Bloomberg News

EADS, Finmeccanica Encourage ATR to Work on Larger Turboprop

May 03, 2012

European Aeronautic, Defense & Space Co. (EAD) and Finmeccanica SpA (FNC), the owners of Avions de Transport Regional, are encouraging the turboprop planemaker to work on plans for a larger model to capture demand for aircraft that guzzle less fuel than jets.

ATR’s 42- and 72-seat turboprops have been in service since the mid 1980s and ATR’s only remaining competitor in that market is Bombardier’s Q-Series capable of carrying 74 passengers. Both Bombardier and ATR have been eyeing a 90-seat version as rising oil prices drive demand for more fuel-efficient turboprops.

After rapid sales in the late 1980s and early 1990s, orders for turbopropeller planes petered as airlines chose faster-and quieter jets. Demand is now surging as higher fuel costs make turboprops much cheaper to operate on short routes.

“We want to encourage ATR to work on plans for developing its future,” EADS Chief Executive Officer Louis Gallois said today at a ceremony to mark the 1,000th delivery of an ATR plane. “Shareholders will take a decision based on priorities of financial and technical resources, and will consider a partnership.”

Air Nostrum, a franchise partner of Iberia, received today’s landmark delivery.

Saab and BAE Systems Plc (BA/)’s predecessor British Aerospace exited the turboprop market. Jet fuel, which is derived from crude oil, today comprises on average between 30 and 40 percent of airlines’ operating costs. A decade ago, jet fuel represented only between 10 percent and 12 percent.

Engine Talks

ATR has fared far better than Bombardier since the resurgence of demand, partly because the Q Series is better adapted for longer routes. ATR’s backlog at the end of last year was 224 aircraft worth $5 billion, boosted by a record order tally in 2011 when the manufacturer won orders for 157 planes, with another 79 options, which ATR CEO Filippo Bagnato today said was an 80 percent market share.

Bagnato, in an interview, said he is currently talking with General Electric Co. (GE:US) and Pratt & Whitney about developing an engine for a larger turboprop. A future plane may be somewhat larger than 90 seats, he added, without being specific.

Giuseppe Orsi, CEO of Finmeccanica, also said he would encourage ATR to move forward.

“Turboprops are no longer considered a niche market; the regional turboprop is expanding and in this aeronautical business, nobody can rest,” Orsi said. “We are listening to customers and closely examining the business case for a new project. We’ll take a decision at the right time.

Bombardier, as of Dec. 31, had 24 firm orders and 118 options for turboprops. The company won just seven turboprop orders in the 11-month period ended Dec. 31.

‘‘ATR is eating Bombardier’s lunch,” said Nick Cunningham, managing partner at Agency Partners in London. “Funny thing is, everyone wrote the market off a decade ago and now people love turboprops and can’t make them fast enough.”

ATR in 2011 delivered 54 planes and had total revenue of $1.3 billion.

To contact the reporters on this story: Andrea Rothman in Toulouse, France at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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