ATR is poised to see demand for its aircraft rebound soon on the strength of an inevitable increase in fuel prices and growth in key emerging markets; demand for aftermarket work will follow suit.
The Franco-Italian turboprop maker saw orders hit a record 160 in 2014, boosted in part by oil prices that seemed ensconced at $100 or more per barrel, making its fuel-sipping aircraft extremely appealing. But the oil bubble burst, sending prices down to the $30 range before a slight rebound to current levels of about $40. ATR’s orders followed the descent, totaling just 76 aircraft in 2015.
Delivery totals provided better news, hitting a record 88, five more than in 2014. The company has set a mark of 90 deliveries for 2016.
Major growth will depend on generating momentum in several key markets—notably Japan and China. ATR breached the Japan market in 2015 with an order for eight ATR 42s from Japan Airlines’ subsidiary Japan Air Commuter. It was a major win in the strong Asia-Pacific region that may hold the key to how much ATR can grow in the next decade.
Last year, the manufacturer introduced a 78-seat version of its ATR 72-600, up from the previous maximum of 74. The company is hopeful that the larger variant will win fans in Asia, particularly in markets that are just now seeing their regional services mature.
Aviation Week’s Commercial Fleet & MRO Forecast sees strong growth for the ATR 72 in the Asia-Pacific region, already home to more of the larger ATR models than any other area. Asia-Pacific’s share of the -72 fleet is projected to rise from 39% today to 44% in 2025, with total units going from 329 to 690 in that time—a compound annual growth rate (CAGR) of 8.6%.
The continued strong presence in Asia-Pacific comes without assuming any contribution from one of most tantalizing markets, China. The country’s airlines have fewer than 100 aircraft in the 90-seat-and-under category—a testament to the government’s focus on developing mainline and international business. ATR, which has yet to place any aircraft in China, is not sitting idly by; it opened an office in Beijing last year in anticipation of the Chinese government’s focus shifting to its vast regional market.
“We’ll start small but hope we’ll grow big in China,” ATR CEO Patrick de Castelbajac said earlier this year. “Today there are no ATRs flying in China. But to continue growth, they need regional [aircraft]. We’ll be there.”
At the recent Singapore Airshow, Castelbajac noted that China’s mainline routes “are now sufficiently mature to refocus,” while acknowledging that foreign regional aircraft makers investing in the country are taking a large risk. “China is likely to be all-or-nothing. There will not be a middle ground.”
Latin America should provide more momentum. Shaky economic conditions there cost ATR some business in 2015 as carriers postponed purchase decisions. The ATR 72 fleet is projected to surge from 130 this year to 319 in a decade, a strong 10.5% CAGR.
The rosy fleet-growth outlook for both Asia-Pacific and Latin America translates into similar lofty projections on the MRO side. Aviation Week’s figures see regional MRO demand growing at 8.6% in Asia-Pacific, totaling $7.1 billion, and 9.9% in Latin America, totaling $3.3 billion, during the decade. Asia-Pacific will capture 42% of all MRO demand, while Latin America will hold a 19% share, matching Western Europe for the second-largest.
ATR has dominated in OEM-provided fleet-support packages; about 30% of its total fleet is under “Global Maintenance Agreements,” its flexible support package. Add in the newest models—ATR 42-600s and 72-600s, which have 90% parts commonality—the total jumps to nearly 60%.
ATR has been ramping up its MRO presence in key markets to support its growing operator base. It expanded its spares material pool in Singapore in recent years, and last year set up a warehouse in Sao Paulo, primarily to support long-time customer Azul Brazilian Airlines.
Aviation Week fleet data show 850 ATR turboprops in commercial service, including 609 ATR 72s. ATR added 12 new operators for its new -600 series in 2015, taking it past the milestone of 200 operators in nearly 100 countries.