CONNECTING THE FUTURE - TURBOPROP MARKET FORECAST 2018-2037 - ATR AIRCRAFT
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CONNECTING
THE FUTURE
Turboprop market
forecast 2018-2037
atrbroadcast atraircraft atraircraft atr atrchina
introduction
The competitive environment of regional aviation is
showing its utmost importance for developing local
economies and territorial cohesion. It not only feeds
hubs, but more importantly, it allows connections to the
world’s regional capitals.
Everyone likes fast and easy trips from a nearby airport.
Not only do turboprops offer the right capacity and
technology, they also reach places where no other aircraft
can go: more than one third of the world’s commercial
airports rely exclusively on turboprops.
As new regions emerge, new regional routes will be
opened and developed. This is another mission at which
turboprops excel.
By efficiently connecting such a large diversity of
communities, with the most limited environmental
footprint, turboprops are revealed as the most efficient
choice to quickly enable and sustain economic
development of many regions.
Looking 20 years ahead requires us not only to study the
past and the world today but also to imagine the networks
that will shape our future.
Christian Scherer
Chief Executive Officer ATR
TABLE OF CONTENTS 06 EXECUTIVE SUMMARY 12 RATIONALE 16 REGIONAL TRAVEL TRENDS 28 BENEFITS OF REGIONAL AVIATION 38 FORECAST BY REGION 56 FREIGHTERS
Executive Summary ExecutiveSummary
Executive Summary
CAPACITY
TRAFFIC GROWTH ROUTES CREATED BY TURBOPROPs
AVERAGE ANNUAL TRAFFIC GROWTH New turboprop routes
ACTUAL Forecast
9%
30% 6%
New 12%
25%
Routes
7%
11%
15% 16%
70%
Existing
network
Africa &
300 Middle East 200 South Asia
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
330 North America
690 China
Latin America
410 & Caribbean
Central Europe,
240 Russia & CIS
440 Asia Pacific 160 Western Europe
+3.2% +4.5% 30% +2,770
of 2037 activity comes potential new
GDP TRAFFIC from new routes routes created
8 9
Executive Summary ExecutiveSummary
Executive Summary
CAPACITY
TURBOPROP DEMAND TURBOPROP DEMAND by region
TURBOPROP Fleet Evolution and deliveries Turboprop deliveries
In-service passenger fleets
4,060 3,020
Growth
1,800
60%
deliveries
2,260
Replacement
1,220
40%
In service
Stay in Africa &
service 350 Middle East
1,040
260 South Asia
350 North America
2017 2037
300 China
Latin America
420 & Caribbean Central Europe,
250 Russia & CIS
350 Western Europe
740 Asia Pacific
3,020
deliveries
Fleet growth is envisioned to account for 60% of
turboprop deliveries in the next 20 years.
Most of this growth is driven by the creation of new routes
as part of airlines’ network development strategies.
630 2,390
The other part relates to the expanded usage of the 40-60 SEATS 61-80 SEATS
turboprop technology in pre-existing markets.
10 11
RATIONALE EXECUTIVE SUMMARY
RATIONALE
ASSUMPTIONS
CAPACITY METHODOLOGY
ASSUMPTIONS FORECAST STREAM
The following assumptions and definitions apply unless
otherwise specified: Aircraft
allocation
ASK: Available Seat Kilometer – seats multiplied by
CURRENT & CURRENT &
distance. HISTORICAL HISTORICAL
GDP: Gross Domestic Product considered in this NETWORK TP FLEET
document at Purchasing Power Parity.
Mature markets: North America, Western Europe, Japan,
South Korea, Australia, Singapore, Chinese Taipei, Hong
Kong, New Zealand & South Africa.
Turboprop in-service fleets are considered in the range of Macro-economic Retirement
20-80 seats in standard configuration. & demographic & conversion
forecast
Network range up to 900 NM ~ 1,700 km ~1,000 mi.
Route size considered: up to 450 daily seats each way per
carrier.
Traffic allocation to all types of existing aircraft categories
from 20 to 200 seats, jet and turboprop technologies.
Deliveries include aircraft currently in-production and TP Fleet
Replacement
launched programs. NETWORK staying
demand
EVOLUTION in service
DELIVERIES
Allocated
to TP
Sources
• ATR Studies and survey
• Flightglobal
• IATA NEW Growth demand
Larger ROUTES
• OAG Capacity
• Oxford Economics
• US Department of Transportation
• US Energy Information Administration
14 15
regional travel trends regional travel trends
FUEL TRENDs upward Higher Fuel Price in Regional Airports
Oil price evolution Difference in fuel price between main
airports and regional airports
Forecast
x2
fuel price
1998
2001
2004
2007
2010
2013
2016
2019
2022
2025
2028
2031
2034
2037
differences
Data: US Energy Information Administration/ Haver Analytics
No difference Average Over 100%
difference difference
Blank: no data +34%
In a context of economical growth, oil price is expected Fuel price is higher in regional airports than in main
to double in the next 20 years, regardless of temporary airports due to higher fuel transportation costs, which
fluctuations. translates to a worldwide average extra cost of +34%.
Fuel price will again be a key decision factor for airlines. Turboprop technology limits airline exposure to this
additional volatility.
18 19regional travel trends regional travel trends
different PROPENSITies TO TRAVEL key GROWTH CONTRIBUTORS
Seats flown vs Wealth per capita TURBOPROP MARKET MECHANISMS
Total seats
Regional seats /
thousand inhabitant Upsizing to larger capacity aircraft
Growth of remaining network
Route creation
2000 2037
+4.5%
1.00 TRAFFIC GROWTH
10,000 20,000 30,000 40,000 50,000 60,000
+3.0%
GDP per capita
2037
2037
+3.5%
0.10
2000 -2.0%
2000
0.01
Advanced
Emerging average
Developing
Advanced
Emerging countries in 2017
Developing
2017 2037
As middle-class and consumer spending increase in Creation of new routes will outpace upsizing to larger
many regions, the propensity to travel will develop - with aircraft, and will contribute 2/3 of total growth for the
new emerging regional markets taking the lead. next twenty years.
It has been observed recently that people in countries
with a strong turboprop presence have a 40% higher
propensity to travel regionally.
20 21regional travel trends regional travel trends
ROUTE CREATION intensifies strong CONTRIBUTION FROM NEW ROUTES
Number of regional routes created Seats flown on routes created since 2002
+33% route creation
period
2012-2017
China
Asia Pacific 2007-2011
excl China 2002-2006
Latin America
& Caribbean
Africa
& Middle East
Europe & CIS
North America
2002-2006 2007-2011 2012-2017
2002 2007 2011 2017
The bulk of growth comes from the Asia-Pacific region.
Europe is once again creating routes while simultaneously
growth in China is gaining momentum.
58%
of the current regional
21%
of current regional seats
network has been created come from routes created
in the last 15 years in the last 15 years
22 23regional travel trends regional travel trends
New regional markets TURBOPROP: the proven optimal
are yet to emerge choice for short haul
Regional networks maturity stage Share of Turboprop vs Regional Jet
100%
Rest of the world
World average
United States
75%
50%
330 NM
25%
Maturity
stages
0%
Regional aviation activity
Early stage Mature 100 200 300 400 500 600 700
per inhabitants
(NM)
Blank: no data
Although some are very well populated, many countries
still have poor regional connectivity, contrasting with Turboprops are airlines’ preferred choice worldwide for
mature European and North American markets. distances up to 330 NM.
Leveraging turboprop advantages (cost efficiency, access There is a substantial fleet of legacy regional jets in
to challenging airfields), these countries will contribute the United States leading to the contrast between this
to the bulk of market growth while developing the country and other regions.
economies of secondary and tertiary cities.
24 25regional travel trends
regional travel trends
Turboprops: the way to reduce
TURBOPROPs ARE MORE SILENT
regional aviation emissions
Potential emission savings by replacing EFFECTIVE PERCEIVED NOISE IN DECIBEL (EPNDB)
regional jets with turboprops
TP Similar size RJ
tonnes
11%
Chapter 3 limit
(1978)
Up to of
876,000 overall regional aviation -10dB
emissions saved
Chapter 4 limit
Current generation (2006)
regional jets
-7dB
1,095,000 Chapter 14 limit
9dB margin (2020)
Future noise limit?
Future regional
jets (EIS 2021)
1,168,000
CO2 annual savings by replacing
jets on routes up to…
400-500 NM Today’s environment noise regulations are getting more
300-400 NM and more stringent.
949,000
200-300 NM With their remarkably low noise signature, turboprop
Up to 200 NM aircraft are the benchmark with a strong margin to 2020s’
ICAO standards.
Turboprops’ low noise footprint allows operations at
airports located in city centres that impose strict sound
levels, like London City or Stockholm Bromma.
Assuming all short haul flights operated by regional
jets today are replaced by modern turboprops, 11% of
overall regional aviation CO2 emissions could be saved.
Turboprops are
These 4,100,000 tonnes of CO2 overall regional aviation already meeting
emissions are equivalent to the annual absorption of future standards
200,000,000 trees.
26 27benefits of regional aviation
benefits of regional aviation Executive Summary
CONNECTING LOCAL COMMUNITIES AIR CONNECTIVITY SUPPORTS
CAPACITY LOCAL DEVELOPMENT
Airports SERVED exclusively BY regional Economic Impact of Regional Aviation
aircraft
50%
Airports relying
More More
Social Development Employment
exclusively on
regional aircraft
3,800+
commercial
airports
36% +5% +6% +8%Foreign
Airports relying
exclusively on Tourists Regional GDP Direct Investment
turboprops
Many communities rely on regional aircraft to connect
to other countries and regions in the world. Through an
adapted technology and capacity, turboprops efficiently
answer this essential market need. +10%
Turboprops are the benchmark as they provide specifically
FLIGHTS
adapted economics for the average worldwide route Generates
length of 300 NM.
Furthermore they ensure accessibility to all airfield Either through tourism development or by establishing
profiles and are the lifeline of many communities. business, interlinking secondary and tertiary cities allows
every community to be connected and benefit from
world economic growth – a key component of sustainable
development.
30 31benefits of regional aviation benefits of regional aviation
Executive Summary
Turboprops complement VALUABLE TIME SAVING OF
CAPACITY
ground transportation AIR CONNECTIVITY
Different solutions for different schemes Average time benefit of air vs ground
transport
From surface ... ... to air transport
Manila Manila
1h30
1h30
10h
Kalibo
Kalibo
11h30 1h30
from dense air traffic... ... to high speed train
with large capacity and regional aircraft
Paris Paris
Average difference between flight-time
1.5h and ground transport time over all city-pairs >10h
Nantes Nantes
Blank: no data
Turboprops provide a valuable travel solution which Depending on ground infrastructure and/or geographical
qualitatively complements any alternative mode of constraint, the time saved flying regionally is highly
ground transportation. valuable to travellers.
Not only turboprops provide travelers accustomed to Moreover, regional air transport is a quick enabler of
slower modes of ground transportation with the comfort economic development as it requires shorter lead-time
and convenience of extra speed, but they also maintain to implement connectivity.
essential air connectivity on previously dense routes
where flows have reached levels that allow high speed
trains to ‘dry out’ air traffic.
32 33benefits of regional aviation
Executive Summary
benefits of regional aviation
Lower competition on
CAPACITY FIRST MOVER ADVANTAGE
regional routes
COMPETITION FORCES VS TRAFFIC VOLUME Yield difference in regional routes
depending on number of operators
Average
number
of carriers
+3%
Trunk routes
-38%
Regional routes
-44%
Route
opening 1 operator* 2 operators 3+ operators
20 140 260 380 500 620 740 860 980
Seats flown
daily each way *
after one year since route opening
Emerging markets
World average
Europe
North America
Regional networks tend to be operated by fewer carriers Opening a route offers a dominant competitive position
than routes with larger traffic volume. that eventually leads to a higher yield when the route is
mature. However, the entry of new competitors has an
This “blue ocean” provides a wealth of opportunities to adverse effect on total revenues.
get away from the cash-intensive competition on main
routes Turboprops, as typical first movers, offer higher rewards
for exploring new routes and developing regional
networks.
34 35benefits of regional aviation benefits of regional aviation
Executive Summary
AFTER ROUTE OPENING: Advantages of high frequencies
DIFFERENT GROWTHCAPACITY
PROFILES with turboprops
AVERAGE ROUTE GROWTH PROFILES Leveraging schedule flexibility
MAIN CLUSTERS BY GROWTH POTENTIAL
(% of total new routes)
High (8%)
Medium (11%)
Weekly
Intermediate (20%) Flexibility
flights Low to Intermediate (26%)
Low (30%) Higher yield
56
Protect
the market
49
High frequency Low frequency
42
Small module Large module
Growth potential
35
28
21
14
Operating high frequencies with turboprops offers a
competitive advantage to airlines:
7
• Adapt to peaks of demand with a flexible offer and
strategic utilisation of slots
0
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 • More choices for business passengers, which allows
20% higher yield than low frequencies
• Protect the market by blocking the entry of new
operators.
There are various patterns of new route development,
ranging from fast growing routes likely to welcome
single-aisle capacity within a few years, to flows whose
growth is capped due to more limited traffic potential.
36 37FORECAST by region Executive Summary
FOCUS ON Africa & Middle East
CAPACITY
Turboprop 70
Turboprop 50
260
90
350
DELIVERIES
+3.5% +4% 300
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
TURBOPROPs in service
The Africa & Middle-East region is the largest and most
versatile region, but the poorest in terms of road and
460 railway infrastructure.
300 Many ageing 30-50 seater aircraft are costly to operate
and need to be replaced.
Modern turboprops are the easiest way to an immediate,
safe and affordable regional connectivity, which answers
2017 2037 accessibility challenges and supports local economies.
40 41FORECAST by region Executive Summary
FOCUS ON North America
CAPACITY
Turboprop 70
Turboprop 50
240
110
350
DELIVERIES
+1.7% +2.2% 330
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
TURBOPROPs in service
With many inefficient 50-seater jets left over from the 90s
555 and the subsequent average capacity growth, US regional
aviation has failed to maintain many air links. Modern
430 turboprops can restore connectivity by replacing ageing
30-50-seaters and providing an efficient alternative to a
5-6 hour drive.
In Canada, with their enhanced performance, modern
turboprops will access more communities and extend
2017 2037 the essential air service required.
42 43FORECAST by region Executive Summary
FOCUS ON Latin America & CAPACITY
Caribbean
Turboprop 70
Turboprop 50
350
70
420
DELIVERIES
+2.4% +13% 410
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
TURBOPROPs in service
525 Turboprops are a proven strategic component for airlines
to offer access to an extensive network in Latin America
at suitable economics. Growth will come from connecting
230 communities to economic recovery.
Essential for the tourism and socio-economic
development of the Caribbean, turboprops will remain
2017 2037 the island hopper benchmark for sustainable air links.
44 45FORECAST BY REGION EXECUTIVE SUMMARY
FOCUS ON ASIA PACIFIC
CAPACITY
TURBOPROP 70
600
TURBOPROP 50
140
740
DELIVERIES
+2.8% +4.3% 440
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
1015
TURBOPROPS IN SERVICE
590
Route creation will accelerate and drive growth,
especially in South East Asia, where air connections will
offer a faster and more efficient choice to travelers.
Many ageing and out of production turboprops are
still operated in mature countries and will have to be
replaced.
2017 2037
46 47FORECAST by region Executive Summary
FOCUS ON South asia
CAPACITY
Turboprop 70
Turboprop 50
220
40
260
DELIVERIES
+5.9% +10.9% 200
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
TURBOPROPs in service
360 With some of the fastest growing markets, route creation
is crucial to enhance connectivity and support economic
growth in the region.
120
Turboprops are the perfect tool for this, allowing
affordable and sustainable operations on thin markets
2017 2037 and from challenging airfields.
48 49FORECAST by region Executive Summary
FOCUSCAPACITY
ON China
Turboprop 70
Turboprop 50
230
70
300
DELIVERIES
+4.6% +47.1% 690
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
TURBOPROPs in service
Regional market is at an early stage of development with
340 an inefficient use of large capacity aircraft generating the
extensive need for public subsidies.
40 Chinese government encourages the development of
regional connectivity which will result in the creation of
2017 2037 new routes.
50 51FORECAST by region
FOCUS ON Central Europe, Russia & CIS
CAPACITY
Turboprop 70
Turboprop 50
190
60
250
DELIVERIES
+2.2% +10% 240
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
TURBOPROPs in service
Stronger growth in emerging economies creates
280 opportunities for increasing air traffic and better regional
connectivity.
100
Ageing current turboprop fleet will pave the way for a
requirement for cost-efficient and high performance
2017 2037 replacement aircraft.
52 53FORECAST by region Executive Summary
FOCUS ON WESTERN EUROPE
Turboprop 70
Turboprop 50 300
50
350
DELIVERIES
+1.4% +1.2% 160
GDP GROWTH TRAFFIC GROWTH NEW ROUTES
525
TURBOPROPs in service
Turboprops have the unique capability to access even
450 the most challenging airfields, thus contributing to
valuable point-to-point connectivity in a competitive
market.
Modern turboprops are the most cost-efficient
replacement for the existing fleet as well as for upsizing
2017 2037 the current 30 seat fleet.
54 55FREIGHTERS
FREIGHTERS
Executive Summary
Significant untapped opportunities
CAPACITY E-commerce continues to grow
in emerging markets
Worldwide turboprop freighter fleet Population with internet access
distribution 2017
x2
37%
41%
9% 6%
7%
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
Emerging & Developing
78% Advanced
of the current turboprop
freighter fleet is flying in
Europe and North-America
Developing and emerging countries will see their share
of Internet users double over the next 20 years, while also
There is still ample room for expansion in emerging enjoying the bulk of population growth.
markets (e.g. China, India, Brazil, South-East Asia).
E-commerce will continue to influence consumer habits,
Turboprop freighters could efficiently contribute to shaping worldwide cargo and logistics networks.
regional economic development in these markets, be it
as feeders in larger integrator networks or as a faster and Turboprop freighters have key role to play as a means of
more reliable alternative to surface transportation. last mile delivery in a timely manner.
58 59FREIGHTERS FREIGHTERS
Executive Summary
upsizing capacity
CAPACITY Turboprop freighter demand
Influence of feedstock on fleet capacity In-service turboprop freighter fleet
Opportunities
Today's for freighter Tomorrow’s
fleet conversion fleet
TP 8t
Down-gauge 420 TP 5t
TP 3t to 2t capacity
TP 3t
No
0
feedstock
Up-gauge to
122
5t capacity
TP 5t
Limited
feedstock 87
Up-gauge to
8t capacity
124
TP 8t
Ample 40
feedstock
2017 2037
460
Freighter
deliveries
The air cargo market is highly price sensitive and Growing world trade together with the emergence of
operators constantly seek the best economics. This new markets will result in a 3.2% annual growth over the
explains the clear market preference for turboprops, next 20 years. This growth will translate into an increase in
which represent 96% of the regional freighter fleet. overall fleet size and upsizing of current aircraft gauge.
The evolution of the turboprop freighter fleet will be The 8-tonne segment will become the reference point
determined by feedstock availability and market needs. for the market while 3-5 tonne capacities will significantly
reduce due to a lack of feedstock.
60 61SAFE HARBOUR STATEMENT Disclaimer This presentation includes forward-looking statements. Words such as anticipates, believes, estimates, expects, intends, plans, projects, may, forecast and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements made about strategy, rampup and delivery schedules, introduction of new products and services and market expectations, as well as statements regarding future performance and outlook. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include but are not limited to: • Changes in general economic, political or market conditions, including the cyclical nature of ATR business; • Significant disruptions in air travel (including as a result of terrorist attacks); • Currency exchange rate fluctuations, in particular between the Euro and the U.S. dollar; • The successful execution of internal performance plans, including cost reduction and productivity efforts; • Product performance risks, as well as programme development and management risks; • Customer, supplier and subcontractor performance or contract negotiations, including financing issues; • Competition and consolidation in the aerospace and defence industry; • Significant collective bargaining, labour disputes; • The outcome of political and legal processes, including the availability of government financing for certain programmes and the size of defence and space procurement budgets; • Research and development costs in connection with new products; • Legal, financial and governmental risks related to international transactions; • Legal and investigatory proceedings and other economic, political and technological risks and uncertainties. Any forward-looking statement contained in this presentation/ publication speaks as of the date of this presentation/ publication release. ATR undertakes no obligation to publicly revise or update any forward-looking statements in light of new information.
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