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Monday, January 22, 2007

Turboprop Rentals Manage To Rise

The lease rentals of turboprops continued to reflect the overall demand in the market and have therefore exhibited a modest rise.

Though fuel prices have eased slightly, the seeming new-found economics of the turboprop continue to be held in high regard. The fuel efficiency of the turboprop over shorter sectors has increased demand once more. Even in the context of global warming the lower operating altitude used by turboprops is seen as less harmful to the environment.

The demand for used turboprops has made it necessary for some operators to seek examples from storage. This has allowed the level of availability to decline to more reasonable levels in some instances. The number of turboprop aircraft listed as being in storage can be deceiving. Sources citing storage levels have failed to take into account those aircraft that are undergoing maintenance or those that have been acquired for freighter conversion but are awaiting such modification. The members of the ATR family, in particular, may show a number as being in storage but a large proportion are awaiting conversion by FedEx. Indeed, FedEx continues to acquire additional ATRs for future conversion.

The popularity of the existing range of turboprop still lies in part to the absence of a replacement. The turboprop manufacturers continue to focus on meeting demand from a number of sources. While improvements are constantly being sought -- for example Kingfisher aircraft have been fitted with an IFE, the first time for a turboprop -- there is still little appetite for the design of a replacement. The losses made when production was in virtually single figures, need to be recouped. The age profile of the existing turboprop fleet also needs to increase. A major upgrade in terms of performance, operating efficiency and even size may however be required within 10 years. The failure of ATR and Bombardier to eventually make a decision will leave the market open to other competitors with the funds and industrial will to produce aircraft of their own. India, Russia and China are prime examples.

Rentals are expressed in thousands of US dollars and are for indicative purposes only. Long lease terms, less credit worthy lessee, return conditions, will vary rentals considerably.

Aircraft Rentals courtesy of The Aircraft Value Analysis Company http://www.aircraftvalues.net.

European Specification Turboprop Lease Rates (Dry) US$ '000s pm -- January 2007
Aircraft Age Rental Trend Analysis
ATR42-300 1985-90 40-50 The -300 represents the initial version of the ATR42. The product life cycle of the ATR42 now runs for more than 20 years, though the improvements, particularly the -500, have been more than modest. At 22 years of age, some jets would be prone to retirement and scrapping and indeed the condition of some ATR42s may suggest a similar fate is lurking. However, the cost of ensuring airworthiness is relatively low for a turboprop, particularly when compared to the alternative of acquiring a new, or nearly new, replacement. While lease rentals of the -300 are not considered to have risen, their stability is testament to their continued attraction. The age profile, as with so many things in life, cannot be reversed or even ignored. The time will come when demand will falter and rentals will suffer.
ATR42-300 1990-95 45-70 The -300 represents the initial version of the ATR42. The product life cycle of the ATR42 now runs for more than 20 years, though the improvements, particularly the -500, have been more than modest. At 22 years of age, some jets would be prone to retirement and scrapping and indeed the condition of some ATR42s may suggest a similar fate is lurking. However, the cost of ensuring airworthiness is relatively low for a turboprop, particularly when compared to the alternative of acquiring a new, or nearly new, replacement. While lease rentals of the -300 are not considered to have risen, their stability is testament to their continued attraction. The age profile, as with so many things in life, cannot be reversed or even ignored. The time will come when demand will falter and rentals will suffer.
ATR42-500 1995-06 85-150 New orders for the -500 have been relatively elusive reflecting the sustained demand for the larger ATR72. The 50-seat, regional-jet market, despite the uncertainty the lack of new orders, has managed to remain at the core of the US regional market, at least for the time being. However, the market for used ATR42-500s is firmly outside of the US and placements continue to be made. Such is the demand for the -500 that lease rentals have edged higher. The fuel efficiency of the 50 seat turboprop in a low-yielding environment has proved itself whereas the 50-seat regional jet may require higher-yielding passengers, greater load factors and perhaps limited competition. Rentals levels are now, perhaps, higher than for comparable 50-seat regional jets which underlines just how much the market has changed over the course of the last two years.
ATR72-200 1989-96 60-110 The ATR72 freighter conversion program is making considerable headway and is serving to soak up those that come onto the used market. The higher capacity ATR72-200 still provides operators with a solid alternative to either other turboprops or, indeed, regional jets. A higher capacity spreads operating costs over a greater number of passengers and, with traffic rising, operators need the extra capacity that the ATR72 can offer. The demand for the type has allowed lease rentals to improve slightly as operators struggle to find capacity in a timely fashion.
ATR72-500 1998-06 110-175 The ATR72-500 has secured a sizeable number of orders during the course of 2006, adding to those placed in the previous year. The economics of the -500 are not in question as operators have moved from regional jets to the turboprop. The placement of the -500 is proving to be very easy with a shortage of such equipment evident. In such an environment lease rentals have enjoyed a slight improvement. The market for the ATR72-500 has improved sufficiently as to allow ATR to increase production to much more economic levels, though pricing on new sales has to remain competitive.
Beech C99 1981-86 <10-15 There can be no escaping the difficulty of the 19-seat market. Age is against many of the original 19 seaters produced in the 1980s. The market structure has increasingly favored larger types and the problem associated with passenger weight only gets worse. The economics of the 19 seater fail to elicit much interest although public service issues represent a means of generating sufficient revenues.
Beech 1900C 1983-87 10-25 The lease rentals of the 19 seater only represent a small proportion of total costs. The incremental development of 19 seaters afforded operators improved economics in the 1980s but then passengers were smaller and fuel prices were lower.
Beech 1900C1 1987-92 10-30 The C1 offered a slight improvement in performance sufficient to keep operators interested in the 19 seater until stand -up headroom offered a new level in comfort. With the availability of 1900Ds, interest in the 1900C1 has waned.
Beech 1900D 1991-01 25-50 The lease rentals of the 1900D may have improved slightly owing to being one of the last 19-seat variants to be produced. The type offers reasonable passenger comfort. Though the market for 19 seaters may be contracting, there remains a need for such aircraft in a variety of markets. The type still has a role to play as operators of predecessors seek replacements.
DHC6-300 1969-75 <10-25 The renewed interest in the Dash6-400 has not placed rentals of the -300 under a cloud, rather the reverse. The -400 proves the validity of the STOL capability of the type and when compared to the -300, the differential in lease rentals will still be sufficient to make the latter seem attractive.
DHC6-300 1976-88 15-40 The renewed interest in the Dash6-400 has not placed rentals of the -300 under a cloud, rather the reverse. The -400 proves the validity of the STOL capability of the type and when compared to the -300, the differential in lease rentals will still be sufficient to make the latter seem attractive.
DHC7 1977-82 <20-30 The DH7 was always something of a gas guzzler and in a period of high fuel prices, the problems associated with the type have only multiplied. The STOL advantage of the DHC7 was never fully exploited by operators, owing to high fuel costs and the ability of other types to use steep approaches and accept lower payloads. Even where STOL is the only option, there remains the difficulty of charging premium fares to cover the cost of having to undertake air-to-air refueling to complete each flight.
DHC7 1983-88 20-30 The DH7 was always something of a gas guzzler and in a period of high fuel prices, the problems associated with the type have only multiplied. The STOL advantage of the DHC7 was never fully exploited by operators, owing to high fuel costs and the ability of other types to use steep approaches and accept lower payloads. Even where STOL is the only option, there remains the difficulty of charging premium fares to cover the cost of having to undertake air-to-air refueling to complete each flight.
DHC8-100 DHC8-100B DHC8-100Q 1984-91 20-40 Though lessees may be able to pick and choose, lessors of the Dash8-100 are not so much in evidence as for other types. The conversion to freighter has not taken off to the same extent as for the ATR series. A large, small-package operator needs to be involved to create sufficient demand as to reduce the number of surplus units.
DHC8-100 DHC8-100B DHC8-100Q 1992-96 30-40 Though lessees may be able to pick and choose, lessors of the Dash8-100 are not so much in evidence as for other types. The conversion to freighter has not taken off to the same extent as for the ATR series. A large, small-package operator needs to be involved to create sufficient demand as to reduce the number of surplus units.
DHC8-100 DHC8-100B DHC8-100Q 1997-01 35-60 Though lessees may be able to pick and choose, lessors of the Dash8-100 are not so much in evidence as for other types. The conversion to freighter has not taken off to the same extent as for the ATR series. A large, small-package operator needs to be involved to create sufficient demand as to reduce the number of surplus units.
DHC8-200A DHC8-200Q 1992-96 25-45 The improved performance of the -200 provides some relief but the capacity of the aircraft remains a drawback.
DHC8-200A DHC8-200Q 1997-02 40-60 The improved performance of the -200 provides some relief but the capacity of the aircraft remains a drawback.
DHC8-300 DHC8-300Q 1988-96 35-55 The rates of the -300 have managed to attract a slight increase as operators are able to contemplate alternatives to the 50-seat regional jets. However, the lease rentals of the -300 are not dissimilar to those of the CRJ100/200.
DHC8-300 DHC8-300Q 1997-06 55-120 The rates of the -300 have managed to attract a slight increase as operators are able to contemplate alternatives to the 50-seat regional jets. However, the lease rentals of the -300 are not dissimilar to those of the CRJ100/200.
DHC8-400 2000-06 115-180 The rentals of the -400 have improved slightly as demand for the type remains strong. Availability on the used market is extremely limited and will remain so for the foreseeable future. Operators are now less reluctant to consider a long-term future for the turboprop even though the progression to larger capacity is non existent.
BAe J32 1988-93 <10-30 The market for the 19 seater remains very difficult even though lessors are trying their hardest to place aircraft. Rentals have been at rock bottom for some time and will not likely show any improvement unless a lack of supply becomes an issue -- something which is not foreseen.
BAe J41 1992-97 20-40 Though the J41 was produced in small numbers there still exists demand from a limited number of operators for such capacity. The lease rentals may not have increased but at least they remain steady.
BAe ATP/J61 1988-93 25-45 Conversion to freighter continues to be a principal source of demand for used ATPs/J61s. With the lack of alternatives, lease rentals may have actually improved slightly.
Do328 1992-01 20-40 The Do328 provided reasonable service for operators but the wider market was far from impressed.
EMB110 1980-89 <10-25 As with most 19 seaters the lease rentals of the EMB110 have barely moved in recent years having fallen by so much. Lessees can still pick and choose their aircraft.
EMB120 1985-93 <15-30 Those quality EMB120s will be able to attract interest but there always seem to be a number to pick from.
EMB120 1994-99 20-45 Those quality EMB120s will be able to attract interest but there always seem to be a number to pick from.
Metro III 1981-91 <10-25 The Metro III, despite its age still has some validity.
Metro 23 1992-99 <15-40 As with the Beech 1900D, the Metro 23 was the last of the 19 seaters to be built and will be more sought after to act as a replacement for earlier 19 seaters. Lease rates may have improved as a consequence.
Fokker 50 1987-96 25-45 The market for the Fokker 50 is very much dependent on aircraft condition. Those in a good condition will attract interest and the indicated rise in lease rentals reflects the demand for robust airframes to replace earlier Fokker F27s.
Saab 340A Saab 340B Saab 340B+ 1984-89 <20-35 Availability remains an issue but with the right experience, aircraft can be placed. The type still has considerable merit in a number of markets.
Saab 340A Saab 340B Saab 340B+ 1989-96 30-50 Availability remains an issue but with the right experience, aircraft can be placed. The type still has considerable merit in a number of markets.
Saab 340A Saab 340B Saab 340B+ 1995-99 35-55 Availability remains an issue but with the right experience, aircraft can be placed. The type still has considerable merit in a number of markets.
Saab 2000 1994-99 40-55 Corporate and other non-commercial users may be willing to pay more for the aircraft as the type continues to seek niche roles.

 

Commentary reflects change from the last update to Turboprop Rentals of September 2006.

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