Ross Mitchell: Our belief is that the design we have to-date meets the requirements of the market. Over the years, there have been questions about whether a larger
turboprop is required. Specifically, a lot of the discussion has been around the 90-seat level, and that’s part of the reason why we worked on the Q400 by removing that forward, right-hand cargo bay from the inside of the cabin and expanding the seating capacity [to 90 seats].
Our view is that to the extent the market needs a 90-seat airplane, we have a 90-seat solution. To the extent you need more than 78 seats we used to offer, we have that. We can do a number of different configurations inside the airplane to maximize an airline’s seating capacity.
Our belief right now is the Q400 meets the requirements of the market and certainly in terms of the size of the aircraft, it is the right size for the future.
I don’t know. I guess on the Q400, you say it’s decades-old design. The airplane is really entered into service in the early 2000s. Certainly when you compare it to our competitors, the airplane is newer. I know there is a temptation to reach back into the early Dash 8s to look for the genesis of the airplanes. Most of the major systems of the aircraft are new. They aren’t simply derivatives of the older Dash 8.
We’ve upgraded the airplane interiors, we’ve continued to look at ways to upgrade the airplane and keep it in line with all of the current requirements. I’m not sure I see it in the same light as our competitor’s aircraft, in that it is a newer design and certainly the engines are a much newer design.
I don’t know if I can give you a specific answer on the lifetime of the aircraft, but we certainly believe it’s still an airframe that has a lot of life left. We can continue to upgrade the airplane as we move along to meet the requirements of our customers.
To the extent the engine manufacturers come to us with ideas, we’ll always take a look at what they are working on and try and understand how it fits into the plan. But at the moment, we are satisfied with the airplane that we have and with the engine combination, it is certainly the right combination.
We are working on a number of campaigns and we’re active with a number of customers, looking to secure the orders. There is a pipeline of orders we’re working on. That’s important for us in continuing to convert that pipeline into firm orders. That’s what we’re really focused on.
It’s clear that we’ve had good success in North America. We have established customers in North America with large fleets. We’ll continue to be able to build on those orders. We had success recently in Africa with a number of customers.
When you look at the Q400 and its performance characteristics, it’s ability to operate hot and high, its ability to operate into short runways and yet go long distances, as well as its ability to offer a dual class configuration, which our African customers seem to like, especially with forward and rear lavatories, we have an advantage in Africa.
In Europe, you see a lot of turboprops in use on the short-haul routes. You see activity there. We would like to have more orders in Asia-Pacific and in China. We’re working hard in those regions.
I refer to North America. Let’s not give short shrift to the Canadian carriers. They’ve ordered a lot of airplanes from us. The Q400 is integral to the business plans of WestJet, Air Canada and Porter. I want to make sure they get their mention. They are exceptionally important customers to us. The Q400 provides them with a life they really need. It works well within their networks.
With respect to Horizon, I think that’s a question that you would have to ask Horizon. There will be Q400s in their fleet going forward. There are routes simply better-suited to a turboprop. We’ll see how things develop. There will be retirements in 50-seat jets and other aircraft. The Q400 is well-positioned in terms of a replacement aircraft for some of those opportunities. The Q400 is capable of flying longer routes and keeping up with jet traffic.
If you have a network that’s suited toward the 50-seat jet, it might be your better replacement is the Q400.
I think we’ll have to wait and see how that all develops as those aircraft are coming out of service over the next few years.
Let’s start with the trip cost differential. I suppose that’s a number they gave you recently when you interview them. I’d ask that you be a little bit careful with the way they will roll out that number. They’ll do a DOC (Direct Operating Cost) rather than a COC (Cash Operating Cost) comparison. You will need to look at some of the assumptions they will give you, because it’s not really close to 20%.
We actually see the differential, depending on how you run the airplane, as one that’s being very close even on the trip costs. We can slow our airplane down. We can fly at a higher altitude. There are a number of assumptions that you need to look at when you’re getting there.
The first point is that the airplanes’ trip costs are very close to one another. If you run the Q400 in the right way, it will provide you with very low trip costs.
Something the Q400 that the ATR can’t is you can travel a lot faster and it can adapt into a network much easier. If you’re running a full network, you’re really not interested in how the airplane runs on one specific route. You’re more interested in how it blends into your network and how it can fly various stage lengths.
Given that the trip costs are very close, and we say they are one on top of the other, the Q400 has 10-12 more seats. You can very quickly figure out that seat cost on the Q400 is lower. We often say that in the regional space, that is the lowest seat cost you can get.
The first thing to say about list prices is that where we end up in actual prices…is that list prices aren’t always reflective where we end up in actual prices. I wouldn’t put too much of an emphasis on list prices. We are certainly competitive. Because we offer a lower seat cost and more value for the airplane, airlines will recognize that value.
In terms of the production costs, I think it’s been public that we’ve had permission to take the wing and cockpit elsewhere, so we’re looking now at what we’ll do there. We’re always looking at ways to try and reduce the production costs so that we can bring the production costs down.
I don’t think that’s been decided. We’ll look at where it makes the most sense. But as of now, that hasn’t been decided.
It’s hard to speculate on that. That is an important, growing market. We see the regional space in China as something that needs development. We have the right airplane and products to put in there. Certainly they’ll look to develop their home market aircraft. There is room for the Q400 there. Many of the places they look to develop are more remote, hot and high and you need the abilities the Q400 has.
I would say there probably is not much we can do today. So, I would say it’s probably elsewhere. It’s hard to forecast where we’ll go on that.
I think those are still in early days. I think there is a lot that needs to be done in assessing the aircraft you’re going to build, and the model. It’s very early days now.