| COMMITMENTS AND CONTINGENCIES |
COMMITMENTS AND CONTINGENCIES Aircraft Purchase Contracts — As shown in the table below, we expect to make additional capital expenditures over the next seven fiscal years to purchase additional aircraft. As of March 31, 2018, we had 27 aircraft on order and options to acquire an additional four aircraft. Although a similar number of our existing aircraft may be sold during the same period, the additional aircraft on order will provide incremental fleet capacity in terms of revenue and operating income. | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 | | 2020 | | 2021 | | 2022 and thereafter (1) | | Total | | | | | | | | | | | Number of aircraft: | | | | | | | | | | Large | 1 |
| | — |
| | 4 |
| | 18 |
| | 23 |
| U.K. SAR | — |
| | 4 |
| | — |
| | — |
| | 4 |
| | 1 |
| | 4 |
| | 4 |
| | 18 |
| | 27 |
| Related commitment expenditures (in thousands) (2) | | | | | | | | | | Large | $ | 19,912 |
| | $ | 26,154 |
| | $ | 80,633 |
| | $ | 292,204 |
| | $ | 418,903 |
| U.K. SAR | — |
| | 64,494 |
| | — |
| | — |
| | 64,494 |
| | $ | 19,912 |
| | $ | 90,648 |
| | $ | 80,633 |
| | $ | 292,204 |
| | $ | 483,397 |
| | | | | | | | | | | Number of aircraft: | | | | | | | | | | Large | 2 |
| | 2 |
| | — |
| | — |
| | 4 |
| | 2 |
| | 2 |
| | — |
| | — |
| | 4 |
| | | | | | | | | | | Related option expenditures (in thousands) (2) | $ | 44,181 |
| | $ | 31,536 |
| | $ | — |
| | $ | — |
| | $ | 75,717 |
|
_______________ | | (1) | Includes $98.0 million for five aircraft orders that can be cancelled prior to the delivery dates. We have made non-refundable deposits of $4.5 million related to these aircraft. |
| | (2) | Includes progress payments on aircraft scheduled to be delivered in future periods only if options are exercised. |
The following chart presents an analysis of our aircraft orders and options during fiscal years 2018, 2017 and 2016: | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | | 2016 | | Orders | | Options | | Orders | | Options | | Orders | | Options | Beginning of fiscal year | 32 |
| | 4 |
| | 36 |
| | 14 |
| | 45 |
| | 30 |
| Aircraft delivered | (5 | ) | | — |
| | (9 | ) | | — |
| | (8 | ) | | — |
| Aircraft ordered | — |
| | — |
| | 5 |
| | — |
| | — |
| | — |
| New options | — |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| Exercised options | — |
| | — |
| | — |
| | — |
| | (1 | ) | | — |
| Expired options | — |
| | — |
| | — |
| | (10 | ) | | — |
| | (20 | ) | End of fiscal year | 27 |
| | 4 |
| | 32 |
| | 4 |
| | 36 |
| | 14 |
|
We periodically purchase aircraft for which we have no orders. During fiscal year 2018, we did not purchase any aircraft for which we did not have an order. During both fiscal years 2017 and 2016, we purchased one aircraft for which we did not have an order. Operating Leases — We have non-cancelable operating leases in connection with the lease of certain equipment, land and facilities, including leases for aircraft. Rental expense incurred under all operating leases was $208.7 million, $212.6 million and $211.8 million in fiscal years 2018, 2017 and 2016, respectively. Rental expense incurred under operating leases for aircraft was $181.3 million, $188.2 million and $184.0 million in fiscal years 2018, 2017 and 2016, respectively. As of March 31, 2018, aggregate future payments under all non-cancelable operating leases that have initial or remaining terms in excess of one year, including leases for 86 aircraft, are as follows (in thousands): | | | | | | | | | | | | | | Aircraft | | Other | | Total | | | | | | | 2019 | $ | 158,763 |
| | $ | 9,959 |
| | $ | 168,722 |
| 2020 | 114,298 |
| | 8,343 |
| | 122,641 |
| 2021 | 50,507 |
| | 8,234 |
| | 58,741 |
| 2022 | 25,727 |
| | 8,026 |
| | 33,753 |
| 2023 | 12,239 |
| | 8,130 |
| | 20,369 |
| Thereafter | 4,676 |
| | 32,730 |
| | 37,406 |
| | $ | 366,210 |
| | $ | 75,422 |
| | $ | 441,632 |
|
In fiscal year 2016, we sold three aircraft for $29.2 million and entered into separate agreements to lease these aircraft back. We did not enter into any sale leasebacks during fiscal years 2018 or 2017. The aircraft leases range from base terms of up to 181 months with renewal options of up to 240 months in some cases, include purchase options upon expiration and some include early purchase options. The leases contain terms customary in transactions of this type, including provisions that allow the lessor to repossess the aircraft and require us to pay a stipulated amount if we default on our obligations under the agreements. These leases are included in the amounts disclosed above. The following is a summary of the terms related to aircraft leased under operating leases with original or remaining terms in excess of one year as of March 31, 2018: | | | End of Lease Term | Number of Aircraft | Fiscal year 2019 to fiscal year 2020 | 43 | Fiscal year 2021 to fiscal year 2023 | 32 | Fiscal year 2024 to fiscal year 2026 | 11 | | 86 |
Employee Agreements — Approximately 54% of our employees are represented by collective bargaining agreements and/or unions with 86% of these employees being represented by collective bargaining agreements and/or unions that have expired or will expire in one year. These agreements generally include annual escalations of up to 3%. Periodically, certain groups of our employees who are not covered by a collective bargaining agreement consider entering into such an agreement. We also have employment agreements with members of senior management. For discussion on separation programs between the Company and its employees, see Note 9. Environmental Contingencies — The U.S. Environmental Protection Agency (the “EPA”) has in the past notified us that we are a potential responsible party, or PRP, at three former waste disposal facilities that are on the National Priorities List of contaminated sites. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, also known as the Superfund law, persons who are identified as PRPs may be subject to strict, joint and several liability for the costs of cleaning up environmental contamination resulting from releases of hazardous substances at National Priorities List sites. Although we have not yet obtained a formal release of liability from the EPA with respect to any of the sites, we believe that our potential liability in connection with the sites is not likely to have a material adverse effect on our business, financial condition or results of operations. Other Purchase Obligations — As of March 31, 2018, we had $48.3 million of other purchase obligations representing unfilled purchase orders for aircraft parts, commitments associated with upgrading facilities at our bases and non-cancelable power-by-the-hour maintenance commitments. For further details on the non-cancelable power-by-the-hour maintenance commitments, see Note 1. Other Matters — Although infrequent, aircraft accidents have occurred in the past, and the related losses and liability claims have been covered by insurance subject to deductible, self-insured retention and loss sensitive factors. As previously reported, on April 29, 2016, another company’s EC 225LP (also known as a H225LP) model helicopter crashed near Turøy outside of Bergen, Norway resulting in the European Aviation Safety Agency (“EASA”) issuing airworthiness directives prohibiting flight of H225LP and AS332L2 model aircraft. On July 20, 2017, the U.K. CAA and the Norway Aviation Agency issued safety and operational directives that detail the conditions to apply for safe return to service of H225LP and AS332L2 model aircraft, where operators wish to do so. We continue not to operate for commercial purposes our 24 H225LP model aircraft. We are carefully evaluating next steps and demand for the H225LP model aircraft in our oil and gas and SAR operations worldwide, with the safety of passengers and crews remaining our highest priority. Separately, our efforts to successfully integrate AW189 aircraft into service for the U.K. SAR contract have been delayed due to a product improvement plan with the aircraft. As a result, the acceptance of four AW189 aircraft will be pushed to later dates. We continue to meet our contractual obligations under the U.K. SAR contract through the utilization of other aircraft. During fiscal year 2018, we reached agreements with OEMs to recover $136.0 million related to ongoing aircraft issues mentioned above, of which $125.0 million was recovered during fiscal year 2018 and $11.0 million was recovered in May 2018. For further details on the accounting for these recoveries, see Note 3. We operate in jurisdictions internationally where we are subject to risks that include government action to obtain additional tax revenue. In a number of these jurisdictions, political unrest, the lack of well-developed legal systems and legislation that is not clear enough in its wording to determine the ultimate application, can make it difficult to determine whether legislation may impact our earnings until such time as a clear court or other ruling exists. We operate in jurisdictions currently where amounts may be due to governmental bodies that we are not currently recording liabilities for as it is unclear how broad or narrow legislation may ultimately be interpreted. We believe that payment of amounts in these instances is not probable at this time, but is reasonably possible. A loss contingency is reasonably possible if the contingency has a more than remote but less than probable chance of occurring. Although management believes that there is no clear requirement to pay amounts at this time and that positions exist suggesting that no further amounts are currently due, it is reasonably possible that a loss could occur for which we have estimated a maximum loss at March 31, 2018 to be approximately $5 million to $6 million. In connection with the Bristow Norway acquisition in October 2008, we granted the former partner in this joint venture an option that if exercised would require us to acquire up to five aircraft at fair value upon the expiration of the lease terms for such aircraft. One of the options was exercised in December 2009 and two of the options expired. The remaining aircraft leases expire in August 2018. We are currently unable to estimate the fair value of these aircraft. While we do not currently expect to be required to purchase these aircraft, the former joint venture partner has until May 31, 2018 to notify us. We are a defendant in certain claims and litigation arising out of operations in the normal course of business. In the opinion of management, uninsured losses, if any, will not be material to our financial position, results of operations or cash flows. |
