Slow ATR 42/72 turboprop sales last year are the result of combining adverse market forces that put the airframer in a position its executives could have thought a thing of the past – competing against jets.

During the so-called “jetmania” market shift of the 1990s and early 2000s, a new generation of 40- to 70-seat jets managed to lure regional carriers.

They were promoted as a way for regional carriers to get rid of an image of slow, old technology. Turboprop sales plummeted and ATR was badly hit. But the operating costs of jets went spiraling when oil prices increased. Turboprops regained their attractiveness thanks to their lower fuel consumption, as well as passenger comfort improvements. The production of some prominent turbofan-powered competitors ceased.

But now the salespeople of the Toulouse-based manufacturer have to argue against these jets again. “In most sales campaigns [we are involved in], the customer is considering buying either a cheap used jet or a new efficient turboprop,” says ATR CEO Christian Scherer. For instance, Embraer has been placing used E170s – that had their first life with U.S. carriers – into emerging markets.

The market is soft overall and ATR took orders for a disappointing 36 aircraft (34 ATR 72-600s and two ATR 42-600s) in 2016. One of the reasons for the soft market is the stronger U.S. dollar. Citing Indonesian carriers as an important example, Scherer notes many of ATR's customers pay in other currencies. Therefore, a used jet may be more affordable.

Compounding the problem are relatively low fuel prices, which make the turboprop's better business case less obvious. So jetmania is not dead – “everybody wants a jet, they buy one, burn their fingers [due to the higher operating costs] and then buy a turboprop,” Scherer says.

The phenomenon can also be seen with pilots, who tend to see turboprops only as a stepping stone. Thus ATR's customers also face a pilot shortage. “Maybe we should have anticipated the pilot bottleneck,” Scherer concedes. And not only the airlines are having a hard time finding pilots, they also have to cope with scarce slots at training organizations. In a bid to contribute to the solution, ATR in January installed an additional ATR 72-600 sim in Paris.

Finally, according to Scherer, there “may be a bit of oversupply in the turboprop leasing sector.” Selling to lessors involves finding a modus vivendi to avoid competing with each other. Scherer sees a lessor as best placed to offer availability at a six- to 18-month notice, the airframer being positioned for 18-month-distant slots.

As a result of the weakening sales, Scherer has decided to “stabilize” the production at an annual 80, thus stopping the planned ramp-up to 100 or more. The backlog is still reassuring, estimated at three years of production.

The supply chain, once a source of delays, is now “doing rather well,” Scherer says. Leonardo and Airbus, both ATR's parent companies and main suppliers, have agreed on a procedural change: subassemblies are handed over at their own factories, which means ATR is not accepting them if incomplete.

In 2017, ATR salespeople hope to conclude the sale of 40 aircraft to Iran Air, announced in early 2016 (the first four ATR 72-600s were delivered last month).

Farther east, efforts to sell ATR's in China continue. Scherer cites two kinds of obstacles – protectionism, as the Chinese government wishes to promote AVIC's turboprops, and political, as granting an air operator's certificate to a startup airline in a remote province has to be thoroughly mulled. “But the Great Wall is not insurmountable,” he says.

Current market trends have not changed ATR executives' belief in the intrinsic advantages of the turboprop. When Sweden-based carrier BRA organized a public relations event for the first flight of one its new brand-new ATRs on biofuel, Scherer seized the opportunity to promote its products as more environmentally friendly than a jet.

 

 

ATR Limiting Paris Participation

Regional airliner manufacturer ATR has reduced its show participation, with a presence this week solely on the static line (B2).

“There are better ways to meet our customers than going to the show and meeting them at a chalet,” the company told Aviation Week via an emailed statement.

“Based on our aim of being closer to its customers, we will prioritize meetings in downtown Paris,” the company said. “We do not need to take part at major events as exhibitors to match our customers’ needs.”