RAA 2011 Debrief: No new, small turboprops from current OEMs

If the industry wants turboprop replacements for the 1980s-era, 19- to 30-seat aircraft, it should not look to Bombardier, ATR, Embraer or Saab, who all said the used market will keep airlines supplied with good, small turboprops for at least a decade, reports Kathryn Creedy.

But there were conflicting undercurrents during the Regional Airline Association’s meeting in Nashville with conventional regional OEMs nixing the idea of new turboprops and regional airlines crying for more. By the time the convention was into its second day, the trend was clear and even had reporters suggesting there is a market for new aircraft.

That left regionals worried about the timing of any new efforts. New aircraft programmes take time to develop and bring to market, despite the advances wrought by computers and new engineering, manufacturing and maintenance philosophies. That puts any clean-sheet designs entering service about the same time of Boeing’s new narrowbody – 2019/20 – if the manufacturer opts for a completely new design. Even so, there are a host of likely candidates already in development or which have been developed for the business aviation market so that regional EIS could shorten considerably.

Regional airlines such as SkyWest, Mesaba/Colgan, Cape Air, Island Air and Great Lakes are speaking with one voice. Replacement aircraft are needed and they can’t wait a decade or more. They have last-generation turboprops on pro-rate flying where they are most vulnerable to fuel price hikes. A new generation turboprop with the improvements that are being laid out for the regional airline industry’s larger birds, although too large for this application, could change the dynamics of this pro-rate service, not to mention small community air service.

Building the case
By the time the RAA Convention ended, the regionals had built a pretty good case for new, small turboprops buoyed by ATR’s discussion of all the abandoned routes over the last several years. Interestingly, it seemed the time had finally come to test the theory that the aviation industry needed a new generation of airlines to do what the current generation industry had done in the immediate post-deregulation period – become the vital link between small-town America and the rest of the world.

In fact, almost the entire regional airline fleet is in need of refurbishment. ATR head of sales, John Moore, made an interesting observation in response to a question as to why turboprops aren’t making bigger inroads in the regional fleet. It was pointed out that engine and airframe manufacturers have produced numerous efficiencies that are not yet being applied by the airlines in a large way despite the fact that airlines are still losing money.

Moore noted that US airlines have been unable to renew fleets because of bankruptcy, mergers and capacity cuts. Airlines, he said, have yet to make the investment to make regional fleets more efficient for the new market reality. After that, it becomes a question of capacity, demand and pricing, he said. Instead, airlines have been more disciplined in reducing capacity to maintain yield.

Moore also pointed to scope clauses as a major restraint, saying they produce a lot of inefficiencies and higher costs. Coupled with all that is the fact that regionals have been under pressure to reduce costs to be able to provide majors with low-cost capacity solutions.

Opportunities coming
The lack of any new aircraft of 50 seats or below on the horizon means a tremendous opportunity both for airlines and the host of new entrants airframers to come along just as Saab, de Havilland, Embraer, British Aerospace, Fokker and ATR came along when US business aircraft manufacturers, riding a wave of business aviation activity, decided not to enter the small, commercial aircraft market after US deregulation.

Their loss was the regional industry’s gain as these new entrant airframers took over the market and set a new standard for regional airliners, one that continues today with both regional jets and large turboprops which are now closer to the mainline experience than passengers have ever had before.

The only problem is that the turboprop has an image problem, despite all the work done by the industry to help the public understand that a modern turboprop has as much new technology as mainline jets.

Plenty of players
Now, it might be the current airframers’ turn to step aside. Certainly, China is developing an indigenous industry and it has a mid-size turboprop in development. It is well known India wants to develop an indigenous airframe capability and the Middle East might also be a fitting venue for an equally robust investment in aircraft technology.

But there are manufacturers such as Viking which is manufacturing the new Series 400 variant of the Twin Otter that de Havilland let die. Will someone do something similar with the hearty Saab aircraft using new materials and advances in production and aerodynamics? Certainly, Pinnacle is finding new life for the 340Bs which it may use to replace its older 340s. Great Lakes is looking for a replacement for the 19-seat Beech 1900s even as it is upgauging to the Embraer Brasilia. Great Lakes president Chuck Howell noted how short the Brasilia supply is. CommutAir, in the past few years, completed an upgrade with Horizon’s Bombardier Q200s.

Several programmes are also in the offing from other world regions including 50-seaters like the Antonov An-140 out of the Ukraine, the Xian MA-60 from China and the Ilyushin 114 from the CIS. These are not names that come trippingly off the Western tongue but nor did Saab, British Aerospace, Fokker, Embraer or ATR ring many aviation bells at the dawn of deregulation. They eventually made the market that exists today.

There are another four manufacturers of small turboprops including the Antonov An-38, the GECI Skylander Sk-105 from France and the Let 410/610 from the Czech Republic. Then there is the well-known and rugged Cessna Grand Caravan at 12 passengers. Really all one has to do to find candidates is look at any guide to business aircraft. Finally, there is the interesting prospect in a new programme as Cape Air works with Costruzioni Aeronautiche Tecnam Srl (TECNAM) to see if it is viable to create a Cessna 402 replacement.

But what of others? There is Pilatus with its Islander which flunked in the US although if the market were truly there it might develop a new, modern commercial t-prop. Czech manufacturer Evektok Aircraft has a nine-seat utility aircraft in development as is the Skylander, both originally for the business market but now showing potential for the commercial market. Of course there is the 11-seat King Air and the Piaggio Aero P180 Avanti II, at nine passengers. Wouldn’t it be ironic if these business aviation manufacturers decided to expand their market to supply regionals?

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Source: OAG Fleet Mix, March 2011

Sorry, not interested, used will do
It was clear from conversations with engine and airframe OEMs at RAA, there will be no new-generation turboprops to address the aging 9- to 50-seat market. Saab, Bombardier, Embraer, ATR, GE and Pratt & Whitney Canada all said that the excess of current generation turboprops will forestall development of a new-generation small turboprops – at least from established manufacturers – for at least a decade as the thousands of used aircraft are retired over those same years.

And therein lies the crux of the question. Will the economics of new aircraft enable the replacement of the used? Certainly, history says no. Indeed, every one of the regionals who were made prosperous by the mid-80s influx of new aircraft, started with used and built themselves up with DC-3s, C99s, Bandeirantes and Cessnas. Consequently, any new entrant carriers developed to serve the numerous abandoned markets will likely go the same route but this time with Saabs, Dash 8s and the like.

Indeed, Embraer is no longer into producing turboprops, period, saying the passengers don’t like them, according to Paulo Cesar de Souza. That begs the question as to whether he has seen the NextGen turboprops. While the Q400 has gained traction at Horizon (for Alaska) and Colgan (for Continental), the latter was an expediency wrought from the 50-seat cap on regional jet flying in Continental’s scope clause. It is likely that cap will disappear in the United/Continental merger so it remains to be seen whether the surviving carrier will stick with the more economical aircraft.

Then again the Q400 is gaining more traction in Canada where Porter established its bona fides and now Jazz Air and new entrant Air Canada Express, Sky Regional Airlines, are putting it into service, again in a unique situation at Toronto’s downtown Billy Bishop Airport. The question then becomes is the Q400 really a niche aircraft or will Horizon and others in Europe prove its worth as a feeder aircraft after all.

Bigger is where the market is
“Right now we are looking at airline needs,” said Pratt & Whitney Canada vice-president marketing regional airline and helicopter engines, Richard Dussault. “First of all, you have a large fleet in the market today and a lot of capacity. Until the market really sorts through these aircraft you will not see a new generation 30- to 50-seat turboprop.”

He pointed out the difficulty in establishing a market for such programmes as the 19-seat Viking Twin Otter largely because of the availability of 30-seaters.

GE general manager small commercial engines Chuck Nugent echoed Dussault when he, too, pointed out the trend was for larger aircraft not smaller. “The market that exists today,” he explained to LARA of the 30- to 50-seat segment, “does not appear to support any significant investment.”

Could this be the same blind spot exhibited by the US business aviation market back in the 1970s and 80s?

Saab Aircraft Leasing president Michael Magnusson said the scheduled daily departures today in the 30- to 50-seat segment has been shrinking worldwide and is down 16%. The US has had a far deeper drop than other world regions, he added. The biggest drop, he told LARA, is in the 30-seat arena which is down 30% while the 50-seat market was down 15%. He noted the 30-seat RJ has just about disappeared.

“Despite the RJ influx in the 1990s, the below-90-seat turboprops are the majority of the fleet,” he told LARA. “The growth is in the larger aircraft – the 70- to 90-seat RJs and the 70-seat turboprop. The 30- to 50-seat has plateaued and the 19-seat is shrinking while the 50-seat turboprop is hanging in there.”

ATR and Bombardier, the only two commercial turboprop manufacturers left, agree, saying they are focusing on the larger turboprops with both saying if a 90-seater were in production today, the airlines would buy it. That seems to belie the prejudice against turboprops that Embraer says is redolent among mainlines.

Embraer agreed there was no market for a new 50-seat turboprop while ATR head of sales John Moore noted that the move toward larger regional aircraft, the recession and declining capacity has forced yet another wholesale abandonment of regional routes. For regionals, the value of the turboprop is a no-brainer but that begs the question as to whether their mainline marketing departments would agree.

Abandoned markets present opportunity
What makes this interesting is that these routes were the backbone of regional aviation service in the immediate post-deregulation period. That begs several questions including whether the barrier to entry is now so high as to preclude a new-generation, regional airline industry – one that serves abandoned markets just as the current industry did when major airlines abandoned hundreds of markets in the immediate post-deregulation period.

One would normally say that such an evolution is inevitable but with the changes wrought by the single level of safety and the more recent changes to training rules, the question then becomes: “Does it cost too much to start an airline?” Even so, we have seen SeaPort start up in recent years. There is also a growing crop of charter airlines.

That leaves questions about whether or not new entrant airlines can gain the capital needed to develop a business plan, gain FAA certification and acquire aircraft and ground facilities. In this tight credit market the answer should be clear, except the same could have been said during the 1980s when manufacturer contributions began to build the industry into what it is today. They made a good bet on most regional airlines of the day.

“More than 220 routes under 300 nm have been cut in the US since 2004, according to OAG,” Moore told assembled press during the RAA Convention. “Some 75% of the routes under 300 nm in the US are now operated by regional jets – that’s roughly 150,000 of 200,000 monthly. Since 2007, about 170 regional jets between 30 and 50 seats have been grounded or sold to other countries, according to Ascend. After the jet-mania years, airlines have seen that regional jets are becoming more and more unprofitable.”

Well, that is debatable since SkyWest still sees a role for the 50-passenger jet but with rising fuel, the turboprop is likely to continue the comeback it has experienced since 2005. The biggest question then becomes whether passengers have permanently changed their behaviour. East of the Mississippi, routes under 300 nm are usually not far from a low-fare carrier airport. Has the passenger been trained to drive to lower fares? Have they permanently abandoned their hometown markets in favour of low fares?

West of the Mississippi the story is different because windshield times between local markets and hubs is so much longer. In addition, there are a host of markets both east and west that are trapped by geographical barriers that preclude driving. Think West Virginia.

Moore quoted an Atlanta Journal Constitution story published last January saying there are more 50-seat jets in the US fleet “than there are markets they can make money with. As fuel prices go up, that happens. Forecasts show that 700 50-seat regional jets will be parked between now and 2015.” The question then becomes what if there were a turboprop to replace those jets?

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Source: ATR/OAG

For Moore, the answer is yes. That, he said, made the argument for the turboprop unless the major carriers want another wholesale abandonment of the communities now served by those jets.

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Source: ATR

“They will lose service or frequency or that service will be provided in another way,” he said, alluding the transferring those markets from jets to turboprops. “You might say we’ve become a public service organisation because we allow airlines to retain service to smaller cities. The ATR 72 is 25% less expensive than the 70-seat RJ and has the same costs as the 50-seat RJ so you get the same trip costs with more seats. There will be an incremental replacement of the RJs with turboprops and that goes straight to the bottom line at $3.00 per gallon. As RJs work their way out of the system there will be an opportunity for ATR to succeed.” 

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Source: ATR

Given ATR’s 30-year commitment to turboprops, it is not surprising that not only is it the last Western manufacturer standing for new 50-seaters, but it sees a continuing future for the aircraft. Indeed, it is bringing to market an advanced version of the ATR 42, the -600 which more closely mirrors the onboard experience as the mainline aircraft. The 42-600 will come to market after the ATR-72-600 scheduled to enter service this summer. However, ATR’s forecast shows a need for only 500 30- to 60-seat aircraft compared with 1,600 larger turboprops.

It promises significantly less fuel consumption, improved avionics, enhanced performance, increased cabin space. The ATR -600 family will offer a dual-class cabin, inflight entertainment potential, larger overhead bins with room for the standard roller bag, and the widest cabin in its class.

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Source: ATR which sees a need for 1,600 61- to 90-seat turboprops

His counterparts at Bombardier clearly agree since both continue to study producing a 90-seat turboprop. Moore noted that jet vs turboprops demand has flipped in the past decade from only 15% of the fleet in 2000 to today when 40% of the fleet is turboprop.

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Source: ATR

Bombardier sees the below-50-seat market shrinking in the next 20 years with only 300 deliveries vs. 2,500 retirements. That agrees with Moore’s tally that those points must either be dropped as uneconomical or a new solution provided.

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Source: Bombardier

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Source: Bombardier

Interestingly, Bombardier sees the turboprop fleet flat at 41% over the next 20 years even at $107 per barrel for fuel.

Fleet optimization with turboprops and jets

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Source: Bombardier

Moore, as with his Bombardier counterparts vice-president marketing Philippe Poutissou and senior vice-president commercial aircraft Eric Martel, offered no timeframe for producing their respective 90-seat projects as they focus respectively on the -600 for ATR and the CSeries for Bombardier. Moore indicated there were several variables to launching such a product including what airlines want and what improvements in engines can be offered and, of course, the willingness of shareholders to shoulder the programme.

Conclusion
The RAA meeting offered up more questions than answers when it came to retaining communities in the US national air transportation system and in what might be next in aircraft to serve them. The answers will only come with more study and putting hard numbers to the trends cited by airframers and airlines alike.

That makes the future pretty interesting both in terms of the current batch of regional airlines, for the evolution of a new batch to serve abandoned markets, and, of course, for the airframers that will develop aircraft to serve them.

Kathryn Creedy, US correspondent, Low-Fare & Regional Airlines/LARAnews.net

 

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