COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Contracts — As shown in the table below, we expect to make additional capital expenditures over the next five fiscal years to purchase additional aircraft. As of December 31, 2016, we had 34 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.



	Three Months Ending March 31, 2017		Fiscal Year Ending March 31,
	Three Months Ending March 31, 2017		2018		2019		2020		2021 and thereafter⁽¹⁾		Total
Commitments as of December 31, 2016: ⁽²⁾
Number of aircraft:
Medium	—		5		—		—		—		5
Large	—		—		5		4		14		23
U.K. SAR	2		4		—		—		—		6
	2		9		5		4		14		34
Related expenditures (in thousands) ⁽³⁾
Medium and large	$	—	$	2,263	$	92,735	$	72,133	$	194,624	$	361,755
U.K. SAR	4,633		58,208		—		—		—		62,841
	$	4,633	$	60,471	$	92,735	$	72,133	$	194,624	$	424,596
Options as of December 31, 2016:
Number of aircraft:
Large	—		2		2		—		—		4

Related expenditures (in thousands)⁽³⁾	$	—	$	43,088	$	30,410	$	—	$	—	$	73,498

_____________


⁽¹⁾	Includes $83.7 million for five aircraft orders that can be cancelled prior to delivery dates. During the nine months ended December 31, 2016, we made non-refundable deposits of $4.5 million related to these aircraft.


⁽²⁾	Signed client contracts are currently in place that will utilize six of these U.K. SAR aircraft.


⁽³⁾	Includes progress payments on aircraft scheduled to be delivered in future periods.

The following chart presents an analysis of our aircraft orders and options during fiscal year 2017:



	Three Months Ended
	December 31, 2016				September 30, 2016				June 30, 2016
	Orders		Options		Orders		Options		Orders	Options
Beginning of period	35		6		36		10		36	14
Aircraft delivered	(1	)	—		(6	)	—		—	—
Aircraft ordered	—		—		5		—		—	—
Expired options	—		(2	)	—		(4	)	—	(4	)
End of period	34		4		35		6		36	10

We periodically purchase aircraft for which we have no orders.

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 $53.7 million and $52.2 million for the three months ended December 31, 2016 and 2015, respectively, and $156.9 million and $160.5 million for the nine months ended December 31, 2016 and 2015, respectively. Rental expense incurred under operating leases for aircraft was $47.9 million and $45.6 million for the three months ended December 31, 2016 and 2015, respectively, and $138.7 million and $139.5 million for the nine months ended December 31, 2016 and 2015, respectively.

The aircraft leases range from base terms of up to 180 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. 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 December 31, 2016:



	End of Lease Term		Number of Aircraft
	Three months ending March 31, 2017 to fiscal year 2018		19
	Fiscal year 2019 to fiscal year 2021		57
	Fiscal year 2022 to fiscal year 2025		17
			93

Employee Agreements — Approximately 52% of our employees are represented by collective bargaining agreements and/or unions with 83% 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 4%. 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.

Separation Programs — In March 2015 and May 2016, we offered voluntary separation programs (“VSPs”) to certain employees as part of our ongoing efforts to improve efficiencies and reduce costs. Additionally, beginning in March 2015, we initiated involuntary separation programs (“ISPs”) in certain regions. The expense related to the VSPs and ISPs for the three and nine months ended December 31, 2016 and 2015 is as follows (in thousands):



	Three Months Ended December 31,				Nine Months Ended December 31,
	2016		2015		2016		2015
VSP:
Direct cost	$	179	$	661	$	1,624	$	7,338
General and administrative	—		234		23		831
Total	$	179	$	895	$	1,647	$	8,169

ISP:
Direct cost	$	464	$	2,184	$	5,360	$	4,745
General and administrative	102		4,269		8,697		8,125
Total	$	566	$	6,453	$	14,057	$	12,870

On April 18, 2016, Mr. Jeremy Akel departed the Company as Senior Vice President and Chief Operating Officer. Mr. Akel and the Company have entered into a Separation Agreement and Release in Full, dated June 7, 2016 to specify the terms of his departure from the Company, pursuant to which he will receive benefits generally consistent with the termination without cause terms set forth in the Bristow Group Inc. Management Severance Benefits Plan for U.S. Employees effective June 4, 2014 and the Amended and Restated Severance Benefits Agreement between Mr. Akel and the Company dated April 20, 2012. Additionally, on July 1, 2016, Ms. Hilary Ware departed the Company as Senior Vice President and Chief Administration Officer. Ms. Ware and the Company have entered into a Separation Agreement and Release in Full, dated July 14, 2016 to specify the terms of her departure from the Company, pursuant to which she will receive benefits generally consistent with the termination without cause terms set forth in the Bristow Group Inc. Management Severance Benefits Plan for U.S. Employees effective June 4, 2014 and the Amended and Restated Severance Benefits Agreement between Ms. Ware and the Company dated November 4, 2010. We recognized compensation expense related to the departure of Mr. Akel during the three months ended June 30, 2016 and Ms. Ware during the three months ended September 30, 2016 included in the amounts above.

Environmental Contingencies — The U.S. Environmental Protection Agency (the “EPA”), has in the past notified us that we are a potential responsible party (“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 December 31, 2016, we had $55.5 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.

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.

We became aware of an incident involving another operator of the Sikorsky S-92A in the North Sea in December 2016. The preliminary review suggests a reduction in tail rotor control authority. In response to an Alert Service Bulletin issued by Sikorsky shortly after the incident, on January 13, 2017, the Federal Aviation Administration issued an Emergency Airworthiness Directive (Emergency AD) to perform one-time and periodic inspections on the tail rotor pitch change shaft bearing assembly. We acted immediately to ensure ongoing compliance with the Emergency AD across our global fleet. The other operator’s incident remains under investigation by the U.K. Air Accidents Investigation Branch. It is too early to determine whether or not any further action may be required or the impact of this on our future business, financial condition and results of operations.

As previously reported, on April 29, 2016, another helicopter company’s Airbus Helicopters EC225LP (also known as a H225) model helicopter crashed near Turøy outside of Bergen, Norway. The aircraft was carrying eleven passengers and two crew members at the time of the accident. Thirteen fatalities were reported. The cause of the accident is not yet known and is under investigation by authorities in Norway.

Prior to the accident, we operated a total of 27 H225 model aircraft (including 16 owned and 11 leased) worldwide as follows:

•Five H225 model aircraft registered in Norway;

•Thirteen H225 model aircraft registered in the United Kingdom; and

•Nine H225 model aircraft registered in Australia.

On June 2, 2016, the European Aviation Safety Agency (“EASA”) issued an emergency airworthiness directive, which was subsequently amended on June 3, 2016 and June 9, 2016 (collectively, the “June EASA Airworthiness Directive”), prohibiting flight of Airbus Helicopters EC225LP and AS332L2 model aircraft. The June EASA Airworthiness Directive by its terms did not apply to military, customs, police, search and rescue, firefighting, coastguard or similar activities or services as those types of services are governed by the member states of EASA directly.

On October 7, 2016, EASA issued a new airworthiness directive effective October 13, 2016 (the “October EASA Airworthiness Directive”) that expressly supersedes the June EASA Airworthiness Directive and details the mandatory actions necessary to permit a return to service of the Airbus Helicopters EC225LP and AS332L2 model aircraft. In response to the October EASA Airworthiness Directive, the U.K. Civil Aviation Authority (“UK CAA”) immediately issued a statement (the “UK CAA Statement”) confirming that its existing restriction that was evidenced through its safety directive issued in June 2016, prohibiting all commercial flying of these model aircraft, remains in effect until further notice. The safety directive issued in June 2016 by the Norway Civil Aviation Agency (“NCAA”) prohibiting commercial operation of the EC225LP and AS332L2 model aircraft in Norway remains in effect as well. The UK CAA Statement also stated that the UK CAA and NCAA are awaiting further information from the accident investigation before considering any future action.

In light of the October EASA Airworthiness Directive and UK CAA Statement, we are working with local regulators, Airbus, HeliOffshore and our clients to carefully evaluate our next steps for the H225 model aircraft in both our oil and gas and SAR operations in Norway, the United Kingdom and Australia. We do not currently have any AS332L2 model aircraft in our fleet. Until we are confident that the H225 model aircraft can be operated safely, we will continue to suspend all operation of its H225 model aircraft, including for SAR and training.

Specifically, we will continue to not operate for commercial purposes our sole H225 model aircraft in Norway, our 13 H225 model aircraft in the United Kingdom or our six H225 model aircraft in Australia, or for search and rescue purposes, including training and missions, any of our other four H225 model aircraft in Norway or our other three H225 model aircraft in Australia.

Our other aircraft, including SAR, continue to operate globally. It is too early to determine whether the H225 accident that occurred in Norway in April 2016 will have a material impact on us as we are in the process of quantifying the impact and investigating potential claims against Airbus.

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 December 31, 2016 to be approximately $5 million to $7 million.

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.