Singapore Air Show

BAE struggles to move idle craft in ‘tough’ market

 - November 30, 2006, 11:01 AM

While ATR and Bombardier’s de Havilland division enjoy a renaissance of sorts in the new turboprop airliner business, companies no longer involved in airplane manufacturing have moved to stake their own claims on the used market. For BAE Systems Regional Aircraft, however, managing and eliminating its “idle portfolio” has proven harder than one might imagine.

Meanwhile, the former British Aerospace also faces the prospect of having to place 20 BAe 146 and Avro RJs that remain uncontracted and expand the four-engine regional jet family’s customer base during a period of record-high fuel costs. BAE Regional Aircraft managing director Alan Fraser described recent trading conditions  for both turboprops and jets as “a tough market [competing] against other pre-owned aircraft, new entrants and our own products offered by other parties.”

Nevertheless, the company said it is “very confident” it will find turboprop operators for about 15 available ATPs and almost as many Jetstream 41s. This year, it also expects to find homes for some 40 idle J32 twin turboprops; there are no J31s in its portfolio.

Sales and marketing vice president Steven Doughty predicted a 20-year regional aircraft market worth “at least $90 billion.” Even with regional airlines gravitating toward large-RJ operations, smaller turboprops are enjoying a renaissance, he said. In addition, Doughty sees an increasingly relevant role for freighter variants of older aircraft.

Last year BAE conducted 68 lease transactions, including contract extensions, with BAe 146/Avro RJs and ATPs worth $230 million, while other financial activities involved a further 28 aircraft, 18 of which are operated by Swiss Air Lines. It also reported sales or leases of 40 smaller J32/J41s valued at $12 million.

The company also noted that Ireland’s City Jet, an Air France franchise, last month began leasing an additional BAe 146-200, bringing its fleet to 19 of the type as it prepares to accommodate 1.5 million passengers this year–up 20 percent from 2005.

BAE has commitments for six converted ATP freighters (ATPFs) scheduled for delivery this year, increasing the operational fleet to 20, and claims to have received “high interest” from customers for remaining aircraft available this year and next. New lease customers are India’s First Flight Couriers (FFCL), which plans to accept three ATPF E-class bulk freighters in the May-to-July time frame, and Atlantic Airlines, which is to take three ATPs with large freight door modifications. The UK operator will fit its own E-class interiors.

Doughty said he is “very hopeful” that the FFCL will lead to more Asian business involving both ATPs and 146/Avro RJs. The company sees Southeast Asia as offering the greatest potential market, especially for jet operations in countries such as Malaysia and the Philippines, where he claims existing airfields would not require the upgrading necessary for larger aircraft such as the Boeing 737.

BAE and Swedish operator West Air jointly own design rights for the ATP large freight door (LFD), which is fitted by Romavia in Romania. Both companies provide cargo cabin interiors for ATP freight conversions and LFD-equipped aircraft, he said.

BAE also reported that it has leased two more J41s to the UK’s Eastern Airways for delivery in April, bringing its fleet–the world’s largest–to 21. The operator has established a refurbishment and customization center at BAe’s Prestwick factory, near Glasgow. The manufacturer believes the J41 will benefit from resurging interest in turboprop aircraft, as well as offering potential conversion for cargo operations, corporate shuttle flights and other special roles.

Last year, BAE exceeded its business plan by selling 38 J32s–three to Channel Isles operator Rockhopper–and leasing four others, one of those to Dominican Republic carrier Servicios Aereos Professionales.

BAE is also seeking to increase its activity in aircraft trading and management, Doughty reported. It now is managing leases on some 80 aircraft, including seven Airbus A320s repossessed from Volare on behalf of European banks. The manufacturer has expanded its agency work to include the sale and lease back of Airbus A330s and Boeing 777s.

Late last year, BAE Systems received UK airworthiness approval for its liquid-crystal display flightdeck upgrade for the BAe 146, Doughty said, and it is to convert nine aircraft for Eurowings and Air Dolomiti.