Last Year, ATR produced 60 ATR 72 aircraft. Bombardier had produced 36 Q400s. 2012 saw ATR selling 115 aircraft (74 firm orders and 41 options), while Bombardier witnessed a sales of 81 aircraft (50 firm orders and 31 option aircraft).
This year, ATR is projected to produce 80 aircraft, almost all being the ATR 72-600. This will widen the gap between deliveries of the ATR 72 and the Q400, in 2013. A sign that the slower of the two turboprops, the ATR 72, is actually racing ahead of the Q400.
Maybe it’s the operating economics of the ATR 72. Or the average regional route lengths suited to its typical missions. Or the large number of operators in a region. Or the access to proximate training facilities. Or the rise of the developing nations while the developed saturate.
The aviation market in Asia, especially South-East Asia, is booming, in contrast to slowdowns and downsizing in Europe and the United States. In the February of 2013, ATR won an order for upto 36 ATR 72-600s, from Malaysia Airlines (MAS). Prior to that order, MAS had ruled out the ATR 72-600 series, on the grounds that there was no -600 simulator in the area. Says ATR’s CEO Filippo Bagnato, “In the last five years, Asia-Pacific has accounted for 50% of sales; so it is quite an important market for us”. So important is the market that ATR, in December, set up a ATR 72-600 training centre at Singapore, just because one customer demanded it.
What resulted in the ATR epidemic in Asia, particularly South East Asia?
The rise of the South East, Average regional route lengths, superior operating economics, Aggressive Sales, local availability of ATR type-specific qualified pilots and engineers, Luck #1, and Luck #2.
The Rise of the South East.
Says Neil Dave, Consulting Analyst, Aerospace & Defense, Frost & Sullivan Asia Pacific, “Many ASEAN countries currently lack comprehensive and well developed ground transport infrastructure and countries in these regions are divided by vast seas, therefore there is a demand for a well-knit, flexible air-transport system,” said Dave.
“Also, with the increasing popularity of air-travel as mode of transport, there is a rise in demand for low cost travel among countries in the ASEAN region which are not connected,” Dave continued.
Quoting a CAPA report, “The continued strength of the economies in ASEAN, led by booming Indonesia, and the continued rapid rise of the region’s middle class should ensure another big year of traffic growth for Southeast Asian carriers – particularly LCCs and, to a lesser extent, full-service carriers.”
Lucky with Route Lengths:
The ATR 72 is typically packed with 68 -72 passengers. Air Dolomiti in Europe flies its -72s with 66 seats, while Jet Airways (South Asia) has 68 seats, and this number can easily rise to 70-72 seats for South East Asian operators, thanks to the average height of the average male in the respective countries (Germany: 5′ 10″, India: 5′ 5″, Indonesia: 5′ 2.2″), which allow for a lower seat pitch.
The typical baggage weight limits for ATR flights in the SE-Asian region are 10kg for cabin and 15 kg for check in, totalling 25kg. With the average assumed body weight of 70kg per passenger, this total weight per passenger, including baggage, is 95kg.
With 95kg/passenger and 72 passengers, the payload goes upto 6840kg. Considering headwinds of upto 80kts at the cruise levels of the ATR, the useful range of the ATR 72-600 can be very safely assumed to be 500 NM. (ATR Literature claims 825NM for the -600 “option” [23,000kg MTOW] under the following conditions: ISA – No wind – JAR Fuel Reserves – Typical European Airline OEW)
500NM circles, centred at Mumbai, Delhi, Kolkata, and Bangalore, cover the whole of India.*
A 500NM circle, centred at Manila, covers almost the whole of the Philippines.*
A 500NM circle, centred at Bangkok, covers the whole of Thailand.*
500NM circles, centred at Kuala Lumpur and Kuching, covers all airports in Malaysia.*
500NM circles centred at Jakarta, Surabaya, Makassar, Ambon and Jambi cover most of Indonesia.*
The regional routes are tailor made for the ATR 72-600. Luck #1.
*Does not consider terrain and elevated airports beyond the performance limits of the ATR 72.
The ATR 72 is less expensive to buy (by list price, though the heavy market demand for the type may make Bombardier offer the Q400 for lesser), less expensive to operate (the Q400 consumes almost 30% more fuel than the ATR 72-600), and due to its simpler design and systems, has a very high dispatch reliability.
The lower operating costs results in a lower breakeven load, of around 35 passengers, which is about 6 to 10 passengers lesser than the Q400.
ATR and Airbus share the same parent company: EADS. The not-spoken-of fact is that if you buy an ATR aircraft, you get a good deal on Airbus airplanes. And vice-versa. On top of this, ATR’s sales team is comprised of an aggressive one, that can help with support from European export credit agencies. Further, ATR goes out of the way to secure a customer.
Bombardier is milder. “The aircraft sells for itself” is the attitude of key sales personnel. Plus, Bombardier has two nearly competing aircraft under its brand: the Q400, and the CRJ700. Both are in the 70 seat category, and have similar range. Bombardier, and the customer, are easily confused.
Bombardier, unlike EADS, does not, as yet, offer a comprehensive product line. The yet to fly C-Series will be Bombardier’s first single aisle mainline solution, which will well complement the Q400. But Bombardier still lacks the entire product line and capacity that would be needed for domestic operations: products the size of the A321 and A320.
Local availability of manpower and training facility.
There are only 5 operators of the Q400, in 4 countries of Asia. ANA and JAC in Japan, Air Niugini in Papua New Guinea, PAL Express in the Philippines, and Spicejet in India. There is no abundance of Asian Q400 pilots and engineers.
Although South and South-East Asia is teeming with ATR type pilots and engineers, the demand for the type is so high that there is a shortage of such qualified crew. This is where luck#2 plays a role.
ATR has one ATR 72-600 training centre at Singapore, which will help significantly reduce the costs of training and sim-checks.
There are ATR-type-rated pilots in Europe who could come to SE countries such as Indonesia. Lufthansa’s ATR operation Air Dolomiti, for example, will be downsizing, which will make ATR pilots available. They will need jobs, and they are in good demand.
The curious case of Citilink Indonesia:
Citilink, the low cost carrier of the national flag carrier, Garuda Indonesia, had considered the Bombardier Q400 for its turboprop fleet. It was believed that the Q400 would be chosen, to differentiate from the competition: Wings Air’s ATR 72 fleet.
Arif Wibowo, the CEO of Citilink, said that there were three key considerations to selecting the aircraft type: economic, such the purchase price; financing; and aircraft performance. In the request for proposals, Citilink required bidders to present a plan to provide pilots, and ATR had agreed to this.
Incidentally, after Citilink announced in the December of 2012 that had decided to order ATR 72-600s, it placed a firm order with Airbus for 25 A320neo, in the January of 2013.
The Head or the Heart?
Just because two or more aircraft are in the same class, it doesn’t mean that they’ll perform to the same standard. An airline’s requirement stems from route demand, and this demand defines the desired capacity, and range; Everything else that define the aircraft then play an important role in deciding the best.
In an airframe market, filled with competition, which results in options, the airline is caught between choosing a product that stands out from the other players, and choosing a product that makes the most economical sense. More often than not, what ego-driven airlines look for, is a differentiator, while truly customer focused airlines that are keen on operational viability, look for, is a suitable performer.
Citilink is a low cost carrier; and no 70-80 seat airplane beats the operating economics of the ATR 72-600. The Q400 has a greater performance (greater range, faster climbs, higher cruise speeds), and promising potential (upto 8 more seats on the same flight), but a potential remains a potential until tapped. Forego the 8 seats and you break even with lesser passengers. Look at the typical routes in South East Asia and they are all suited for an ATR 72, as typified by Wings Air, which is set to becomes the largest operator of the ATR 72. Watch the ever increasing fuel prices and you’ll want a less thirsty aircraft.
The Q400 promises more revenue potential, with more seats and an extra flight. But it has to fly more passengers to break even, and more passengers to make the same amount of profit that operating the ATR 72-600 will make. Not many regional sectors bring in 100% loads to tap that potential.
True that the Q400 flies faster, but there must be customers willing to pay for that speed. In a booming aviation environment that is low-cost driven, where the markets are yet to mature and loads are yet to pick up, economics is paramount.
In short, in most of Asia, a low cost carrier can only beat the ATR 72-600 with an ATR 72-600. For everywhere else, like in North America, you have the Q400.
Aditya Chaudhary (@aditya_chaudry) said:
Wonderful Article as always! Great work Vaz! Truly amazing!