Vih Aviation Group - the Helicopter Services Industry

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VIH AVIATION GROUP 1

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The development of this case study was sponsored by Export Development Canada (EDC). Charlene Zietsma and Dan Day developed this case study for instructional purposes. It is not the purpose of this material to serve as an illustration of how to effectively or ineffectively address a managerial situation. Some information may be altered to protect confidentiality.

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In the fall of 2008, VIH Aviation Group (VIH), a privately owned helicopter services firm, was poised to launch its next stage of international growth. Charles Hodgins, Senior Vice President, Finance, and Chief Financial Officer, was preparing for the upcoming board meeting. The VIH management team had identified three promising opportunities providing helicopter services to the rapidly growing offshore oil and gas market: an alliance with a major airline in China; an acquisition or alliance in Australia; or further development of its VIH Cougar partnership in the Gulf of Mexico. Each option required large financial commitments well in advance of obtaining contracts. Could VIH obtain sufficient financial backing to support its strategic choices? Would the returns justify the risks involved? What, if any, option could Hodgins recommend at the upcoming board meeting?

The Helicopter Services Industry

Helicopter services firms provided helicopter transportation to a diverse group of clients for uses such as transporting crews to and from offshore oil rigs; power line patrol for electrical utilities; survey and seismic work for mining and oil exploration; firefighting; construction; and industrial operations like logging. Helicopters could also provide emergency ambulance service as well as maritime search and rescue services. Helicopters were often quicker, cheaper and safer than alternatives. They also enabled operations in remote locations where surface access was impossible or environmentally damaging.

Different kinds of helicopters were used for different purposes (see Exhibit 1). Visual Flight Rules (VFR) aircraft were flown without instruments, and were used for tasks like long line logging, seismic work and firefighting which required a good view of the ground. Helicopters certified as Instrument Flying Rules (IFR) could be flown in bad weather where the pilot couldn't see the ground by utilizing their instruments (computer screens), and thus were ideal for offshore oil and gas or search and rescue uses, where the weather was often difficult. Helicopters also came in light, intermediate, medium and heavy weight capacities. In the early 2000s, the first generation of "new-technology"