ATR deliveries fall 9% in ’16 as demand slows

New orders drop by more than half

TOULOUSE: The world’s largest commercial turboprop maker, Franco-Italian ATR, said yesterday that deliveries fell 9% last year as demand for regional aircraft slows in response to a weakening global economy.

Deliveries fell to 80 aircraft from the previous year’s 88, a record performance that ATR had originally hoped to repeat in 2016, and the first step backwards in deliveries since 2010.

“They are a little less than we expected a year ago,” recently appointed ATR chief executive Christian Scherer said.

“That reflects demand that has considerably softened in aviation in general, but the smaller segment has a tendency to react more violently to market fluctuations,” he said.

Scherer said some customers had delayed taking aircraft, the latest sign of vulnerability as the aerospace cycle turns lower.

Orders for new ATRs dropped by more than half to 36, their lowest level since 2009 and deepening a slowdown in orders that began in 2015.

The backlog of aircraft sold but not yet delivered fell 18% to 212, just under three years of production.

Revenue at ATR, co-owned by Airbus Group SE and Leonardo SpA, fell 10% to $1.8 billion.

Scherer said ATR still contributed healthy margins, but did not give details.

Once obscured by the jet age, turboprops have seen a six fold rise in deliveries since high oil prices and reductions in cabin noise restored their popularity in the middle of last decade.

Manufacturers say they are more efficient than jets on short routes, especially when oil costs rise. But recent demand has been hit by economic malaise and the 201415 oil price slump.

Now that oil is rebounding somewhat, ATR believes demand will gradually pick up, especially as economic development reaches isolated markets. Some 100 new routes open each year.

Scherer said there was room for turboprop demand to grow in the United States, where ATR is talking to one carrier and where dozens of regional jets have been idled, and in China, where the focus of growth is moving away from the main cities.

For now, ATR has trimmed its ambitions for future deliveries, while Canadian rival Bombardier Inc is shedding costs.

“We are stabilising the output right now in the 80s and that is a very decent cruise altitude for our company against a turboprop market that ... is approximately 100 a year,” Scherer said.

A year ago, his predecessor at Toulousebased ATR had said it alone aimed to reach 100 annual deliveries in coming years.

ATR outsells its main competitor Bombardier and the upcoming MA700 from China in the market for turboprops, which is part of a market for planes up to 90 seats, also served by small jets.

Scherer said on Friday that a deal with Iran to purchase 20 short-haul passenger aircraft would be signed soon after the two sides concluded talks.

“We have concluded the negotiations and we should sign the contract imminently,” he told Reuters.

Some Iranian media quoted ATR officials as saying on Friday that the deal had been signed.

ATR in February reported preliminary orders from Iran for 20 twin-engine turboprop ATR 72-600 aircraft.

Iranian officials said in December the contract for 20 planes was worth $400 million.

Iran signed contracts with Airbus and American planemaker Boeing Co last year to purchase around 180 jets.