Andrzej Jeziorski/TOULOUSE
After months of negotiations, ATR and British Aerospace put an end to their Aero International (Regional) (AI(R)) partnership on 3 July with the signing of the official termination documents, retroactively valid from the beginning of the month.
Two-and-a-half year old AI(R) - formed under French law as a Société par Actions Simplifiée - ran aground last December, when the Airjet regional jet programme collapsed over BAe's refusal to share in the programme's development costs of more than $1 billion. AI(R) was originally based on the merger of sales and marketing activities for ATR's turboprop aircraft range and BAe's Jetstream and Avro International Aerospace regional aircraft activities, and plans for joint production based around the Airjet, the failure of which undermined the rationale for continuing the partnership.
Now that AI(R) is no more, ATR has started afresh with a new team at the helm, a new structure and new targets. The recently-appointed chief executive, replacing Patrick Gavin, is Antoine Bouvier. He previously served as the company's general secretary and industrial senior vice-president from 1992 to 1994, returning then to French ATR partner Aerospatiale where he ran the ATR business unit, overseeing the development of the -500 series of the ATR 42 and 72 turboprops. Since last October he has also been a member of Aerospatiale's negotiating team for the restructuring of Airbus into a single corporate entity (SCE) .
The experience should stand him in good stead as ATR itself now heads from an Airbus-style GIE consortium structure, to become a standalone company taking charge of the production functions still held within the parent Aerospatiale and Alenia groups. That process should be complete by the beginning of 1999. Bouvier says that the decision on exactly which of the production activities will be transferred has not been fixed, but the new SCE is expected to grow from around 450 employees, largely in sales and marketing, to a complement of some 1,000 people.
Bouvier insists the divorce from BAe is an "amicable split", citing as evidence the fact that BAe has retained offices at AI(R)'s former headquarters at Blagnac near Toulouse, as well as at the company's Washington site. He adds that the separation was made easier because the AI(R) partnership never required a merger of the partners' finances or financial involvement in each other's programmes.
ORDERS PENDING
"From the marketing standpoint, AI(R) has been positive for the ATR programme," says Bouvier, pointing out that the company sold 54 aircraft last year. The consortium has failed to book any new orders so far this year, admits senior vice-president commercial Alain Brodin, but he insists that several contracts are in the final stages of negotiation. He adds that the bulk of 1997's orders were signed within the space of a few months, arguing that the second half of this year will bring in substantial new business.
The manufacturer's current backlog of around 20 aircraft represents only six months production at current rates, however, and concern has been growing that it could begin to face the same build up of unplaced aircraft that have dogged other regional aircraft builders. ATR denies allegations that there is a large stock of completed "white-tail" aircraft awaiting sale, claiming that production is only undertaken against orders.
The company has delivered around 20 aircraft this year, including machines coming back off lease. While the marketing of new aircraft is obviously a priority, ATR is also now focusing its efforts on the remarketing of secondhand ATR 42s and 72s which have been returned to the manufacturer or taken in trade against new orders. As a result the asset management division is being spun off into a standalone business unit which is likely to be turned into a separate subsidiary. According to senior vice-president asset management Paolo Revelli-Beaumont, the company has drawn on BAe's own experience and recognised the need for a separate used aircraft organisation.
Revelli-Beaumont says the unit will look after the approximately 200 aircraft, out of the 560 ATRs in service, on which the manufacturer carries some financial recourse.The asset management unit deals with the financing of leases on these aircraft when new, and will remarket used aircraft. Revelli-Beaumont admits that it is hard to make money in this field, but it is a good way of establishing a presence in virgin markets which could lead to new aircraft sales in future.
An example of ATR's used aircraft remarketing was the recent delivery of an ex-American Eagle ATR42-300 to Cuba, which will be followed by at least three more aircraft. ATR also recently delivered the first of five ATR 42-300s traded back by Eurowings, to new Polish regional Eurolot.
Eastern Europe is one of ATR's "main targets" says Brodin. Apart from Poland and Romania, ATR aircraft are also flying in Croatia, the Czech Republic, Lithuania and Slovenia. The manufacturer is now laying the groundwork to enter Russia, aiming for Russian certification of the ATR 42 in the third quarter of this year, but must somehow get around that country's punitive import taxes on aircraft before it can take advantage of Russia's "significant potential" as a new market, he adds.
"We are confident that the [overall] regional market will show consistent traffic growth for the next 10-20 years," says Bouvier. The company predicts a market for 4,000 jet and turboprop deliveries in the 40/90-seat class over the next two decades.
"There are two new major factors in the market-[which] have to be handled and understood in parallel," he continues. The first is the arrival of regional jets, which Bouvier believes could in future take about two-thirds of the market, the second is the reshaping of the turboprop industry in the last four years, with the departure from the market of such competitors as Fokker and Saab.
Effectively, the turboprop market has been reduced to a head-to-head competition between ATR and Bombardier subsidiary de Havilland with the Dash 8 family, says Bouvier. Embraer is no longer seen as a serious turboprop contender, since it is putting priority on its jet programmes, like Fairchild Dornier.
How much of the market will go to jets will be determined by regionally-differentiated airline and passenger demands, overall economic conditions and fuel prices, Bouvier believes. Prospects for ATR in the US and crisis-hit Asia, for instance, are limited over the next two years, but the situation in Europe is "more balanced".
"We are now living in a favourable economic climate, which does not put a lot of pressure on [airlines'] costs," says Bouvier. Any worsening of the economy will refocus airline needs on to cost-efficient aircraft, and turboprops remain the most cost-efficient solution on short routes.
ATR acknowledges that the the turboprop market shows little sign of significant growth over the long term. The consortium estimates, however, that there should be room for an average of around 70 new turboprops to enter the market annually over the next two decades. With ATR having ambitions to capture "more than 50%" of this market, it is aiming to deliver around 40 aircraft per year.
ATR will continue to improve its aircraft as far as possible, although it says that the new generation -500 series ATR42 and 72 variants are reaching the limits of turboprop development potential. Aerospatiale and Alenia invested over $100 million in developing these aircraft, which offer 89% spares commonality, and allow pilots to fly both variants on a single type rating.
The -500 aircraft have lighter structures than earlier ATRs, with the notable addition of a carbonfibre composite rudder, which allows useful payload to be raised by 80kg (175lb), and Pratt & Whitney Canada PW127 engines, offering more power than earlier variants and giving the ATR 42-500 a 300kt (550km/h) cruise speed. The engines drive six-bladed, electronically controlled Hamilton Standard 568F propellers.
The cabin has been redesigned with a series of improvements which reduce interior noise to 79dBA near the propeller and 77dBA in the rest of the cabin, without the added maintenance complications of an active noise control system. The ATR 72-500 also offers more seating capacity, with 68 seats compared with the standard ATR 72-200's 66.
Other turboprops such as the Saab 2000 have achieved higher cruising speeds, but ATR is sceptical of the benefits. "We confidently believe that the fast turboprop concept is an oxymoron," says Brodin. "The idea of a turboprop is to be fully cost efficient over short distances. If you go for speed, you lose out on cost-effectiveness." Production of the Saab 2000 was halted only three years after the aircraft went into service and ATR believes that the Fairchild Dornier 328 has sold poorly, being perceived as too expensive.
With the ATR 72-500 certificated at the beginning of 1997, the manufacturer has no plans for a next generation of turboprops. Future project plans remain focused on a jet, and now that BAe has removed itself from the picture, ATR has revived the Airjet family concept, based around a 70-seat aircraft with 58-seat and 84-seat variants.
"It is a clear intention to reactivate the Airjet case, to update and assess the work done with AI(R)," says Bouvier. He admits that with the May revelation of letters of intent from Crossair and Lufthansa CityLine promising a massive 120-aircraft launch order for the rival Fairchild Dornier 728JET family, ATR is now under pressure for a quick launch decision. It intends to take this decision by the end of this year.
Meanwhile, the existing Airjet concept will be presented to potential customers and modified according to their requirements, and ATR will find a new partner to share the risk of the development programme, which Bouvier now estimates will cost about $1.4 billion. This figure seems high compared with Fairchild Dornier's predicted $850 million 728JET family development cost, but ATR points out that its own estimate tends towards the pessimistic, while its rival's may well be overoptimistic.
AIRJET PARTNERS
Senior ATR officials say that the most likely Airjet partners would be Spain's CASA or Brazil's Embraer. In Embraer's case, they say, the prospect would seem to make especially good sense, since the company is looking at a 70-seat programme but cannot stretch the three-abreast EMB-145 any further. Combined with Embraer's existing 30- and 50-seat jet range, the Airjet would complete a regional jet family covering about the same seating classes which Fairchild Dornier eventually hopes to offer. "I don't think Embraer can do this alone," says one ATR official.
The company is considering sticking to AI(R)'s plan of placing the Airjet in a standalone subsidiary established together with its new partner, although the details of the programme and how it could be run remain fluid until the responses from potential partners and the market have been assessed. Bouvier stresses repeatedly, however, that ATR has a future, with or without the jet programme.
Source: Flight International
