southeast Asia. The Australians understand that market better; their regulations are more appropriate.'
The Lloyd acquisition involved an element of luck as well as policy, as Bond is happy to relate. The previous year he had put in a bid for BIH (which was in administration after Robert Maxwell's demise), primarily, he now admits, to stop anyone else from buying it. To his astonishment, the bid was blocked by the Monopolies and Mergers Commission, in the interests of maintaining competition in the UK helicopter industry. 'But our customers are the biggest companies in the world - they could buy us up from petty cash - so how could a tiny family company be acting against their interest?' he asks, still spluttering with disbelief. And ironically, as he points out, BIH was then sold to a Canadian corporation under the guise of a management buy-out.
'The so-called buy-out was completed in January 1993,' he recalls. 'I had still thought that maybe it would go into receivership and that we could buy the assets, so I was feeling pretty flat.' It was in this mood of dejection, that he met up with Guy Lloyd's second-in-command at a trade conference in Florida: five days later, he was in Adelaide, and within another seven days the deal had been agreed. 'With hindsight, it was better to have bought Lloyd than BIH: I never thought I would say I was grateful to Michael Heseltine, but there it is.'
Even more significant, however, was last year's merger with the Norwegian group, Helikopter Service, which was then the fourth largest operator in the world, very profitable (because it had been operating as a monopoly), and quoted on the Oslo stock exchange. The merger has now created the world's largest civilian helicopter operation, with a combined fleet of 168 aircraft valued at some £330 million, a joint turnover of over £250 million, and some 1,800 employees. Such size, Bond believes, is more than what he irreverently calls 'willy-measuring': companies will need financial strength, the cost-effective use of assets and pooled expertise, to meet the increasing competition of a deregulated European market (from 1997).
The deal, which netted 3i its well-deserved £20 million for its 32% stake, has been structured in two stages. The first was completed last December, when Helikopter Service bought 49% of Bond Holdings (the shares held by 3i and other minority shareholders), leaving Stephen Bond and his management with 51% of Bond Holdings. Then in May this year, as an interim stage, the Norwegian group will create a holding company, Helikopter Services Group. 'Christian Brinch [chief executive of Helikopter Service] and I believe it's wrong for one operator to own another: operating companies should retain their own management, livery, identity,' Bond explains. He himself had set up Bond Holdings in 1989, when he felt that expansion was on the horizon; it was this holding company that purchased Lloyd, so that 'the Lloyd management wouldn't feel overshadowed by Bond. You can't have a management team running a company from the other side of the world.'
The second stage of the merger will be completed in three years' time, when the Helikopter Services Group will buy the remaining shares in Bond Holdings. This will leave Bond and his management as the biggest single shareholder in the new group, with 13%. The management structure of the merged group has not been finalised, but Bond envisages that Brinch will continue as group chairman, while he himself will carry on as chief executive of the Bond Group of companies (Bond Helicopters, Lloyd Helicopters, Rotortech and HeliPortugal).
Brinch intends that the Norwegians will learn something of the Bond commercial nous and cost-effectiveness. The Bond companies, meanwhile, will obviously benefit from a strong shareholder with financial strength and substantial assets. Bond himself says that he may learn more sedate corporate manners from the new group chairman, a 'big company man [formerly in the telecommunications industry] who is used to dealing politely with the financial establishment'. Somehow, one doubts it.
THE BOND HISTORY
David Bond, an ex-RAF pilot, founds Management Aviation mostly for crop-spraying tasks
Management Aviation enters the North Sea market and takes delivery of its first twin-engined helicopter, the Bolkow 105D
David Bond dies. Stephen Bond, aged 27, becomes MD
Start of scheduled daily crew-change flights direct from Aberdeen to the East Shetland basin with S76 helicopters for Unionoil
Offshore helicopter fleet expands with introduction of the new Aerospatiale SA365N helicopters
Bond moves HQ to Aberdeen to consolidate the control of offshore operations
Bond helicopters pioneers operation of a dedicated helicopter air ambulance in Cornwall
$6 million deal with Sikorsky and Turbomeca to introduce new Sikorsky S76A+ to the North Sea
Acquires the Australian operator, Lloyd Helicopters
Merges with Norwegian operator Helikopter Service to form world's largest civilian helicopter operating group.