2019 Outlook: ATR begins year in commanding position

ATR dominance

ATR overtook Bombardier’s turboprop dominance years ago.

With Bombardier focused on development of the CSeries (sold last year to Airbus and now called the A220), the company neglected sales of the Q400 and CRJ.

Bombardier also dropped the 50-passenger Q300 from its portfolio. This left ATR as the only Western turboprop manufacturer of this category airplane. (For purposes of this article, turboprop programs in China and Russia are excluded, as these do not sell outside their home markets.)

To be sure, few 50-seat turboprops are in demand. ATR’s 2018 20-year market forecast sees a demand of 630 aircraft. Japan Aircraft Development Corp. is even more pessimistic: it sees a demand for slightly more than 100.

ATR sees a 20-year demand in the 60-80 seat turboprop sector of 2,390 aircraft. JADC is much more conservative, seeing a demand of just over 1,000 aircraft.

ATR can be expected to continue its domination.

Q400 is a niche airplane

The Q400 is a niche airplane. It carries more passengers than the ATR-72, but it was designed as a hot-and-high, fast turboprop. When operated to its design criteria, its operating costs are significantly higher than the ATR-72. When throttled back to a similar cruising speed, the operating costs are reasonably competitive.

But the price of the Q400 is millions more than the ATR-72, presenting a challenge for Bombardier and Viking and retaining an advantage for ATR.

David Curtis is chairman, Longview Aviation Capital and president and CEO of Viking Air. He declined an interview pending closing of the Q400 deal, but said in a written statement:

“We see great opportunities for turboprops around the world and are excited to add the Q-Series to our portfolio of aircraft. Our track record is based on investing for the long-term, and that is the perspective we are bringing to this acquisition.

“The Q400 is a high-performance and highly efficient aircraft, and once the acquisition closes we will put in place a long-term program strategy. There is a solid order book already in place, and this transaction will also allow us to apply our company’s core expertise in service and support to a diverse group of operators around the world. We are enthusiastic about this business and look forward to assuming responsibility for the Q-Series program, which we expect to occur later this year. “

Next Generation

ATR’s leadership has wanted to launch a brand new design, 90-seat turboprop for years. Airbus owns 50% of ATR and has blocked development. The rationale: given ATR’s dominance, questionable cost-benefit for such a small market and questionable benefit for the low-utilization operators, Airbus officials weren’t persuaded by the business case.

But there may come a time when ATR’s hand, and Airbus’, is forced.

China continues to evolve its turboprop development. While few if any consider this a near-term threat, over 20 years, this situation may change.

Indian and Indonesian officials announced interest in developing a 70-90 seat turboprop. They’ve been down this path before, without success. Skeptics justifiably question these announcements.

However, Embraer is another matter.

Officials have been talking about the possibility of creating a new turboprop since at least 2015. Meetings have been held with airlines. The airplane concept looks like an EJet but with straight-wings and propeller engines.

Embraer sees a market of about 2,500 70-90 seaters over 20 years. If Bombardier’s Q400 is a question mark—Viking Air hasn’t discussed its long-term plans for the airplane—ATR would be a monopoly, creating possibilities for Embraer. How the expected Boeing-Embraer joint venture might affect this prospect is a question mark of its own.

It seems unlikely that Embraer would pursue a 50-seat airplane, given the small demand. But a two-member, 70- and 90-seat family splitting the market with ATR might be feasible.

If Embraer pursues a next generation turboprop, with nextgen engines from either Pratt & Whitney Canada or GE Aviation (each of which have pursued a new design for years), ATR (and Airbus) would have little choice but to follow suit.

Clarity this year

This year may bring some clarity. The Boeing-Embraer JV is expected to be approved by the Brazilian government this month. Global regulatory reviews begin afterward. Final approvals are hoped for by the fourth quarter.

With the Paris Air Show in June, Boeing-Embraer/NewCo may have something to say at the air show—or maybe not.

Time will tell.

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