The appointment of the Airbus’s head of contract negotiations, Patrick de Castelbajac, as ATR’s new chief executive comes as the Franco-Italian manufacturer is expected to start work to transform its legal status from “groupement d’intérêt économique” (GIE) to “société anonyme” (SA) over the next few years.
That may sound like an arcane piece of French company law, but the change should lead to ATR having more control over the supply chain through the management of its suppliers and therefore more efficient day-to-day management.
Although, the mandate of an ATR chief executive may only be a four-year-term, de Castelbajac will lay down the foundations for a company that will be more in control of its own destiny.
De Castelbajac, a lawyer, arrives at a rejuvenated ATR. It is winning the battle of the turboprops against the Bombardier Q400 and is in rude financial health. The manufacturer generated $1.63 billion in revenue in 2013, up 30% over three years – and a $150 million profit, representing a 9% return on sales. This year, it is on course to achieve $2 billion in revenue. In 2005 its turnover was $500 million turnover.
That financial success, of course, is derived from its commercial stranglehold on the turboprop market. In the 50-90-seat regional market, the European turboprop manufacturer has booked 579 orders over the past five years. Since the beginning of 2014, it has amassed 107 firm orders, compared with only 18 at its Canadian rival.
Dubai, United Arab Emirates-based operating lessor DAE Capital placed a 20 ATR 72-600 firm order along with 20 options at the Singapore air show in February, while Spain’s Binter Canarias ordered six of the same type.
And in a foretaste of things to come this week, ATR booked eight undisclosed contracts for 81 firm aircraft plus 41 options during the January-June period. The majority are likely to be unveiled at Farnborough air show.
Speaking to Flight Daily News at a pre-show briefing, de Castelbajac said ATR’s share of the market in the first half of 2014 was exceptional. “We were close to 80% of all-technology aircraft [including jet-powered types] orders in the below 90-seat category. But I don’t think this is representative of the market; we expect a reaction from the other manufacturers,” he says.
ATR’s fortunes have transformed over a decade in which it has gone from a candidate for termination to leader of the market for 70-seat turboprops. As fuel prices have risen, the operating economics of turboprops have led airlines to turn to them for many low-capacity short-haul routes, ditching small regional jets.
Today’s backlog stands at 320 aircraft – a historic high, representing about three and a half years’ worth of production.
“[The] backlog has doubled over the past four years and is the highest ever among up to 90-seat regional aircraft manufacturers,” says de Castelbajac.
Last year’s deliveries totalled 74 units but in 2014, ATR expects this to increase to 84 customer handovers. The production ramp-up will not stop there, however, says de Castelbajac: “We believe we can achieve 95 deliveries in 2015 and our target is 100 deliveries in 2016,” he says.
By reaching 100 deliveries a year in 2016, ATR would have increased production by 25% in three years. “It is one of the most ambitious ramp-ups in the industry,” he says.
But ATR’s overriding concern is to ensure that output increase can be achieved despite supply-chain issues that appear to have hampered growth over the past two years.
The manufacturer fell short of its delivery targets in 2012 with 64 units handed over to customers, versus a planned 72. Last year’s 74 deliveries may have been a record high, but the company fell short of its 80-aircraft objective.
The first step in ramping up production is the “hardest one”, former ATR chief Filippo Bagnato said earlier this year. Manufacture of aerostructures is the “choke point ATR must resolve”, he said.
De Castelbajac says his skills and experience, especially in the supply-chain part of the business, can be brought to bear in order to solve this issue.
At Airbus, he worked closely on the growth of the supply chain. “This experience gives me a span and visibility on how we partner with our suppliers and support our customers,” he says.
A legal status potential change is also a prerequisite of launching a larger turboprop, which has been the subject of lobbying to both shareholders for years.
Under the current shareholding structure, Airbus Group and Alenia Aermacchi would both have to approve it and financially support the estimated $1.5 billion programme development cost.
In the past, ATR said that it would take four years of development to bring a 90-seat aircraft to market.
Research and development is expected to increase under de Castelbajac’s tenure as ATR may even look beyond a 90-seater.
At the ISTAT Asia conference in May, ATR’s general manager sales Asia-Pacific, Christophe Potocki, mentioned demand for a turboprop that could seat up to 120 passengers.
“The market is asking us actually to build a 120-seat turboprop and this aircraft has to be a totally new design,” Potocki said. But as he points out, Airbus in particular has its “priorities elsewhere” at the moment, which is why it has been hesitant to move forward with a design for a larger aircraft.
Airbus Industrie changed its status to a more simplified joint-stock company in 2001 in the immediate aftermath of the formal A380 launch decision.
In the future, ATR may undergo this transformation too.