The Bombardier's Q400 sale programme is now heading towards the 500 units milestone, after 13 years of service.
The Q400 is the Canadian manufacturer's turboprop in the 60 to 99-seat marketplace, one of the "most dynamic segment" in commercial aviation as growth will be driven largely by evolving relationships between mainline and regional carriers, according to Bombardier.
The aircraft is offered in different passenger versions from 67 to 80 seats. Although the majority of the fleet is configured with 74 seats, SATA Airlines took delivery of its aircraft in a high density 80-seat configuration in 2010. Last September Ethiopian Airlines took delivery of Q400NG outfitted with a 67 seats dual-class configuration. The new configuration features seven business class and 60 economy seats, fore and aft lavatories as well as a galley outfitted to provide cold and hot meals. The new configuration has also provides airlines with increased cargo capacity.
Unlike its direct competitor, the ATR 72 series, Bombardier has based its Q400 campaigns on speed. The Q400 has a cruising speed close to that of most regional jets allowing the Canadian manufacturer to focus on many campaigns also involving low-cost markets.
Not only does the Q400 possess all the benefits of jet speed productivity, it also sustains all the advantages of turboprop economics.
Bombardier continues to study a stretched 90-seat version (dubbed Q400X) to compete in the 90/100-seat market range. Previously a 2013-14 timeframe had been suggested and although a stretch version remains of "high interest" to existing and potential customers, Bombardier has not made any formal announcement.
At 30 June 2013, Bombardier had received 475 net orders for its Q400/ Q400 NextGen models and delivered 439 units. At that time last year Bombardier had 428 net orders and 22 aircraft on backlog.
The Q400 fleet totals 264 aircraft of which 17 are stored. The Q400 NextGen fleet accounts for 162 units in service and three in storage.
For the first six months of 2013, the manufacturer had delivered 14 aircraft, six of which in the second quarter.
Flightglobal's Ascend Online database anticipates another 17 deliveries throughout the end of this year, 14 in 2014 and four in 2015.
A total of nine airlines: Air Baltic, Alaska Airlines Commuter, Arik Air, EuroLot, Horizon Air, Qantas, Sunstate Airlines, Rwandair and WestJet Encore have aircraft on backlog.
The Q400 programme wrapped up a successful year in 2012 with up to $2.7 billion in orders including 50 firm orders and 31 option aircraft, while welcoming seven new customers, operators and leasing companies, says Bombardier.
ATR has sold more ATR 72 turboprops over the past few years but slot availability remains in favour of the Q400 while Bombardier seems commercially motivated to win deals at present, notes Ascend.
Last year Bombardier booked first time customers WestJet Encore and EuroLot along with repeat orders from other customers.
Since the beginning of this year, Bombardier has added two new customers for the type over five new orders totaling 18 aircraft.
In June the manufacturer announced a re-order for four Q400s from Nigeria's Arik Air alongside an conversion of three options from Qantas and another three from Horizon Air.
In April, Rwandair agreed to purchase one Q400 in a dual class 67-seat configuration.
In March Nordic Aviation Capital purchased four new Q400s for forward lease to Latvia's Air Baltic.
In January, Qantas placed a three four Q400s order for operations at QantasLink.
"The Q400 aircraft spread further into secondary markets and, together with the Q400 NextGen aircraft, brought new customers, operators and leasing companies from almost every continent into the Bombardier turboprop family," said earlier this year Bombardier Commercial Aircraft's president Mike Arcamone.
With up to 10 more seats, up to 35% more cargo volume and with their jet-like speed, the aircraft can fly up to 18% more flights per day than a competing turboprop. That's approximately 30% more revenue potential, according to Arcamone.
Bombardier's latest 20-year forecast predicts 2,850 aircraft deliveries in the turboprop market.
Between 2011 and 2031, Bombardier's commercial aircraft market forecast anticipates a demand of 150 aircraft in the 20 to 59-seat aircraft segment.
In the 60 to 99-seat aircraft segment, the Canadian manufacturer expects demand for 2,700 turboprops, or 400 more aircraft than its previous forecast.
Bombardier says high speed turboprops are now used by many airlines to replace 50-seat regional jets on short haul routes with little increase in block time or reduction in passenger comfort.
Whilst the Q400 competes in the same market with the ATR 72, the aircraft are significantly different. The Q400 is faster, quieter and roomier than the ATR 72, but it is substantially more expensive, says Collateral Verifications' Gueric Dechavanne.
According to IBA Group's senior analyst Alice Gondry the market has changed in the last 12 months, whereby the ATR 72 has become a more popular product and institutions that were active in the turboprop market have shifted their focus to ATR products.
"This has resulted in some shortage of financing in the Q400 sector and therefore any financing deal is likely to be priced slightly higher than the current market values," she says.
ICF SH&E says while the Q400 is a more capable aircraft in terms of payload and range than the ATR 72-600, it also represents a higher level of capital investment to acquire - given the operational needs of many operators, the Q400 may be "too much airplane" to fulfil its required mission, particularly on shorter sectors, and as a result sales of new airplanes appear to be suffering.
ICF SH&E expects that the market for the Q400 will remain steady, if somewhat soft, in the short to medium term.
"The Q400 remains a capable aircraft, and in terms of market acceptance, the type has been successful, attracting orders from all major world regions. This reflects on residual values, and IBA considers the type well placed to capitalise on the current climate of high fuel prices on low density, regional routes to which it is well suited. However, with the lack of financing for the type, availability is markedly more pronounced than for the competing ATR aircraft," says Gondry.
The customer base has expanded by four operators over the past year with Yakutia (Russia), Eznis Airways (Mongolia), AeroContractors (Nigeria) and 748 Air Services (Kenya), notes Ascend, indicating that some element of fleet fragmentation into developing regions.
At 27 August 2013, Europe represented 178 aircraft or a 40.2% market share. Europe is the largest continent in terms of aircraft in operations but its market share has dropped about 4% over the past three years.
Bombardier has penetrated the Polish market and more importantly Russia, where it anticipates significant growth in the long-term.
Russia's Interstate Aviation Committee awarded a type certificate for the types in June 2012, a key milestone in Bombardier's marketing strategy to tap non-traditional markets.
Bombardier notes the 50-seat CRJ100/200 received type approval in Russia in 2006, and since demand has increased "significantly" in Russia, Belarus, Georgia, Armenia and Kazakhstan.
Last year Bombardier projected that Russian and former Soviet bloc airlines will buy 460 70-seat airlines over the next 18 years, or one-fifth of all European demand.
Since the beginning of this year Yakutia Airlines has taken over some ex-Luxair Q400s in a deal financed by VEB Leasing.
At this year's MAKS air show in Moscow, the Canadian manufacturer said it considered setting up a Russian final assembly line for its turboprop, in partnership with state industrial corporation Rostekhnologii.
The line is a "key commercial requirement" to finalising a related agreement to supply up to 100 Q400s for the Russian market.
The existing final assembly line in Toronto is to continue building Q400s for Bombardier's traditional markets.
Bombardier and Rostekhnologii have signed a tentative deal for 50 Q400s and at least another 50 optional orders for the Russian company's leasing subsidiary, Aviakapital-Servis.
North America accounts for 145 aircraft, or another a 33% market share while there are 87 aircraft operated by Asia-Pacific customers. Africa and the Middle East account for another 30 aircraft, or 7% of total aircraft fleet.
South America is the only continent where no Q400s are in operations.
The Q400 is mainly passenger application, but Bombardier has sold a few multi-role aircraft including aerial fire fighting as an airtanker. In addition, Swedish cargo operator Nord-Flyg launched a freighter conversion programme in 2008 with Cascade Aerospace and converted a 1999-vintage aircraft in E-Class bulk compartment and will put a 9g rigid vertical net.
Nord-Flyg, which filed for bankruptcy in April 2010 returned its two Q400s - only one of which had been converted to a freighter - to SG Finans AS Norge leasing entity. Both are now in operations at Blue Bird Aviation in Africa.
A cargo application is not expected to develop although Bombardier has said that there is a potential market there, albeit not a large market.
During the second quarter Ascend registered eight sales, including five straight sales and three sale and leasebacks.
Bodo Aircraft Leasing acquired three aircraft from Wideroe and SAS Norge under sale and leaseback deals while four aircraft headed to African operators Blue Bird Aviation and Aerocontractors. VEB Leasing also completed another ex-Luxair acquisition for forward lease to Yakutia.
Republic Airlines continues the process of taking over the United Airlines Q400 operation previously run by Colgan Air. United is committed to the type through 2020 via a new capacity purchase agreement with Republic. The contract involves 32 aircraft.
Values and lease rates
Availability was limited to a couple of aircraft two years ago. Ascend records about 20 aircraft in storage although the ex-Colgan Air aircraft are committed to Republic Airlines.
Oldest models are in the $100,000 a month range according to a trader, which points out that the ex-Scandinavian aircraft would be placed at a lower rate. "Everything depends on the engine and the landing gear condition," he says.
The Q400 market has been well supported by stronger sales over the past year, but there are "too many" older aircraft that are more than 10 years old, says a leasing source.
The 10-year 70-seat turboprop market is a "spot market". "Enquiries are generally on a short-term notice, not next April delivery like the narrowbody market," he adds.
MBA notes that in the past current market values (CMV) were trading above base values. This year values are on par with base values, according to Tom Burke.
A new aircraft would sell at $21.2 million according to MBA and $21 million for ICF SH&E. IBA Group has a $20.2 million CMV for new delivery while Ascend and Collateral Verifications say the value is $20.6 million.
Collateral Verifications says values have dropped by 10-15% over the past year, depending on the vintage, for the type with lease rentals declining by about 10-20% due to the increase in the availability of aircraft. "Although aircraft's availability has increased by more than 30% in the last six months, this will only be temporary as most of these aircraft should be able to find new homes in the near term. With the beginning of a potential recovery for the industry and the continued volatility of fuel prices, these numbers will most likely stabilize in the next 6-12 months with a potential for further improvements thereafter," says Dechavanne.
Ascend is the lowest of the appraisers for a 2010-vintage aircraft with a $14.7 million quotation. Collateral Verifications has a $15.9 million CMV while IBA Group and MBA value a three-year old model at $16.1 million. ICF SH&E says a 2010-vintage has a $16.4 million CMV.
The CMV of an eight-year old model is $10.2 for Ascend and $10.8 million for MBA and Collateral Verifications. ICF SH&E has a $11.3 million CMV for a 2005-vintage while IBA Group is the highest with $11.7 million.
Oldest aircraft have a $6.1 million CMV, says MBA. ICF SH&E values a 1998-vintage at $6.6 million, Ascend at $7.6 million.
Values of a 2001-vintage is $7.8 million for MBA, $8.3 million for ICF SH&E and Ascend. Collateral Verifications says the value of a 2001-vintage Q400 is $8 million. IBA Group is the highest with a $9.25 million CMV for a 12-year old vintage.
The Q400 will see lease rates staying flat, predict the leasing source. Availability is reasonable but the market needs more demand for the product, he says. "Bombardier needs to further create a secondary market for that model," he says.
Another trading source says the Q400 market is slow and shy of prospects at the moment. "Current operators are not adding any aircraft so the model relies on new markets and opportunities," he says.
A 2001-vintage model is expected to lease between $75,000 and $90,000 a month for MBA, $90,000 and $115,000 a month says ICF SH&E. IBA Group has a $100,000 monthly quote while Collateral Verifications has a $110,000 lease rental. Ascend is the most optimistic with $120,000 a month for a 12-year old aircraft.
Oldest aircraft are in the $105,000 a month range for Ascend while MBA anticipates lease rates in the $65,000 and $80,000 range. ICF SH&E is more optimistic with a $80,000 and $95,000 a month range.
A 2005-vintage aircraft would lease between $100,000 and $115,000 a month for MBA, between $110,000 and $140,000 a month for ICF SH&E. Ascend has a $140,000 a month quote while Collateral Verifications expects $135,000 monthly lease rates and IBA has $130,000 a month.
Lease rates for three-years old aircraft further vary. IBA estimates monthly rentals at $160,000 a month, while Ascend has $165,000 a month and Collateral Verifications has $172,500 a month. ICF SH&E's range is between $160,000 and $180,000 but MBA estimates lease rentals are between $135,000 and $150,000 a month.
A new delivery is expected to lease for between $160,000 and $180,000 a month says MBA. ICF SH&E's range is between $175,000 and $200,000 a month. Ascend and Collateral Verifications anticipate a $195,000 monthly lease rates while IBA has $190,000 a month.