ATR Adjusts Outlook, Turns Attention to Untapped Markets

 - January 25, 2016, 11:16 AM
ATR chief executive Patrick de Castelbajac lamented "a lot of tension" in his company's supply chain. (Photo: Thierry Dubois)

A slight reduction in delivery expectations this year will accompany renewed sales efforts by ATR in Iran, China and the U.S., as the Franco-Italian manufacturer adjusts to headwinds in the turboprop market due to economic softening in the developing world and a sharp dip in fuel prices. Although the company collected record revenues of $2 billion last year, it missed its deliver target of 95 by seven airplanes, while it collected firm orders for 76 machines and options on another 81.

Some customers did not hedge their purchases and, because of the strong U.S. dollar, they could not afford to take delivery of their aircraft, CEO Patrick de Castelbajac explained in a press conference last week.

He also mentioned “a lot of tension” in the supply chain, which caused components to arrive late. The situation has translated into some weeks of delivery delay, he acknowledged. “We are trying to help some suppliers improve their production performance,” Castelbajac said. But, despite his company's efforts, some suppliers seem unable or unwilling to cooperate.

ATR has therefore downgraded a planned ramp-up to more than 100 deliveries in 2016, adjusting the delivery goal for this year to “above 90.” Its order target stands at “roughly 100,” about a quarter of which Castelbajac said could come from Iran. “As the sanctions have been lifted, people there are eager to fly in recent, safe aircraft and the country has airports and pilots,” Castelbajac noted.

Meanwhile, “China has reached a maturity level where they realize they need regionals,” he continued. ATR late last year opened a representative office in Beijing, with full support from Airbus.

ATR also hopes to finally realize its aspirations to return to the U.S. market after several years of no sales activity. “The number of jets that are flying for half an hour is crazy there,” said Castelbajac. “Using an ATR would take five more minutes and burn half the fuel.” As if to underscore its commitment, the company plans to organize a demo tour in the U.S. this year.

Still, ATR’s quest for orders now takes place against a not-so-favorable backdrop. The dwindling price of oil price decreases the turboprop’s competitive advantage, for example. Growth has slowed in Asia and even turned to recession in Brazil. As a result, ATR’s firm backlog has slightly decreased, from 280 to 260.

In terms of product improvement, ATR's engineers continue working with Elbit on a “wearable” head-up display to feature an infrared-based enhanced vision system. ATR expects to gain certification in 2017. The year after, ATR plans to upgrade the standard of satellite-based navigation tools aboard its aircraft to RNP AR 0.3/0.3 for better precision in mountainous areas in particular.