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Market for ATR72-600 Weaker

March 4, 2019

The market for the ATR72-600 over the last three years has been weaker than anticipated perhaps because the manufacturer has been chasing production rates although the demise of a number of operators using the ATR72-600 has not helped.

The sustained demand for turboprops has allowed a measure of stability to emerge for some rentals and values. The market is much more stable this decade than the last. Remarketing turboprops had become a specialist task with the manufacturers in particular playing an important role in securing leases and sales. Today the turboprop manufacturers are much less involved in the used market. Independent owners and lessors have emerged not least Nordic Aviation Capital as well as other notable lessors underlining the perception that turboprop aircraft are more viable. NAC acquired the ATR portfolio of ALC and has expanded its portfolio.

The principal benefits of the -600 as they relate to overshadowing the -500 center on the increase in weight and the incorporation of more powerful engines in the form of the PW127M. The maximum take off weight is increased by 300kgs with an optional further increase of an additional 200kgs. Combined with engines that offer more power for hot and high operations, the weight increases represent a significant improvement in operational flexibility and potential increase in revenue. With the average passenger weight in the all important U.S. and European markets increasing, performance of 50 and 70 seat turboprops has been adversely affected on some routes. The increase in MTOW for the ATR72-600 will allow at least the carriage of two more passengers on previously weight restricted routes.

The uprated PW127N was certificated in June 2014 and provides 4.5% more power at take-off thereby improving hot and high capability. The Standard 2 avionics suite has also been certificated which uses performance based navigation systems to reduce reliance on ground based aids which will improve RNP. Work is now progressing on Standard 3 avionics while there is also activity on an improved air-conditioning system and improved short field performance. In 2015, ATR obtained certifications for two new cabin models of the ATR 72-600: the “High Density” cabin, which increased the maximum capacity to 78 seats, and the “Cargo Flex” cabin, which combines 44 passenger seats with a doubled cargo capacity of nearly 20 m3. the ATR42-600s and ATR72-600s includes the new PW127M as standard engine. This enhanced version of the ATR engine allows an increased power rating for the ATR72-600 that provides improved performance for hot and high conditions. Additional weight increase: compared to the current optional Design Weights, the new ATR72-600 has as standard an additional weight increase of 300 Kg on MTOW (Maximum Take Off Weight, from 22,500 Kg to 22,800 Kg) and on MZFW (Maximum Zero Fuel Weight, from 20,500 Kg to 20,800 Kg), plus optional weight increases of an additional 200kg. This improves the payload and performance to cope with increasing demands of passenger weights and baggage.

In September 2016, ATR delivered its first 78 seat aircraft. ATR obtained certification for the 78-seat configuration of the ATR 72 from European Aviation Safety Agency (EASA) in December 2015. Based on the existing cabin platform, ATR added an additional row of four seats by optimizing the pitch and replacing the galley compartment with a new aft foldable galley. This enables airlines to choose between full cargo capacity or a combination of cargo capacity and galley space. The 78-seat option is also available as a retrofit.

The -600 indeed suffered during 2017 both in terms of demand and lease rentals and only is the market improving.. The near 670 orders for the -600 have come at the price of swamping the market. A number of carriers divested themselves of their -600 fleets either willingly or by default and this led to some entering the market with owners and lessors desperate to place the aircraft. To some extent lease rentals have improved as ATR has sought to rein in production to levels that do not overwhelm the market. Higher production rates have perhaps allowed ATR more freedom in terms of new pricing which has been to the detriment of the used market. There has therefore to be caution over values. The operator base is expansive.

ATR72-600 Vital Statistics
LAUNCH 2007 STANDARD MTOW 50,265lbs LIST PRICE (2019) $26.8m
FIRST FLIGHT 2010 OPTIONAL MTOW 50,705lbs TYPICAL DISCOUNT 25%
SERVICE ENTRY 2011 FUEL CAPACITY 11,023lbs VALUE Y2012 $13.0m
ORDERS 692 PAYLOAD 17,164lbs
DELIVERIES 487 RANGE (MAX PAX) 825nm VALUE TREND Declining
AVAILABILITY 20+ SEATS – 1 CLASS 79 2021 F/V – Y2012 $10.0m
OPERATORS 51 CRUISE SPEED 275 KTAS
ENGINE TYPES PW127M (N) T/O FIELD LENGTH 4,373 feet LEASE RATE–DoM 2012 $110,000m
VARIANTS -600 MZFW-STD 46,296lbs RENTAL TREND Stable
D CHECK COST $0.5m MLW-STD 49,272lbs 2021 LEASE RATE –DoM 2012 $95,000pm
ENG O/H COST $0.3-1.0m CABIN WIDTH 101.2 inches AIRCRAFT RATING B–

There are a good many -600s on the market with an operating lease viewed as a means of disposal. The rentals therefore need to be realistic. The aircraft is no longer so youthful and lease rentals need to reflect such age. NAC and ATR are among the lessors of the aircraft although AVAP, Castlelake, Aergo Capital, Investec, Injet Leasing and Solenta Aviation also feature. The age profile of the -500 lends itself to replacement and also makes it vulnerable to replacement with the -600 which has been delivered in the hundreds and been experiencing its own issues. Those in lesser condition will require some incentive with respect to pricing.

The -600 is no longer new and instead is available in numbers. The problems that beset the type in 2017 have not fully dissipated and this is inevitably preventing lease rentals from returning to previous levels particularly for the younger aircraft. The market is still nervous because the leased fleet is growing. At least there seems to be less competition in this segment of the market than for the larger commercial jets. Lessors include NAC, AVAP, Elix Aviation Capital, GECAS and Transportation Partners. With no new aircraft waiting in the wings, the aircraft is considered to be a desirable turboprop asset but a sense of realism is needed. The Bombardier competitor has managed to increase seating capacity without stretching the aircraft and new orders are being recorded. ATR has no short term answer. The depth and breadth of the operator base is notable but that can be at the expense of placement with weaker credits.

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