"Turbo Profits" and "Proud to be Turboprop"
- Jeff Melang

"Turbo Profits" and "Proud to be Turboprop", these are the tag lines for the big two Commercial Turboprop manufacturers.  Sounds like exuberance. However, in the case of Bombardier and ATR, it's a rational exuberance and well justified.  Those two manufactures claimed backlogs this year of 86 and 89 aircraft, respectively.  There seems to be an unquenchable thirst for large turboprop aircraft like the Dash 8 300 and 400 series and the ATR 72. 

SkyQuest International tracks secondary market activity for commercial turboprop aircraft, to include those of the above-mentioned manufacturers, as well as those from Embraer, Saab, Shorts and Raytheon.  The once prematurely announced dead turboprop market is back and inventories of available used aircraft are beginning to recede.  According to Airfax, the total number of available commercial turboprop aircraft stands at 320, down from a high last year of 397 aircraft.  We see this downward trend in available aircraft accelerating into 2007.

There are two primary drivers causing the increased demand for turboprop aircraft. The most pronounced and publicized is increasing fuel prices.  It's a generally accepted fact that fuel prices will remain at historically high levels for the foreseeable future.  The lesser-publicized driver is the exchange rate. The US Dollar has remained very low against other major world currencies such as the Euro and the South African Rand.  This makes US currency based assets like aircraft appear to be real bargains to the world outside of the United States, thereby creating new markets for aircraft coming out of US commercial fleets.

The export of used commercial turboprop aircraft from the United States has been particularly pronounced with the Embraer EMB-120 and Beech 1900.  The number of available EMB-120 aircraft now stands at 16, down from a high of 48 last year.  Some prospective buyers for the EMB-120 are now saying there are very few marketable EMB-120 aircraft remaining. As for the Beech 1900, a recent article quoted Raytheon as saying they have placed half their available inventory over the past four years, with 75% of those being placed outside of the United States.

The good news for both buyers and sellers of commercial turboprop aircraft on the secondary market is that prices have stabilized.  We have not seen values increase at the same rate that inventories are decreasing.  There is still a large pool of available turboprop aircraft being operated around the world by the original operators and those will continue to come onto the market over time.  Those aircraft are being replaced with new larger turboprops and 75-plus seat regional jets.  The recently pronounced "dead" market is now the 30 to 50-seat regional jet category.  That market looks a lot like the 30-seat turboprop market did 10 years ago essentially fully saturated and oversupplied.

Now on to values.  There are many factors to consider in valuing commercial aircraft. To keep it simple, we will express values for average time aircraft with mid-life engines measured against the hard time (manufacturer) overhaul interval.  We will be look at aircraft with cargo applications only.  Further, we will assume no damage history, all inspections are current, all airworthiness directives complied with and the full complement of required avionics installed (life sure would be a lot easier if this were always the case!).

• Beech 1900C, UB Model, Average Value:  $1,000,000 - $1,300,000 USD
• Beech 1900C, UC Model, Average Value:  $1,200,000 - $1,700,000 USD
• Embraer EMB-120ER, Average Value: $1,200,000 to $2,000,000
• Saab 340A (with ECMP Engines), Average Value: $900,000 - $1,600,000
• ATR 42-300, Average Value:  $2,500,000 - $3,000,000

The above values are for aircraft in passenger configuration.  Conversion cost would be added to these values.

There are a number of other commercial turboprop aircraft that have cargo applications. However, the above aircraft comprise the most mainstream commercial turboprops in today's environment.  Other examples are the Embraer EMB-110P1, the Shorts family, CASA 212, Fairchild Metro and of course the Cessna Caravan.  We can discuss these values another day. Suffice it to say that these latter aircraft entered their second life as freighters well ahead of those mainstream aircraft identified above.

Hooray for those "Proud to be Turbo Prophets" out there.  We have to say, "told you so", as we have always known that there would be a secure afterlife for mainstream turboprops.  That afterlife will include passenger operations in developing nations, as converted freighters, as well as charter and corporate shuttle operations.  There will be further reductions in inventories of used turboprop aircraft this year, and pricing will continue to stabilize.