Decline of U.S. helicopter procurement on the horizon.

• Author: Insinna, Valerie
• Position: Company overview

After a decade-long period of surging sales and rapid expansion, the military helicopter buying boom is coming to an end.

Experts and industry officials expect to see the rotorcraft market contract as U.S. military procurement decreases. Helicopter companies, like other defense businesses, are seeking to expand their share of the commercial sector and are increasingly pursuing opportunities in the field of unmanned aircraft.

At the industry's peak, the Pentagon spent more than $10 billion a year on rotorcraft. That spending will likely be cut in half between 2011 and 2018, said a report by the Teal Group.

"We have innovation, but no money," said Richard Aboulafia, an aerospace analyst at the Teal Group and author of the report. "It's sort of the opposite of the fixed-wing aircraft industry, where there's money but no innovation."

When the wars in Iraq and Afghanistan began more than a decade ago, the Army rushed to replace and upgrade its aging helicopters needed to provide firepower and transportation.

From 2003 to 2012, rotoreraft production worldwide totaled 11,275 units worth $136.9 billion. Of that, $92.1 billion came from military sales. The defense segment grew at a rate of almost 8 percent per year between 2003 and 2008, the report said. Then, from 2008 to 2012, the value of deliveries rose almost 70 percent.

While U.S. military procurement of helicopters deflates by half in the next decade, the international and civil markets are set to expand from 2013 to 2022, Aboulafia told National Defense. Companies would still be larger than they were before the Iraq and Afghanistan wars even if they shrank by one third.

"In industry, we've had this amazing growth path over the past decade. It would take a serious amount of shrinkage to do damage to this larger industry," he said. "It will hurt, but will it be a catastrophic failure of the industrial base? No. It's just not going to be that bad."

Five major prime contractors--Boeing, Sikorsky, Eurocopter, AgustaWestland and Bell Helicopter--are expected to dominate at least 96 percent of the rotorcraft market. U.S. companies Boeing and Sikorsky will lead military sales. France's Eurocopter, now called Airbus Eurocopter, will remain top of the pack in the commercial sector, followed by British-Italian owned AgustaWestland and Bell Helicopter, which is located in Hurst, Texas.

Different corporate strategies and high profits will likely keep the industry from consolidating, but Bell would be the...