Regional Aircraft Manufacturers Pick Their Target Markets
Regional aircraft manufacturers are once again facing a changing landscape. The early 1990s set off a boom in regional jets that kept them busy, but that boom has gone bust. And now the manufacturers have to pick which way to go.
I've been at the Regional Airline Association convention for the past couple of days, and one consistent theme is that turboprops are coming back with a vengeance -- but not everyone agrees that's the right market segment for carriers to focus on.
Bombardier (BBD.B) started off its press briefing by saying that the 60-to-99 seat market will need 6,900 aircraft by 2028, more than triple the 2,100 that were flying in 2008. Of those, it expects a full 40 percent to be turboprops.
Bombardier's focus is on that larger turboprop market (along with the 100+ seat jet market), which it addresses with its 76 seat Q400 aircraft (and possibly a stretch version some day). I asked about the outlook for North America, since this airplane hasn't really made as many inroads in the U.S. as it has elsewhere. Bombardier officials seem bullish. They cited Continental (CAL) contracting with a regional airline to replace some 50 seat jets with the larger turboprops, and they hope to see other airlines doing similar things.
But when it comes to smaller aircraft, they aren't interested. They have a program to help extend the lives of existing smaller Bombardier props, but that's it.
ATR, a joint venture between French and Italian aerospace companies, on the other hand, sees opportunity in a slightly smaller airplane. ATR provides the strongest competitor to the Q400 with its ATR72, and it just rolled out a fresh new version that stacks up well, but it also has the smaller ATR42 to fill the 50 seat category. ATR is the only company building airplanes in that space at all.
I asked about even smaller airplanes, and was told that while they might work for a company in a developing market with low production costs, it just doesn't make sense for ATR. Besides, they see the 50 seaters replacing many of the 30 seaters out there with its lower seat costs. Like Bombardier, ATR sees a tremendous rise in turboprop interest and expects 40 percent of the regional market to be for props. Ten years ago, they predicted 15 percent, so it's a huge change, and everyone is looking that way.
ATR's view is that regional jets will continue to get bigger. The sweet spot will be for the 100 to 140 seat market for those jets. But turboprops will slide right into the sub-90 seat aircraft category and do very well, primarily on flights of 200nm or less.
So a strong future for large turboprops seems relatively certain, but again, what about those 30 seaters? Saab, a company that hasn't made a commercial airplane in over 10 years but continues to manage a leasing portfolio of its airplanes, says it's not interested in making a comeback. In its eyes, the development costs of a prop between 30 and 90 seats are going to be similar, but the revenue potential is much greater for larger airplanes. So manufacturers won't be focusing on the little guys, and Saab won't be focusing on anything that's not already built.
Saab's view is that we might end up seeing a "twin otterization" of the 30 seat prop market. The Twin Otter is a 20 seat prop that never really found an adequate replacement. Over the years, airlines have fixed up and modified Twin Otters to keep them flying. Now, a manufacturer is looking to put them back into production.
Could this be the fate of the 30 seat prop? It's quite possible since nobody seems to be interested in touching that segment of the market.