LE BOURGET - United Technologies Corp.’s (UTC) board has decided to move forward with dropping Sikorsky from its portfolio, and the prospects for a sale, rather than a spinoff, appear to be growing.

CEO Gregory Hayes tells Aviation Week that UTC has already received three bids for the storied helicopter builder and anticipates it may receive more. And those offers have come in higher than expected.

“We have been pleasantly surprised that we have had bidders come in at prices at or near what we would expect to be a full value for Sikorsky, even with some of the tax leakage,” Hayes said during an interview in Paris. “The bids were at least as good as what we had hoped to see.”

Over the next two months, the Connecticut-based aerospace and industrial giant will evaluate whether to sell the helicopter business that has been part of UTC since 1929 or spin it off. When UTC first announced it was interested in shedding Sikorsky, the company had been leaning toward a spin-off, because of the tax implications of selling a business it has owned for 86 years.  But the offers received in the last 30 days were so good, a sale may make sense, Hayes says.

Another factor in favor of a sale is that a spin-off of Sikorsky into an independent company would add about $90 million annually in incremental costs to pay for operations such as a headquarters, facilities and information technology. “I feel pretty good,” Hayes says. “Within 60 days, we’ll have an answer as to where the company is going to go.”

If the company opts for a spin-off, the deal could be completed by the end of the year. Because of regulatory and antitrust reviews, a sale could take between six months and a year, Hayes says.

Potential bidders could include Airbus, Boeing, Lockheed Martin and Textron, the owner of Bell Helicopter. “Obviously there’s issues with [the Pentagon] depending on who you sell it to,” Hayes says. “They haven’t told us there is any company we can’t sell it to."

Internal debates about dumping Sikorsky had been underway since 2010, when a boom in Black Hawk sales driven by the wars in Iraq and Afghanistan was clearly coming to an end, he says. But indiscriminate Congressional budget cuts tipped the scales.

“What really crystallized it for me was when this great, grand bargain came up around sequestration,” says Hayes, who was then the company’s chief financial officer. “It was inevitable you were going to see a downturn in Sikorsky, and there had to be consolidation in the helicopter industry.”

With then-CEO Louis Chenevert strongly opposed to a disposal of Sikorsky, UTC approached other rotorcraft companies as a buyer and wound up in a joint venture with Boeing on the Future Vertical Lift program. But the outlook for Sikorsky – large enough on its own to make the Fortune 500 list – did not change.

Hayes acknowledged that “perhaps” he did not share Chenevert’s view that Sikorsky was core to UTC’s portfolio. After Chenevert abruptly left the company last November and Hayes succeeded him, “maybe it was my prejudice, but we came very quickly to the conclusion that if you think about where UTC’s growth is, where margin opportunities are, where the long-term profitability is going to come from, Sikorsky ranked third after commercial aerospace and commercial buildings.”  

Although Sikorsky’s long-term prospects remain good, the short-term is not so rosy. On June 15, the company’s commercial helicopter sales estimates for 2015 were downgraded by $500 million due to a steep downturn in the oil and gas markets. Hayes estimates Sikorsky’s operating profit will tumble by $100 million.

“We were much more optimistic four months ago, when we talked to investors,” he says. “We have just seen a complete stop in the market for offshore oil, additional helicopters.” That means its sales forecast for S-92 helicopters will be down by about half for the year.

And it will be some time before Sikorsky’s next-generation technologies will translate into profits. That includes the S-97 Raider, which made its first flight last month in West Palm Beach, Florida. Likewise, it will be years before recently won contracts for the U.S. Presidential helicopter, the Joint Multi-Role helicopter, the Army’s Future Vertical Lift program and the Turkish Seahawk helicopter begin to pay off.

“Sikorsky sales this year will be about $6.5 billion. By 2025 it should be a $10 billion business,” Hayes says. “We see a lot of lift. Unfortunately you have to get from here to there, and for the shareholders at UTX there’s not a lot of patience in these next five years.”

The new owners, he says, will understand the long-term nature potential gains. “It will be a good business. It just won’t be part of UTC.”