Lazarus thriving

Those orders included the first new sales in Australia, with Skywest and Virgin Australia selecting the ATR 72 to operate on regional routes, breaking what has for many years been considered a Dash-8/Q400 market.

This year has seen more orders come in, with Indonesia’s Lion Air adding another 27 ATR 72-600s to its backlog, and more recently an order for eight ATR 72-600s from Taiwan’s TransAsia Airways announced at the Farnborough Air Show.

It has also recently celebrated the delivery of its 1000th aircraft, an ATR 72-600 to Spanish carrier Air Nostrum – a mean feat given that the rise of regional jets at one point reduced its production to only 10 aircraft a year.

But now the tables have turned, with stubbornly high fuel prices and environmental concerns once again bringing the relative efficiency of turboprops back into the minds of airline fleet planners.

The manufacturer has also been sure to keep up with the expectations of its customers, and has continually added to the basic design that dates back to the 1980s, culminating in the most recent -600 series variants.

Both the ATR 42-600 and 72-600 feature the Pratt & Whitney Canada PW127M engine, which has a boost option that produces better performance in hot and high conditions. It also features a new Thales avionics suite capable of using the ACARS communication network, and integration of electronic flight bag.

The -600 also introduced new cabin enhancements, such as the addition of a DVD based in-flight entertainment system. The manufacturer also has the option of a new ‘Armonia’ cabin featuring business class seating, developed in collaboration with Italian design house Giugiaro, which in February won a design award from the Chicago Athenaeum.

Another small but important design change has been the addition of a passenger door at the front of the aircraft on the -600 series. This will for the first time make the aircraft compatible with aerobridges, which for some carriers will help to deliver more of a consistent product to their passengers.
The first ATR 72-600 was delivered to Royal Air Maroc in August 2011, following certification from EASA in May of that year. That was followed by the certification in June this year of the smaller ATR 42-600, the first delivery of which is expected shortly.

That has effectively drawn the -600 development program to a close for now, but ATR CEO Filippo Bagnato recently told Australian Aviation at the company’s headquarters in Toulouse that further developments are on the drawing board.

“The fact that I have a certified -600 [series], it does not mean that now I am satisfied with what we have done, and I will stop touching the 72 and the 42, because I have in front of me 20 years of improvement on the 72 and 42,” he said.

Unstoppable sales

Many of the sales of new aircraft have been driven by a need to replace more expensive regional jets, growth on many regional routes globally, and also the need to replace older aircraft.

“Our success is based on our ability to answer to the market requirements,” said Bagnato. “Airlines are increasingly looking for planes that combine the lowest operating costs, cutting-edge technology, comfort and environmental friendliness. In this context, ATRs and particularly our new series of aircraft, the -600, have proven to be the best choice for regional routes in terms of meeting these requirements in regional routes.”

Locally, ATR has managed to finally gain large scale acceptance in Australia with four ATR 72-500s now being flown by Skywest for Virgin Australia from bases in Sydney and Brisbane.

These have largely replaced the 70-seat Embraer E-170s on a number of regional routes, and will be supplemented with the arrival of four ATR 72-600s due by the end of the year as part of an order for 13 new aircraft.

“From the people who are flying ATR in Australia, it seems they are quite satisfied,” said Bagnato.

Skywest has also indicated that in future it is likely to replace its fleet of Fokker 50s flown on regional routes in WA with ATR 72s to maintain commonality with its east coast fleet, although the carrier has yet to commit to replacing those aircraft.

Orders are also coming from existing ATR operators, who favour the advantages of the new -600 series while also maintaining the commonality with the previous -500 series.

A prime example of this is Air New Zealand, which in October last year announced an order for seven ATR 72-600s and five options. These aircraft will replace the ATR 72-500s currently operated by Mount Cook Airline. The first of the new aircraft is due for delivery in October this year.

Another new development in sales has been the growing number of lessors placing orders for ATR aircraft, including many who previously only ordered jet aircraft.

Steven Udvar-Hazy’s Air Lease Corporation ordered 10 ATR 72-600s at the 2010 Farnborough Airshow, and last year converted two options to firm orders. Since then other lessors including Nordic Aviation Capital have since come on board.

Incidentally, Nordic last year bought an ATR 42-500 previously operated by defunct carrier MacAir. The aircraft had previously been parked at Cairns after the carrier collapsed in January 2009.

“In the past some of the lessors were interested in secondhand, but then when the got the confidence that the ATR was a good investment that kept value at a reasonable level, they started to buy here,” said Mr Bagnato.

Helping to drive that confidence in the ATR product is the large number of operators worldwide, which has made placing many of the aircraft relatively easy, and a number of lessors announced purchases for aircraft that are already committed to leasing customers.

One of the more interesting orders from a lessor has been from GE Commercial Aviation Services (GECAS). The world’s biggest lessor placed its first order for ATR 72-600s at last year’s Paris Air Show and now has 17 on order and 17 options. GECAS generally only orders aircraft featuring GE engines, something that ATR doesn’t have.

“Today they have changed their mind, and they have decided to invest in ATR because they think it is a good investment,” said Mr Bagnato.
And while orders have been coming, the current economic climate has also thrown up some challenges.

Like many other manufacturers, ATR reports that some customers are finding it harder to raise finance for new orders as banks have tightened credit in recent years.

While Bagnato argues that the flexibility of an aircraft to be able to move it to another operator if it were to be repossessed should make it an attractive asset, many financiers still remain hesitant.

“But this is life, and we have to cope,” he says, philosophically.

Currency has also been another issue for ATR. Like other European exporters, the company buys many of its goods and pays for staff in Euros, but sells its aircraft in US dollars. Bagnato says that it has proven to be a headache for the company.

While its production is effectively sold out for the next three years, ATR is still involved in a number of sales campaigns around the world, and sees potential for more aircraft over the medium term.

And while it has achieved success in attracting Skywest as a new operator, ATR is also looking to further sales in Australia. In particular, Bagnato feels that as the only manufacturer of an aircraft in the 50-seat category that some operators will look to the ATR 42 to replace smaller types, which are reaching the end of their economic lives.

“I look at some statistics I have, there are 19 seat turboprops in Australia that are will over 20 years old. Then there is the 30 seater, another museum piece, where the aeroplanes are 22 or 23 years old,” he says.

“It’s not only an Australian problem, it’s everywhere.”

A key target is Regional Express with its fleet of 34-seat Saab 340Bs, most of which were formerly operated by US regional carriers. Mr Bagnato believes that traffic growth will force carriers such as Rex to move up into the 50 seat category sooner rather than later.

But bringing in a larger aircraft to replace 19- or 34-seaters will bring with it its own challenges. For smaller independent airlines, a 50 seat aircraft would generally require an additional flight attendant on board, which would affect the economics of some routes. Additionally, some operators would have to invest in new processes to upgrade their air operator’s certificate to the high capacity category.

The manufacturer is also penetrating new markets, with the first direct sales of new ATRs into Russia recently, while it is also keen on widening its customer base in key growth markets including Africa, South America and Southeast Asia.

One area that has been off its map has been China, which has imposed a 24 per cent import tax on aircraft below 90 seats to protect its own manufacturers, some of whom have their own export ambitions.

“For the time being I have to consider the Chinese are my future competitor, and I have to prepare for other competition with another brand,” said Bagnato.

Ramping up

The sales that ATR has amassed over the past few years has meant that the manufacturer is now at a point where it is beginning to implement major increases in production just to keep up.

“This year we will deliver more aeroplanes than last year, when we finished with 54 (delivered),” Mr Bagnato says. “This year we have to deliver 70, next year we have to jump beyond 80 and the year after we have to jump very close to 90.”

The Italian notes that while it appears a dramatic increase in production, it is not unfamiliar territory given its previous ramp ups in recent years, which has seen it move from a low of 10 aircraft per year up to the current levels.

Thankfully, with the -600 development now largely locked away, ATR will have the benefit of being able to dedicate a number of engineers to managing the ramp up.

“From an engineering standpoint, we have got an important peak in 2011 and 2010, in order to arrive at the certification of the new ATR 72-60 and the ATR 42-600,” said Bagnato. “For us, today, the challenge is more on the industrial side.

“I have been working in the aeronautical industry for 40 years, and the problem is always the same: to be sure that the supply chain can match your speed.

“But it’s always the same stuff.”

So far, that supply chain appears to be keeping pace, despite the large number of programs ramping up around the world, and the fact that many, such as ATR’s half-owner Alenia Aermacchi, are involved as suppliers to other programs too.

Nevertheless, given the ramp ups that have already taken place, Bagnato seems confident that one way or another the supply chain will be able to keep up with the plans already put forward.

Future developments

With the -600 now certificated on both aeroplanes, it now appears that ATR will turn its attention to further development of both its existing products and also a possible 90-seat turboprop.

Despite indications in recent years that a larger turboprop could be delivered as early as 2016, the ATR CEO remains tight-lipped about when a launch could be likely, saying only that the development of such an aircraft would be four to five years away.

The competitive pressure to come up with a 90-seat offering has lessened somewhat, as Bombardier is seen to have its hands full developing the CSeries jet, and would be unlikely to divert resources away from that program to work on a competing turboprop.

Previous reports that the Canadian manufacturer was working towards an aircraft that could be in-service by 2014 appear to have been wishful thinking.

The wide acceptance of 90-seat regional jets, such as the CRJ-900 and Embraer E-190 may also be crowding out the market, despite the promise of better economics with a turboprop, particularly on shorter routes.

Nevertheless, there remains a strong level of interest from potential launch customers, and Mr Bagnato believes that it will be passenger growth that will drive airlines towards a 90 seat turboprop.

“The main driver is that they have a situation of growth on the traffic, and so [airlines] would like to have an aeroplane a little bit bigger, with the same economic performance,” he said.

To maintain that similar economic performance, Bagnato sees commonality with the existing ATR aircraft as a big goal for the development of a 90-seater.

“It’s quite clear the lesson learned by Bombardier, when they have developed the Q400, which is an aeroplane completely different from the Q300, the result is that they have been forced to cancel the Q300 because they are completely two different aeroplanes,” he said.

Nevertheless, he admits that commonality would have its limitations.

“On the structure it would be difficult [to maintain commonality] because it’s another aeroplane compared to a 50 seater, but from the system standpoint it is one of our goals.”

While both OEMs have been hosing down expectations of an imminent launch of a new aircraft, the engine manufacturers have been talking publicly about how they intend to develop the next generation of turboprop engines to power 90 seat regional airliners.

General Electric has indicated that it plans to adapt its GE38 turboshaft engine, which has been developed to power the CH-53K SuperStallion helicopter for the US Marine Corps.

Similarly, Pratt & Whitney is looking at ways to get more out of the PW100 family, and has even talked about using concepts from the PW1000G geared turbofan series of jet engines any applying them to a turboprop to gain more power.

In the meantime though, Mr Bagnato and his team are pleased with how the existing family product is holding up, and are doing their best to keep up on both the sales and production sides of the company on track to maintain its growth.

“Looking at the cumulative picture, at least for us, it is significant growth.”