ATP Lease Rentals Sustained By New Conversions

The ATP market is showing signs of improvement albeit through conversion of passenger units to freighters. The market for the ATP has experienced considerable problems over the years, owing to a limited operator base and a preference for the Dash8-400 and ATR72-500. However, as is the case with other...

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The ATP market is showing signs of improvement albeit through conversion of passenger units to freighters.

The market for the ATP has experienced considerable problems over the years, owing to a limited operator base and a preference for the Dash8-400 and ATR72-500. However, as is the case with other turboprop programs such as the ATR, the appetite for freighter use is allowing lease rentals to stabilize.

BAE Systems Regional Aircraft announced long-term leases with UK freight carrier Atlantic Airlines, for a further six ATP Freighters. This will take the Atlantic fleet to 11 aircraft. BAE regional have 32 ATP aircraft in their portfolio while another 27 are owned by other companies. Of the 32 BAE aircraft, 17 have already been converted to freighters with another three due to be converted. These aircraft have a Large Freight Door (LFD) allowing the carriage of pallets and containers. Another five BAE aircraft are E-Class bulk freighters. Of the remaining passenger aircraft, three are on long-term lease to SATA while another three are in storage. Of the remaining 27 non BAE aircraft, a further two are already fitted with the LFD while another 19 are converted or committed to the E-Class bulk freighter conversion program.

Consequently a significant proportion of the fleet has already been converted to freighter, reducing the number of passenger examples on the market by a significant amount. Of the total 59 ATPs in, or available, for commercial service, 41 are already serving the freight sector. This results in very few opportunities for future conversions. Operators of the ATP freighter, apart from Atlantic, include First Flight Couriers and West Air Sweden.

The list price of incorporating the LFD is $750,000 and the conversion requires some five months. The E-Class freighter, if undertaken separately, takes a further three months. The desired lease rental for an E-Class freighter approximates $45,000 per month plus reserves and a contribution to the E-Class conversion. A fully converted ATP with a Large Freight Door will see a BAE seeking a rental of $60,000 per month plus reserves.

The demand for the ATP and other turboprops stems from the better operating economics in an era of high fuel prices. Horizon Air of the U.S. is contemplating moving to an all Dash8 fleet, disposing of its CRJ jet fleet. In 2007, ATR recorded a total of 113 new orders as well as options for a further 26 units. Of the 113 orders, 74 were placed by new customers for the type, underlining the continued expansion of the customer base. With ATR delivering only 44 aircraft in 2007 the new order intake is resulting in an extension of the backlog. However, ATR expects to deliver 60 new aircraft in 2008 and is seeking further rises in the coming years in anticipation of sustained demand. The turnover of ATR has doubled since 2005 and increased by more than 50 percent for 2007 compared to the previous year.

However, the problems being encountered by Bombardier over the withdrawal of the SAS Dash8Q-400 fleet continues to overshadow values for the type. At the time of the withdrawal of the type, values for the -400 fell by some 10-12 percent, more due to the perceived influx of units into the used market than as a result of concern over any design issues. Values have yet to improve.