ATR deliveries are expected to grow to fifty per year from 2023 and remain at this level for the coming years as the turboprop market recovers. Actually, ATR is recovering at a faster pace than was anticipated a few months ago and even quicker than the regional market itself, its Italian shareholder Leonardo said at the presentation of its Q3-result on November 5. Leonardo optimistic about a production surge at ATR.
In the first Covid-year 2020, deliveries fell back to ten aircraft compared to 68 in 2019 and even 78 in 2017. Until the end of September, ATR already delivered sixteen aircraft. Leonardo expects total deliveries for 2021 to end between 25 and 30 as it works through its backlog.
“We are pleased with ATR and expect them to double or triple deliveries in 2021”, said Leonardo’s CFO, Alessandra Genco. Leonardo’s Aerostructures Division expects to produce some fifteen ATR fuselages this year, down from forty in 2020 and 65 in 2019. Within two years, Leonardo is optimistic about a production surge: “We expect ATR to get to a rate around fifty per year. So, starting from 2023 get to fifty and remain at about fifty going on the plan”, CEO Lucio Vallerio Cioffi said.
New variants of the turboprop, including the 72-600F full freighter and the 42-600S short take-off and landing that will enter service in late 2023 or early 2024, are “offering growing new opportunities”, Vallerio Cioffi said. “We are excited by the potential of ATR. As an environmentally friendly platform, ATR is the most suitable and sustainable regional aircraft in the market and is already certified for fifty percent sustainable aviation fuels.” Certification of 100 percent SAF is expected by 2025, while Leonardo is also exploring options for hybrid-electric propulsion.
Leonardo expects to produce fuselage segments for only four Boeing 787 this year. (Leonardo)
Boeing 787 issues hurt Aerostructures Division
While ATR and Leonardo’s activities for Airbus on the A220 and A321neo are improving with production rates of fifty to sixty per month, Aerostructures suffers from the problems with the Boeing 787. Boeing has paused deliveries of the Dreamliner until it has gotten on top of quality issues. This is reflected by lower production rates at its Grottaglie site of only four fuselage sections 44 and 46 this year compared to nine in 2020 and fourteen in 2019. Then, the 787 contributed to 58 percent of Aerostructures revenues, but this will be down to 37 percent this year. Leonardo is not considering a production stop, in contrast to what Spirit AeroSystems has done recently.
Leonardo maintains its outlook that the 787 will become profitable from shipset 1.406, which is still a few years away as Boeing is now at construction number 1.165. “The key issue is volumes and monthly production rates. The 787 remains a highly-regarded aircraft. We expected volumes to increase. It will take time, but if they do, we will strongly benefit,” Vallerio Cioffi remarked.
Leonardo’s 2019 restructuring plans for Aerostructures were derailed by the Covid-crisis, sending revenues and free operating cash flow downwards. The Italian OEM has taken action to reduce losses in the short term and secure its long-term position. It will cut its workforce by 1.000 from 4.000. The ATR production line in Pomigliano has been modernized, reducing production time per fuselage by 25-30 percent. Other cost reductions, more digitalization, and optimization should get Aerostructures to break even at the end of 2025. Leonardo has no intention of selling the division, also because it is the single-source supplier of the 787 sections 44 and 46 that contractually will not allow it to exit the program.
No comment on the legal issue with sub-supplier MPS
Vallerio Cioffi had little to say on the issues with its sub-supplier MPS from Brindisi, with which Boeing terminated the contract earlier this year after it found that MPS had delivered titanium parts of inferior quality. The company is under scrutiny from the Italian prosecutors. “The investigation is covered by confidentiality, so no information could be disclosed. Both Boeing and Leonardo are victims of potential misbehavior. They are working and cooperating with the authorities to solve the issue.” The CEO was unable to say if Leonardo is risking any liability issues from Boeing.
On the Airbus A220, Leonardo reported that it has renegotiated the contract with Airbus that will be implemented from the second half of 2023. As the rate increases, Leonardo will benefit from better unit costs and margins on the program. “It is a win-win solution for us”, said President Alessandro Profumo, who added that Leonardo has given back some work packages to Airbus and got other ones in return.
Leonardo reported a €229 million net profit for the first nine months compared to €137 million last year. EBITA without amortization and impairments was €607 million, up from €497 million. ATR’s EBITA for the period was €-25 million, still an improvement of 59.7 percent over 2020. Aerostructures booked a €125 million loss, with revenues down by 35.7 percent following the production slowdown at ATR and Boeing.
Total revenues ended at €9.564 billion compared to €9.025 billion between January and September 2020. Free cash flow improved to €-1.387 billion from €-2.596 billion last year. New orders were up 8.9 percent to €9.266 billion. Leonardo has €3.6 billion in liquidity and sees no raise to additional liquidity as it still has a €2.4 billion credit facility at its disposal. The company sees 2021 as the bottom year and sees only the way up to better results, expecting revenues to end between €13.8 and 14.3 billion compared to €13.4 billion last year. EBITA should be between €1.075 and 1.125 billion, up from €938 million in 2020.