Turboprop Residuals Under Threat as Manufacturers Consider Upsizing

Current and future values of turboprops have exhibited comparative stability over the course of the last two years not least because of the envisaged status quo in terms of product line. The move by Bombardier and now ATR to consider larger variants has the potential to weaken residuals of existing products...

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Current and future values of turboprops have exhibited comparative stability over the course of the last two years not least because of the envisaged status quo in terms of product line. The move by Bombardier and now ATR to consider larger variants has the potential to weaken residuals of existing products.

In a period of high fuel prices, the economics afforded by the turboprop continue to be proven. With the majority of orders being for the larger derivatives of the ATR42/ATR72 and Dash8 series, there was always likely to be a trend towards still larger models. However, the pace of change has been dependent on demand. Order quantities may be sufficient to justify the cost of developing a new variant. Customers, more confident of passenger acceptance and of operating economics, are now seeking equipment that provide an alternative to the new generation of regional jets while retaining commonality. The production rate of the ATR is due to increase from the 44 of this year to 64 next year. This will rise further to 80 in 2009 and compares with only 24 in 2006.

The development of the "ATR92" could either be viewed as an interim variant until such time as an all new model can be developed or as a long-term solution. The timing of any stretched ATR will likely be made in the next year or two with service entry in perhaps five to seven years. The ATR72-600, featuring an upgraded cockpit and engines is already slated for service entry in 2010. The "ATR92" would be able to build upon these developments.

The consequence for residual values of the existing ATR72-500 and -600 is likely to be reasonably limited as they are seen more as interim variants. However, the ATR72 and Dash8-400 have become the baseline variants for both models and continue to secure the majority of orders. Should the same occur with the Dash8-400X and the "ATR92" then residuals may be impacted to a greater extent.