PHI, Inc.

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PHI, Inc.

Post Office Box 90808
Lafayette, Louisiana 70509
U.S.A.
Telephone: (337) 235-2452
Fax: (337) 232-6537
Web site: http://www.phihelico.com

Public Company
Incorporated: 1949 as Petroleum Bell Helicopters, Inc.
Employees: 2,175
Sales: $363.61 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: PHIIK PHII
NAIC: 481211 Nonscheduled Chartered Passenger Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportation; 488190 Other Support Activities for Air Transportation; 621910 Ambulance Services

Petroleum Helicopters, Inc. (PHI), based in Louisiana, operates one of the largest fleets of commercial helicopters in the world. It provides a wide and diverse range of transportation services to the petroleum industry, principally in the Gulf of Mexico. It has contract operations at other places throughout the world, including South America, Asia, and Africa. The company also provides medical and emergency evacuation services, including a growing air ambulance operation. In addition, PHI conducts its own extensive pilot and crew training and helicopter-repair services, which in no small measure accounts for its excellent safety record. Chairman Al Gonsoulin became the company's largest shareholder in 2001, after buying out the founding Suggs family's holdings.

1949–1959: STARTING OUT TO FILL OIL INDUSTRY NEEDS IN LOUISIANA

With the close of World War II, a marshland and offshore oil and gas industry began emerging in states bordering the Gulf of Mexico, notably Texas and Louisiana. The placement of drilling rigs in remote or difficult to access places posed significant problems. In Louisiana, seismograph crews often had to traverse rugged terrain in four-wheel drive jeeps and trucks, and marshes and swamps in swamp buggies, sometimes getting bogged down. It was a slow and fairly dangerous way to get to potential drilling sites.

Jack Lee, who was then president of a seismographic company, was appalled by the situation and anxious to find a viable alternative. Thinking that helicopters could provide both a more efficient and safer mode of transport for his crews, Lee approached Robert L. Suggs and Maurice M. Bayon with his idea. Suggs and Bayon had been operating a radio navigation company called Offshore Navigations Inc. from a houseboat, according to Bayon's 2001 obituary in the Times-Picayune.

Under the leadership of Suggs, the new company, named Petroleum Bell Helicopters, Inc., officially went into business on February 21, 1949, with an initial investment of $100,000, three Bell 47 D model helicopters, and a small workforce of eight employees.

Potential use of PHI's services quickly increased when, in the 1950s, offshore drilling in the Gulf of Mexico started its rapid expansion. The company was already positioned to provide timely transport services to and from drilling rigs and platforms, not just for seismic crews but for other industry offshore workers and equipment. By 1952, it also began expanding its services on an international scale, starting up operations in oil field locations throughout the contiguous 48 states of the United States. By the end of the decade, it had operations in Alaska, Canada, Bolivia, Colombia, Puerto Rico, and Greenland, as well.

As the nature of its services changed, the company required larger aircraft, and in 1955, PHI began using Sirkorsky S-55s. In the same year, the company designed and built offshore refueling facilities in the Gulf of Mexico for its growing fleet of rotary-blade aircraft. By 1959, it had added Sirkorsky S-58s to its fleet and, among other things, used them to transport power poles over mountainous terrain in Puerto Rico. Such special use of its helicopters demonstrated PHI's willingness to adapt to the needs of its customers.

It was also in the 1950s that PHI began taking significant steps towards achieving the industry's premier safety record. At that time there was a paucity of helpful guidelines for helicopter maintenance and operation, and few reliable ground rules for ensuring the safe and efficient use of the aircraft. In 1956, the company established its own in-house training program, something that thereafter played a major part in its enviable reputation for safety and high quality of service.

1960–1969: CONTINUED EXPANSION AND UNIQUE MISSIONS

In the 1960s PHI continued to expand its operations both at home and abroad. Demand for its services was quickly growing. Between 1961 and 1963, its number of flight hours increased from 200,000 to 300,000 hours. Eventually, customer needs would take the company to 42 countries, where it established associations that in some cases lasted to the end of the century. An important step occurred in 1967, when PHI began operating in Africa, in Angola, or what was then Portuguese West Africa. The long range development of Angola's Cabinda Gulf Oil Company kept a fairly sizable number of PHI aircraft and personnel working there for decades.

Starting even earlier, in the 1950s, PHI also established a reputation for public service, conducting the extremely dangerous work of saving lives during disasters, notably the great hurricanes that ravaged the Gulf of Mexico and the Caribbean. For instance, in 1961, when Hurricane Carla slammed into the Texas coast with winds of 145 mph, PHI pilots rescued 500 people. During the decade, such heroic efforts won several PHI pilots Winged S Awards for rescue work under hazardous conditions. It was in the mid-1960s that PHI also engaged in the first of many unique missions for the U.S. government when one of its pilots undertook the mid-air retrieval of a rocket-launched space module upon its return to earth. Thereafter, PHI often worked for NASA, retrieving objects released from spacecraft. The company was also undertaking some unique assignments for other agencies and businesses, developing a diverse range of uses for its craft and crews outside petroleum industry needs.

By the end of the 1960s, PHI's fleet of aircraft numbered 87. The rapid growth of the offshore oil industry in the Gulf of Mexico fueled PHI's own expansion. As a result, in 1969 PHI built a new facility, the Lake Palourde Heliport at Morgan City, Louisiana, which was then the largest heliport in the world. The growth also required a tracking system that would allow reliable communications between pilots and flight-following facilities throughout their missions. PHI began developing such a system, one that would ultimately become a computerized network allowing effective and dependable communications with airborne pilots from Texas to Florida.

COMPANY PERSPECTIVES

PHI is the Total Helicopter Company. As the offshore oil and gas industry moves further out into the Gulf of Mexico, the air medical industry gets more advanced and, as international arenas open, PHI plans to be able to meet the needs of all customers in all locations. PHI provides customers with the safest, most reliable helicopter transportation in the world and they are prepared to move anywhere their services are needed. As one of the largest helicopter companies in the world, PHI has the ability to expand and grow which allows for greater flexibility and improved service. Thus, as the industry progresses into the 21st century, PHI is primed for any challenge.

1970–1979: OIL BOOM LEADS TO PHI'S ACCELERATED EXPANSION

No decade in the 20th century matched that of the 1970s for the petroleum and related industries in the United States. It was boom time, pure and simple. By the time that it began, PHI already had in place techniques and procedures for ensuring safety and quality service, setting industry standards.

By the decade's first year, PHI had logged over 1 million flight hours, the first commercial helicopter company in the world to achieve that milestone. Two years later, in 1972, PHI placed a major order for new helicopters costing about $5 million. The purchase increased the company's fleet to 233 aircraft by 1974, when PHI was employing almost 1,000 people. The company continued to find diverse uses for its fleet of rotary-winged aircraft. In 1971, in Costa Rica, its pilots fashioned a sling load technique for transporting goods to offshore rigs, including pallets of bananas weighing two tons.

PHI growth was steady and very strong through the entire decade. At the time of its 25th anniversary in 1974, it was maintaining operations at 13 Gulf Coast and five foreign bases. By the end of the decade, the company's fleet reached 308 aircraft, the largest non-military fleet of helicopters in the world. Only the fleets of the U.S. and Soviet Union militaries were larger.

1980–1989: PHI WEATHERS THE OIL INDUSTRY'S COLLAPSE

Unfortunately for U.S. oil and related industries, the boom did not last, and with the resulting collapse in the early 1980s, PHI faced the prospect of a major decline in the oil field's need for its services. Robert Suggs and his staff knew that the company's continued growth would depend on increasing diversification. An important step was taken in 1981 when, in support of Acadian Ambulance's newly created Air Med Program, PHI put its Aeromedical Services Division into operation. The company quickly became one of the major providers of air medical services, expanding beyond its Louisiana base by mid-decade.

In 1984, it reached another milestone when it logged its five-millionth flight hour. At that time, it was operating a fleet of 417 aircraft. Nationally, it also greatly enhanced its profile through support of the Los Angeles Olympics and participation in the Louisiana World's Fair Exposition, where it prominently displayed one of its Sirkorsky S-76 helicopters on the deck of an oil rig erected for the event. It was the same model helicopter that in 1986 PHI put into use for its medical helicopter support of the Cleveland MetroHealth Medical Center's services. It was also in 1986 that PHI introduced innovations in training services with in-house courses focusing on the impact of human factors on pilots and their decision making. Another innovation came in 1988, when the company established PHI Technical Services, a new business providing maintenance services to third-party customers.

When founder Robert Suggs suffered a fatal heart attack in 1989, there was some apprehension about PHI's future, including a possible corporate raid, but Carroll Suggs, his widow, quickly allayed concerns when, in 1990, she took over the company's reins as chairman, president, and CEO. In an industry dominated by males, she demonstrated that she could get the job done, garnering several awards in the process.

KEY DATES

1949:: The company is founded by Robert L. Suggs and Maurice M. Bayon.
1952:: PHI begins its international expansion.
1956:: PHI begins an in-house training program.
1966:: The company's aerospace role begins with work for NASA.
1970:: PHI reaches over one million flight hours.
1981:: PHI starts up its Aeromedical Services Division.
1982:: The oil bust hits the industry hard, but diversification helps PHI.
1989:: Robert Suggs, PHI's founder, dies.
1990:: Carroll Suggs becomes chairman, president, and CEO.
1991:: PHI reaches seven million flight hours.
1997:: The company acquires Air Evac Services.
1999:: PHI opens a new heliport facility in Boothville/Venice, Louisiana, and begins construction of new operations and maintenance facility in Lafayette, Louisiana.
2001:: Al Gonsoulin acquires a 52 percent stake in the company from the Suggs family.
2006:: The company is officially renamed PHI, Inc.

1990–2000: PHI TIGHTENS CORPORATE BELT BUT CONTINUES TO GROW AND DIVERSIFY

In 1990, PHI had a fleet of 291 copters or one out of every 69 non-military whirlybirds in the world. In its primary use market, that of transporting crews and equipment to and from offshore oil platforms in the Gulf of Mexico, PHI held about a 60 percent share, thrice that of Offshore Logistics, its closest competitor. The company had started a strong turnaround from the dark days of the 1980s, when inexpensive foreign oil wreaked havoc with the American oil industry. For the fiscal year ending in April, 1990, the company had netted almost $10 million from revenues of $188 million, or $1.63 per share, its best performance since just before the oil bust hit in 1982. Still, the profits came in part from some downsizing measures, including the sell-off of some of its assets. Among these were some of its older aircraft. In fact, even with a mild resurgence of the oil industry in the mid-1990s, PHI was forced to continue to make belt-tightening efforts such as reducing its work force, selling equipment, and using other cost-cutting measures. The Gulf of Mexico, although remaining PHI's principal source of business, lagged way behind in its pre-bust rig count throughout the decade. Also, technological advances in the industry reduced the number of workers needed on rigs, thereby cutting back on transportation needs. As a partial solution to the Gulf oil drilling doldrums, PHI looked for new international markets to tap for potential growth in South America and Asia.

Despite the U.S. oil industry's stagnation, PHI continued to grow. By 1991, it had logged its seven millionth flight hour. It was also reaching some other important milestones. Under Carroll Suggs' leadership, the company attained a new level as a service-orientated and customer-driven organization, one able to customize operations to fit the specific needs of its clients. Suggs also stressed PHI's continued commitment to both safety and diversification. In order to improve its already enviable safety record, the company dedicated a million dollars annually to a safety incentive program. The result was that PHI's accident rate fell to one-seventh of the national average. Its excellent safety record earned the company international recognition and several awards, including, in 1996, the Federal Aviation Administration's High Flyer Award.

Among other new challenges, in 1994, during the Haiti embargo, PHI put some of its craft to use patrolling the Haiti-Dominican Republic border, making it the first civilian company chosen for such a service. In 1997, it was also selected as the first civilian operator to support the National Science Foundation's Antarctica Program. It was a landmark year in other ways. Among other important measures, PHI established Acadian Composites, Inc. to repair and overhaul structural composite panels on helicopters. It also acquired the Arizona-based Air Evac Services, Inc., the country's largest air medical transport service.

Through the decade, PHI continued to play a major role during disasters. For instance, in 1997 it began fighting fires for the U.S. Forestry Service, and in the following year helped transport food and medical supplies to Nicaragua, which had been ravaged by flooding caused by Hurricane Mitch.

A new downturn in oil prices in the late 1990s led to a further reduction in drilling activity in the Gulf of Mexico with disappointing results for PHI. The worst year was 1999, when the Gulf drilling rig count dropped to its lowest point on record and, in real dollar terms, the price of crude oil plummeted to lows not posted since the Great Depression. Although the company realized record revenues, its flight hours in the area and income from its transport services declined from the previous year and resulted in some further belt-tightening measures, including the sale of underused assets and a reduction in labor costs. However, a solid increase in revenues from its Aeromedical and Technical Services operations helped offset the impact of the decline in production rigs. Between them, the operations produced an increase in revenue of $14.3 million, a growth, respectively, of 30 and 25 percent over the previous year.

At the close of the 20th century, despite the volatility of the oil market, PHI remained very upbeat. It looked for new ways to use its air fleet and planned for additional growth. In August 1999, it ended construction and put into operation a new, state-of-the-art heliport in Boothville/Venice, Louisiana, named the Robert L. Suggs Heliport, in memory of PHI's founder. It was also completing its new operations and maintenance facility in Lafayette, Louisiana.

PHI scaled back its air-ambulance operations in Arizona in late 1999. Entering 2000, PHI had 1,875 employees, 275 helicopters, and ten fixed-wing airplanes. Lance F. Bospflug was appointed president in September 2001 and replaced Carroll Suggs as chief executive about a year later. Suggs remained chairman of the board.

Though new to the aviation industry, Bospflug had been credited with helping turn around T.L. James & Company, Inc., a Gulf Coast dredging, construction, and timber business, and it was hoped he could return PHI to profitability. Bospflug led a restructuring effort that resulted in some one-time charges and a loss of $12.3 million for 2000 on revenues of $235.3 million. The company had lost $5 million in 1999.

Another round of job cuts in early 2001 reduced employment by 220 workers (none of them pilots). Most of these were in administration or maintenance. PHI was trying to boost profits and a lagging stock price, a spokesperson told the Times-Picayune.

2001: NEW LEADERSHIP

Company co-founder Maurice M. Bayon passed away in March 2001 at the age of 92. He had retired from PHI in 1990. In August 2001, the Suggs family sold its 52 percent stake to Houston oilman Al A. Gonsoulin for $30.4 million. Gonsoulin had formed the Sea Mar supply boat company in 1977; it was eventually acquired by drilling firm Nabors Industries.

Gonsoulin subsequently succeeded Carroll Suggs as board chairman. At the same time, the company was preparing to relocate its corporate offices in Metairie into the operations center in Lafayette.

By this time, evidence of a recovery was in hand, according to Helicopter News. Several months of contentious negotiations with its new pilots' union (the Office and Professional Employees Union) had resulted in a new three-year contract. Sources told the Times-Picayune that the exhausting talks, the culmination of several years of fighting against unionization, helped hasten Carroll Suggs' retirement.

There were more executive transitions in store. Lance Bospflug stepped down as CEO and president in May 2004 citing personal reasons. His duties were taken up by chairman Al Gonsoulin.

Although revenues dipped to $270 million in 2003 after holding flat at about $283 million for two years, the company continued to increase its business. By 2005, operating revenues were up to $364 million; net earnings were $14 million, versus $4 million in 2004 and $1 million in 2003. PHI's helicopter fleet numbered 223 aircraft. The company also owned several fixed-wing planes, and operated a dozen rotorcraft on behalf of clients.

PHI was affected by the storms that hammered the Gulf in 2005. Hurricane Katrina flooded its Boothville, Louisiana, base in late August, putting it out of service for a year. A month later, Hurricane Rita wiped out PHI's base in Cameron, Louisiana. Other facilities were damaged. The company experienced no loss of life or aircraft in either case.

The company began 2006 with a new name, PHI, Inc. The move was made to unite its broad range of operations under a single brand. Its old NASDAQ ticker symbols (PHEL, PHELK) were replaced by new ones (PHII, PHIIK), as well.

John W. Fiero

Updated, Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

International Helicopter Transport, Inc.; Evangeline Air-motive, Inc.; Air Evac Services, Inc.; PHI Air Medical Services, Inc.; Petroleum Helicopters International, Inc.; Helicopter Management, LLC; Helicopter Leasing, LLC; HELEX, LLC; Sky Leasing; PHI Angola (Angola); Petroleum Helicopters Angola Limitada (Angola; 49%); PHI International, LTD (Cayman); Energy Risk LTD (Bermuda).