Values of turboprops have been exposed to lesser value volatility than the jet sector, but the decline over the last year is still evident, more particularly for the older variants.

The development of the Dash8Q-400NG and the ATR72-600 has not represented major changes to existing models but they have prevented the incumbent types from maintaining absolute stability.

The introduction of all new types remains in the future. A decision on the part of the manufacturers to build a new aircraft requires a conservative view of fuel prices to ensure that the type has the ability to offer suitable economics in a variety of market conditions.

As the structure has changed once more, from regionals feeding the mainline carriers to greater independence, operators have needed to place operating economics higher than passenger preference. The structure of the turboprop market has also expanded beyond normal boundaries such that there is appetite from new market players in new regions.

There continues to be activity in the market with Nordic Aviation Capital acquiring some ATR72-500s from ATR. Nordic Aviation Capital has an extensive turboprop fleet of some 120 turboprop aircraft and has sold and leased aircraft to a number of carriers in recent months. Four ATR72-500s were acquired from Alitalia and has concluded a sale and leaseback of four Dash8Q-400s with FlyBe. Three ATR72-500s were also sold to Borajet.

The turboprop sector is seeking to move away from the older types built in the 1980s and move onto more efficient equipment. The higher price of fuel has made the turboprop the aircraft of choice on many routes even if passengers may prefer jets. For the predecessors of the ATR42-500, ATR72-500 and Dash8Q-400, the previous lack of availability has been replaced by much more choice. The move to larger capacity equipment is also evident as a means of reducing unit costs.

The issue of fuel efficiency is important but only in terms of determining whether to operate a regional jet or a turboprop. Longer sector lengths will favor the jet while shorter sectors will benefit the turboprop. Once the decision to acquire a turboprop has been made, because the fuel component of direct operating costs is more limited, the relative differential in operating costs between turboprops is more limited, making it less of an imperative to acquire new aircraft. However, a change in the nature of operation in terms of demand and route structure will likely require the acquisition of a different turboprop. The appetite to change equipment is more limited.

The listing of current and future market values is based on the year of build. The essential assumption, following ISTAT Market Value guidelines, is that the aircraft is being sold as a single unit and between a willing seller and willing buyer for cash. The high and low figures for December 2009 current values represent adjustments for offer and sale prices, financing arrangements, specification differences, maintenance status and condition. These are not absolutes and distressed sales as well as sale and leaseback transactions may fall outside the figures indicated.

The future market (not base) values - three and seven years hence from December 2009 - are expressed in current dollars, are based on the mid case current value, and include an adjustment for inflation that varies on an annual basis. The figures are for guidance only and are not intended to reflect actual recent market transactions - assuming that any exist.

Rather the values represent the considered worth of the aircraft tempered by the prevailing market conditions. A subjective aircraft rating is also indicated, reflecting the relative suitability of the type for asset based financing in the prevailing market conditions and in the short to medium term. The values reflect aircraft based on a U.S. specification.

Paul Leighton (pleighton@aircraftvalues.net) is also founder and managing director of the Aircraft Value Analysis Company, a UK-based company that specializes in future value forecasting. AVAC was specifically formed in 1991 to provide independent advice regarding current and future aircraft values, and the factors that affect them, to the air transport community.
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