What does Fokker's bankruptcy hold in its wake for regional-aircraft markets and airlines?
Kevin O'Toole/LONDON
FOKKER MAY NOT BE the first aircraft manufacturer forced to quit the market, but it is hard to recall a more abrupt and final exit. It has left airlines and manufacturers alike attempting to calculate how the market will look without its oldest surviving player.
The most immediate problem is for the airlines, which have outstanding aircraft orders the majority of, which will now not be fulfilled. The Fokker assembly plants, now manned by a skeleton staff of 350 workers, are due to complete 15 more aircraft, but that leaves at least another 50 unaccounted for.
The Royal Netherlands Air Force is due to receive the remaining six turboprops for which it has already paid - four Fokker 60 transports and two Fokker 50s.
Fokker also plans to complete two more turboprops for airline customers, leaving perhaps no more than eight orders unfulfilled. The gap should be relatively easy to fill, given a plentiful supply of new and used turboprops seeking homes in what is still a market dogged by over-capacity. If anything, Fokker's departure is likely to ease congestion in the 50-seat market.
Regional-jet orders could be less straightforward to replace. The plan is to complete a couple of Fokker 100s and five Fokker 70s before the factories are finally padlocked. That would leave around 35 orders, mostly for Fokker 70s, unfulfilled.
While there is no shortage of secondhand Fokker 100s available, the 70-seater is too new to have built up a secondary market. The first airline delivery to Indonesia's Sempati Air, was only a year ago and around 30 have been shipped since.
Alitalia has the biggest single exposure on the type. The airline has so far received only four of the 15 aircraft on order and has hopes to take another two over the "next few weeks". The regional jets, being operated by subsidiary Avianova, were a major plank of Alitalia's strategy to win back market share at neglected Italian provincial airports.
The strategy had apparently been working, and Alitalia appears reluctant to abandon a success in its otherwise troubled restructuring.
Larger aircraft appear not to be an option, perhaps leaving Alitalia no choice but to turn to Avro, which narrowly missed out on the original deal with an offer of RJs. What option Alitalia eventually chooses is expected to emerge when its new management team reveals a fresh strategic plan.
Another 12 Fokker 70 orders are held by airline launch customers Sempati and Pelita Air Service, although these deliveries are potentially less critical. Even before its collapse, Fokker had been forced to renegotiate delivery terms.
British Midland has four Fokker 70s still on order and seems to expect to receive a couple of those as it builds its Fokker fleet up to nine aircraft. Chairman Sir Michael Bishop adds that he wants it to grow bigger still.
Negotiations are still taking place as to where the few remaining aircraft may be placed. For those customers who do not get, or want, further aircraft, there is the prospect of at least recovering down payments and possibly damages from Daimler-Benz Aerospace (DASA), where the German group had provided guarantees on behalf of its Dutch subsidiary.
The undelivered orders have a list price of about $1.4 billion and, typically, around 10% of that would have been pre-paid.
Questions also remain over the repercussions for the fleet of some 1,130 Fokker aircraft already in service. Many airlines and aircraft brokers admit that, even before the final bankruptcy was announced, they had faced difficulty in arranging finances for Fokker aircraft, given uncertainty over its future.
The worst fear is that the market for Fokker aircraft could collapse, wiping out in its wake aircraft residual values and damaging the slow, but badly needed, recovery in regional-aircraft prices.
So far, the general view is that there is little cause for panic. "There will be some impact on pricing, but I don't believe that we'll be faced with a massive distress situation with people simply abandoning Fokker products," says Mike Monks, executive vice-president with the Fortis Aviation Group, which has brokered a series of deals on Fokker aircraft.
He adds that, when Lockheed quit the civil-aircraft market - admittedly in a more orderly fashion than Fokker - the L-1011 traded at a discount compared to the McDonnell Douglas DC-10, but prices did not plummet.
The main concerns centre on continued support for the aircraft. The creation of a new Fokker Aviation business, which includes around 950 staff from the customer- and product-support operations of the bankrupt aircraft- production divisions, appears to have allayed some of the fears.
This new unit, which includes the profitable maintenance division (complete with type certificates) and other component-manufacturing operations, stands a reasonably good chance of surviving as a profitable business.
Whether this will be reassurance enough remains to be seen. Aircraft-financing markets can be prone to sudden collapse once confidence begins to ebb.
A further unknown is how Daimler-Benz will handle the leased fleet of 69 aircraft which DASA and its leasing arm, debis, picked up as part of their efforts to keep Fokker afloat in 1995.
It can gain some cheer from the experience of British Aerospace, which faced a potentially worse problem when its own regional-aircraft operation came close to collapse three years ago. The Asset Management Organisation (AMO), which was set up to handle the group's 100-strong leased fleet of BAe 146 regional jets, has since demonstrated that the it is possible to maintain an orderly after-market. Having started out with the prospect of having the bulk of the fleet returned off lease, it now has every aircraft out in service.
Tim Rice, who now heads the newly formed BAe Asset Management (of which AMO is a part), believes that Daimler-Benz can take heart from the precedent set by BAe, provided that customer support is taken seriously. "What we've proved is that, if you provide quality customer support and the right price, the customers are there in any circumstances," he says.
He adds that, in general, Fokker's demise should be good news for the heavily oversubscribed regional-aircraft market. "It's removed an awful lot of new capacity from coming into the market," he says, although he admits that other manufacturers have yet to assess the full ramifications of Fokker's fall. "No clear pattern has yet emerged," he says.
The most obvious beneficiary should be Avro, which has fought hard with Fokker for regional-jet orders. Avro stands to pick up some business from abandoned Fokker customers and will face one less competitor, but the optimism should not be overstressed.
BAe has been maintaining a strict cap on Avro production at around 18 aircraft a year, and with reason. Over-production and the rush to place aircraft at any cost are largely blamed for the business' near collapse. The group has since concentrated on cash deals to blue-chip airlines, with some success.
BAe boasts that, in 1995, Avro scored 33 cash deals and shows no signs of wanting to return to the bad old days of walk-away leases and mounting liabilities.
Where Fokker's disappearance may have a more profound impact is in easing the way towards the creation of a new regional-aircraft consortium within Europe, to sit within, or alongside, Airbus. The ambitions of Fokker/DASA to be at the centre of this consortium had ultimately proved a stumbling block. Also its rival bid to secure an Asian partner had proved embarrassing for Europe as it attempted to compete against the USA, especially in China.
Technically, it is still possible that Fokker aircraft may yet be produced in Asia. Although hopes of finding a buyer being for much of the manufacturing operation are extremely slim, it is not beyond belief that a budding Asian manufacturer may decide to pick up the aircraft designs. Rights to use the technology patents, will apparently, be held by the new Fokker Aviation grouping and could perhaps, one day live again.
Source: Flight International
