Production cuts coming for ATR

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Franco-Italian turboprop maker ATR is the latest aircraft manufacturer to prepare for production cuts due to the coronavirus crisis, with its chief executive telling Reuters a decision on the extent would be taken in the coming weeks.

The aircraft manufacturer, co-owned by France-based Airbus and Italy’s Leonardo saw deliveries fall last year to 68 aircraft from 76 in 2018, Stefano Bortoli said.

Deliveries last yesr were the lowest since 2012 as ATR headed into a down cycle even before coronavirus, with the traditionally volatile market for nimble short-haul turboprop aircraft feeling the pain.

ATR sold 79 aircraft in 2019 up from 52 in 2018.

ATR dominates the market for 50 to 70 seat turboprop aircraft economic on short flights but exposed to the relatively weak credit profiles of regional airlines compared to larger groups, bankers and leasing firms say.

Bortoli declined to give delivery targets for 2020 saying ATR would follow other aircraft manufacturers in reducing planned production after seeing demand and own ability to make deliveries hit by the epidemic and widespread lockdowns.

“Of course we are going to reduce; we will see how much,” Bortoli said in an interview.

Data from flight-tracking service Flightradar24.com supplied to Reuters shows a marked drop in ATR test flights since the start of the year, suggesting lower production.

Deliveries were hampered in part by rules restricting inspection teams in France, where the company has its final assembly line, Bortoli said.

The coronavirus crisis drove a number of turboprop operators into bankruptcy or administration including ATR user Air Mauritius.

Bortoli said a new cargo version of the benchmark ATR 72-600 turboprop will go into service as planned later this year with launch customer FedEx .

Cargo demand has been rising during the crisis as grounding of passenger aircraft removes key capacity for freight in cargo holds.

Analysts say regional jets, which compete with turboprops in some markets, are expected to benefit from the reluctance of airlines to take risks on larger planes after the crisis.

Bortoli expects turboprops to hold their own as regional economies lead the way out of the crisis. Demand for turboprops is traditionally tied to regional development.

“The first flows will be domestic including regional ones operating essential services,” he said.

Turboprops do best when oil prices are high as they save fuel on short routes and Bortoli predicts a demand-led slump in oil prices will correct itself as the crisis eases.

Industry sources say ATR declared ‘force majeure’ on aircraft deliveries, leaving it at the mercy of events outside its control and informed airlines delays are “excusable,” restricting the amount of compensation.