PHI embraces change as it emerges from Chapter 11 bankruptcy to remain a leader in aviation and healthcare as it stays at the forefront of safety and operations across the globe.
By Janice Hoppe-Spiers, Senior Editor at Knighthouse Publishing
Less than six months after filing Chapter 11 bankruptcy, Lafayette, La.-based PHI has emerged stronger and leaner with a renewed focus on safe, efficient and quality service. The company believes it is moving forward with one of the industry’s leading debt structures and a strengthened balance sheet that positions it for long-term success.
“Our ability to successfully emerge from bankruptcy less than six months after our Chapter 11 filings and strengthen our balance sheet, while maintaining and continuing to expand our safety and service commitments, is a testament to the hard work of our talented employees and the strength of our relationships with our customers and partners,” CEO Lance Bospflug said. “We have now reached all of the key goals that we set for ourselves at the beginning of this process – including a more sustainable debt structure and a stronger balance sheet.”
Bospflug added that this milestone is just the beginning of what the company plans to achieve moving forward. “We have ambitious plans for our company to support not only our customers and the industries we serve, but also to support our workforce – one of the most highly-skilled and committed workforces in the aviation and healthcare industries,” he said. “We will continue to build on our successes and leadership position as we look to grow, to drive innovation and to better serve our customers for years to come.”
The Perfect Storm
PHI is known for its relentless pursuit of safe, reliable helicopter transportation, offering services to the offshore oil and gas, onshore mining, air medical and technical services industries. The company was founded in February 1949 with three Bell 47 helicopters and eight people. It expanded to operate more than 240 aircrafts in more than 70 locations around the world and 2,500 employees.
As the oil and gas industry performed well in the Gulf of Mexico, PHI grew at a rapid rate alongside its customers. However, the volatile industry took a downturn which strongly impacted PHI. That, combined with about $500 million in bonds coming due and the fair debt market drying up, Director, Global Supply Chain Kenny Highlander says it was the perfect storm.
“After examining all strategic options, action was taken to best position the company for success by filing for voluntary Chapter 11 protection,” he adds. “The helicopter industry is facing overcapacity issues much like the airlines did several years ago. We are fighting that in a market that is soft and customers asking for decreased rates to keep costs competitive. We filed on March 14, 2019, went through reorganization and emerged on September 4, 2019. We went in and out pretty quickly, which is very unique, and achieved everything we hoped for.”
Today, PHI has a much stronger balance sheet, less debt and positive cash flow generation, positioning itself to be the consolidator in the market rather than the one consolidated. During the reorganization, PHI established three distinct business units: PHI Americas that focuses on North and South America oil and gas industry; PHI International that focuses on opportunities in Africa, Asia, Australia, Europe, New Zealand and the Middle East; and PHI Health, which focuses on the air medical business.
“We went from a legacy-driven inventory model of owning to a consignment-based model where we partner with OEMs or service provider, set spare levels and service levels that meet dispatch reliability requirements,” Highlander explains. “It’s a true risk and reward sharing model with OEMs and service provider. We are transitioning away from doing component and maintenance work in-house, relying on our business partners more for a reliable product at a fair price.”
PHI is grateful to the many partners who offered unwavering support and perseverance throughout the Chapter 11 process. “They called and told us they were here for us,” Highlander remembers. “We strengthened our relationship on some of our contracts. We were unique in that our contracts and arrangements were extremely fair. I think that upon emergence, our partner relationships were strengthened more so than strained.”
Prior to bankruptcy, PHI was moving towards a more dependent model and the filing escalated the process. As a result, Highlander says a lot of OEMs and business partners are going to get more business from PHI in the future. “We are going to a total service model where they have total visibility of our operation,” he adds. “We are doing joint planning now and more forecasting than with the legacy model that was centered around ‘I need it and I need it now.’”
PHI is also investing in an upgrade with RAMCO ERP solution to better track and manage its metrics. “Right now, reporting for KPIs is very manual and planning is very manual,” Highlander notes. “RAMCO is best-in-class as we chose to move forward. The system integration to 5.8 is going on and will drive increased efficiencies.”
By converting to the consignment model, PHI is reducing its owned inventory. “We have a significant amount of consignment that’s part of the total assurance program agreement,” Highlander says. “That’s a significant investment we didn’t have to make and is available to use for the fleet of roughly 33 S-92A aircraft that are dispatched worldwide. PHI helicopters fly up to 250 miles into the Gulf of Mexico and to locations up to 200 miles offshore in international waters.”
PHI’s outlook has rebounded since the company emerged from bankruptcy. “It’s the light at the end of the tunnel,” Highlander says. “There is still a lot of work to be done and we have instituted change management. We have a mature workforce – the average tenure is about 19 years – so the change management has been a little tough, but they are resilient and understand. We found that if you explain the environment and why we have to change, the workforce is more receptive.”
The supply chain role has also expanded after the reorganization to include things that weren’t traditionally handled such as travel services and secondary services. The department is taking a more active role in contracting for buying services and leases. “I’m extremely proud of the people in the supply chain,” Highlander says. “They drive this process and how they have embraced the change is one of the things that have been key. If you don’t embrace change, you will fail and be left behind. Always take the mindset that there’s a better way to do something and you can’t be complacent.”
Moving forward, Highlander says PHI will continue to stay on its “lean and mean” path toward success. “We are going to be focusing on true partnerships for support and services,” he adds. “We expect high performance and shared standards from our partners to partner with us and we will be focusing on that quite a bit. We are looking for total assurance packages that support a fleet throughout its life. On the corporate side, we will use technology to partner with folks who want to change with PHI and become more efficient.”