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Rates for Some Turboprops On The Rise

December 9, 2019

The market for turboprops remains stable with some aircraft recovering from previous lows.

In terms of environmental compliance then the turboprops would seem to be exposed to potentially negative attention. However, the turboprops are in some ways more efficient than jets, offering vital services where surface transportation is not an option. Indeed, the fuel consumption an be lower than a driver using a car particularly when a turboprop can achieve less than three liters fuel consumption per hundred kilometers. The smaller turboprops also have the potential to be converted to more environmentally friendly methods of propulsion with synthetic fuels and electric powerplants a possibility.

The ATR, Saab and Dash8 products are the principal vehicles for leasing because they have the ability to be remarketed and have standalone asset value. The other types tend to be financed via a finance lease or via a straight loan where the credit represents a more significant part of the equation. The market for the leasing of turboprops therefore continues to center on the larger and more modern types.

Rentals are expressed in thousands of US dollars per month and are for indicative purposes only. Long lease terms, less credit worthy lessee, return conditions, will vary rentals considerably. Aircraft Rentals courtesy of The Aircraft Value Analysis Co. Ltd. (AVAC) www.aircraftvaluespro.com.

European Specification Turboprop Lease Rates (Dry) US$ ‘000s pm – December 2019
Aircraft Age Rental Trend Analysis
ATR42-300 1985-901990-95 30-3530-45 The ATR42-300 remains very much part of the fleet despite advancing age. The lease rentals can be variable depending on the term of the lease. There have been a significant number of freighter conversions which has enabled the number of aircraft on the market to be kept at low levels. The age of the aircraft though is advancing and this is an issue for those seeking reliability. The issue of corrosion will require higher levels of maintenance and the electrics do not necessarily have the reliability of todays aircraft but then the lesser complexity of the systems may be a bonus. The issue of storage is a concern given that there are a number lying idle.
ATR42-500 1995-012002-082009-12 45-6055-6560-70 The -500 is of an age when a number are being released onto the used market. There are many in storage – perhaps as many as 20 – which is a concern given the limited number that were produced. While some of these are transitioning others simply do not have an end-user in sight. The lease rentals of the -500 can therefore be variable depending on the needs of the lessor. There is always demand for a 50 seat from a number of sources particularly those seeking to replace earlier models. The rates have held steady but the gradual age related decline is inevitable. The market for the type is expected to remain steady in the coming years although the rates for the youngest will continue to converge on the oldest.
ATR42-600 2012-19 65-135 The -600 may not have sold in the numbers of the -600 but there remains very much a place in the market for the smaller offering. The aircraft can be used for a multitude of operations and can be more efficient than a ferry. There are none in storage which is an indication of the popularity of the aircraft and a number of fresh orders have emerged. Operators of the 50 seat turboprops can be extremely price sensitive and as such the acquisition of a new turboprop is not an option particularly if the efficiency improvements over the earlier vintage aircraft are nominal. With the -600 being the only 50 seat type on the market – at present at least – there is something of a captive market for those wishing to acquire a more modern aircraft to replace an earlier generation.
ATR72-200 1989-96 30-40 The -200 is of an age that will inevitably see a number on the market at any one time although of course the conversion to freighter has played an important part in keeping availability down to manageable levels. The operator base is still diverse but it must be expected that operators will increasingly seek a replacement in the coming years. The depth and breadth of the operator base is such that a lease is possible but even the youngest is now over 20 years of age. Lessors that lease the type include ATR as well as NAC and Elix Aviation Capital. Although there are a number of freighters on the US register, the majority of passenger configured aircraft are located outside of North America as there are to some extent, spheres of influence.
ATR72-500 1998-022003-12 45-6050-90 The -500 is in storage in relatively large numbers – some 50 are indicated as being parked. Some of these will be transitioning between operators and will be in essentially short term storage but there will be others that are taking time to place aircraft. This means that there is some competition and this could be seeing lower rates depending on the circumstances of the lessor. The -500 offered lessors with a type that had widespread appeal to a range of both first and second tier operators. With a desire to find more lucrative markets, the -500 was seen as overcoming the concerns associated with remarketing, excessive management time and credit overview. NAC and ATR are among the lessors of the aircraft although AVAP, Castlelake, Aergo Capital, Investec, Injet Leasing and Solenta Aviation also feature. A total of 365 -500s were produced which given the limited demand in some years, represents a success.
ATR72-600 2011-19 70-170 The -600 is being produced in consistent numbers which is a positive but the age of the aircraft means that there may be some coming onto the market but not at present. However, ATR and the lessors have been proactive in reducing the previous surplus to virtually zero which has had a beneficial effect on lease rentals – at least from the perspective of the lessors. The aircraft is leased to a wide range of lessees by a number of lessors including 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 depth and breadth of the operator base is notable. A production freighter has now been launched which may affect demand for post production conversions of the -600 going forward.
Beech 1900C 1983-87 15-25 The market for the 1900C is always sporadic. The versatility if not the interior comfort of the 1900C endeared the type to many operators but the market has moved on. The type is more suited to traditional financing rather than leasing and the price is sufficiently low as to allow cash purchases. Indeed, the cost of the 1900C is lower than the price of an average house in some countries although the comfort levels will be significantly less.
Beech 1900C1 1987-92 10-30 The 1900C1 introduced slightly better performance but comfort levels were still largely absent. Rentals have remained a constant for many years though a straight purchase is perhaps preferable for many operators.
Beech 1900D 1991-01 20-30 There may be no 19 seaters being produced today but that means operators needing such capacity have to go to the used market and this has kept demand relatively strong. There are always a number on the market and even more in storage. The 19 seat market may not be high profile but it is indispensable for so many operators although of course the King Air, with its slightly lesser seating, is an option for those that require a more modern aircraft. The lease rentals for the Beech 1900D are less relevant given the more common financing arrangements but there is still a place for the lease. The short sector lengths mean that the fuel component of direct operating costs is limited ensuring that there is little appetite for paying a premium for a new product. Any lessor will be looking at the longest possible lease. The standup headroom at least for those under six feet is a bonus on such a small aircraft.
DHC6-300 1969-751976-88 40-5550-75 The aircraft is essentially a bus with wings. Day in day out the aircraft provides vital service for operators for which there is little or no alternative. The type even lands on beaches when the tide is out or can be used as a floatplane for interisland hopping. As long as the aircraft is well maintained the aircraft has provided the best return of any commercial aircraft. There is still the possibility of a commercial operating lease but these will be few and far between when compared to financing. lease rentals can be variable. The limited utilization of the aircraft and the expansive support network of the type ensures that the aircraft has remained in service despite advancing years. The maintenance burden on the Dash6 is limited with many facilities able to undertake the necessary work. The -400 is selling but is not having an impact on -300 rentals.
DHC7 1977-821983-88 N/A The market for the DHC7 is non existent and has been in such a predicament for many years if not virtually since fuel prices increased above $11 a gallon which is a long, long time ago. The very downtown airports that the aircraft was designed to service had little appetite for such operations. There were few Dash7s ever produced. The aircraft remains very specialist and commercial operations are not relevant. Inevitably most have been scrapped and others have been written off and as such there are very few remaining in service.
Dash8-100Dash8-100BDash8-100Q 1984-911992-961997-01 20-4025-3530-40 The market for the Dash8-100 is variable with some hotspots. The type is sometimes sought as a replacement for earlier models. Whether the aircraft is then leased is more doubtful as direct financing will be more of an option. This is not to say that the type cannot be leased as Castlelake are a lessor as is CIT. Aircraft Leasing Services and Avmax are also lessors as is NAC. There are a number on the market at any one time and this provides for considerable competition although the option of leasing is perhaps not seen as a primary option. The -100 offers PW120A engines, while the -100B is powered by PW121 engines. The Q also has PW121 engines but a restyled interior and a vibration suppression system.
Dash8-200A Dash8-200Q 1992-961997-02 30-4030-40 Bombardier made a number of improvements to the smallest Dash8 variant over the years offering operators slightly more efficiency than the forgoing model. Such is the marginal performance of the smaller turboprops on some routes that the extra bit of power makes the difference. The -200A offered operators the chance to use PW123C engines.
Dash8-300Dash8-300Q 1988-961997-08 35-4545-60 The -300 is an excellent aircraft and production was perhaps prematurely halted although of course orders were becoming hard to secure as a result of the financial crisis and the lack of funding. With Viking now the owners it is possible that there will be renewed interest in the variant but only if the production economics are right. The aircraft is still viewed as very much a viable type for leasing with Aerocentury, Elix Aviation, GECAS, Avmax, Castlelake all participating as lessors to a greater or lesser extent. With the right aircraft to the right lessee, the aircraft can still make money for the lessor. Some 267 -300s of all guises were built before production ceased which is more than a credible number.
Dash8-400 2000-11 50-80 The -400 is of an age – nearly 20 years – and as such availability is an issue. Rates can be expected to be lower. The aircraft is however, still well placed to replace earlier turboprops and in meeting the needs of those seeking to upsize. Just as with the ATR products, NAC and Rand Merchant Bank feature in the lessor list. As the years have progressed more have been placed via the operating lease.
Dash8-400NG 2011-19 70-175 The aircraft is not selling as well as the ATR72-600 by any means but the orders secured at the Dubai air show represent intent from the new owners not to shy away from securing new orders. Production rates are perhaps a quarter of those of the ATR72-600 which may impact the ability to secure discounting from suppliers and in achieving economies of scale. The -400 already offers around 90 seats so it is hard to imagine that there will be an effort to seek a further stretch. The potential for a new engine is very much a possibility which will have an impact on the existing product. The lease rentals of the -400 need to be realistic as should lease rentals for the non-NG fall, then so too will those for the NG.
BAe J32 1988-93 15-30 The Jetstream 32 was once a common sight in the U.S. but no longer. Operators have moved to larger and younger equipment but the type is still able to transition to new operators. BAe were the first manufacturer to recognize the importance of being proactive in the turboprop market and formed Asset Management very early on though it could be argued that this may have been a matter of necessity.
BAe J41 1992-97 20-35 There was always a lack of optimism and vitality when it came to developing a new aircraft or variant. BAe tended to dither which in some cases meant the opportunity for sales was lost with the competition winning. But of course the 30 seater was a difficult market although Embraer would not agree given the demand for the Brasilia. There were only ever 104 sales and most are being advertised on the basis of a lease rather than a direct sale.
BAe ATP/J61 1988-93 30-45 The ATP is another case in point. The aircraft arrived too late and did not feature the efficiency of the ATR72. The conversion to freighter has been a positive but this means that there are fewer available for those wishing to build a passenger fleet. With even fewer sales than the J41, the aircraft was always going to have a checkered history. The aircraft is of a vintage which makes retirement all the more likely.
Do328 1992-01 20-30 Lease rentals are at perhaps at levels that prevents further falls. There are a few being advertised for lease but this will not prevent variability in lease rentals. The Do328 still has much to commend it in terms of utility for some operators but again the aircraft is more likely to be acquired via traditional financing than a lease.
EMB110 1980-89 10-25 The aircraft is more likely to be bought outright than leased. An excellent aircraft for those that need a no-nonsense 19 seater capable of dealing with both good runways and bad airstrips. Getting from A to B is the main concern with comfort levels of lesser importance. The ability to maintain the aircraft easily and fix problems is a prime consideration for operators.
EMB120 1985-931994-99 15-2520-30 The age of the aircraft is a concern and there are always a number in storage which continues to make it a buyers market. The aircraft is a good aircraft still but there can be considerable variation in terms of condition. A premium will be willing to be paid for a quality aircraft. The lease rentals for the type may not be high but with such stability comes reassurance of some return. Maintenance and cabin refurbishment costs are contained.
Metro III 1981-91 <10-25 A big money earner it may not be but placed with the right operator it can generate profit without too much management – or risk. The Metro III has a long heritage and this particular variant still has considerable attraction for financiers. There are some niche organizations that can still make a living from leasing the aircraft.
Metro 23 1992-99 20-30 The market for the 19 seater is inevitably focused on used aircraft because of the absence of production of new units for nearly 20 years. The Metro 23 offers operators needing 19 seat capacity an efficient product even if customers may not enjoy the comforts that are provided in larger aircraft. The problem for the 19 seaters is the load factor – a single passenger can make the difference between profit and loss of a specific flight and it only needs the cancellation of a few flights due to technical problems for an operator to consider alternatives.
Fokker 50 1987-96 30-35 There are a surprising number of lessors still involved in the Fokker 50 but as with any older aircraft, there has to be a recognition that the aircraft is very specialist and that management time can be greater than for other more mainstream types. The aircraft has the ruggedness to cope with a variety of demanding operational scenarios. The aircraft continues to have its advocates with Largus Aviation, Aerocentury, AFT and even Bombardier being listed as lessors.
Saab 340A 1984-89 20-30 The number on the market is always a concern. While it may seem that this would inevitably lead to a reduction in lease rentals the lessors have returns on investment that cannot be exceeded. This ensures that lease rentals are above a certain level. The Saab 340B and B+ are the more sought after but even for these variants there are always some available. Some are being advertised as part out candidates. The competition is intense and therefore lease rentals are not expected to rise.
Saab 340B 1989-96 25-40
Saab 340B+ 1995-99 30-40
Saab 2000 1994-99 30-45 Jetstream Aviation Capital, Rockton and NAC are listed as lessors of the aircraft indicating that the type still has some attraction for lessors although some are in storage. The aircraft is more suited for non-commercial operations.
Commentary reflects change from the last update to Turboprop Rentals of September 2019.

 

 

 

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