The commercial turboprop market remains essentially a two-horse race between ATR and Bombardier. The story is interesting. The chart below shows the order history for both models since 2000. ATR had a bumpy start but has done exceptionally well since 2004, albeit with much more volatile swings in its order book.
The list prices for the aircraft are different, and the ATR72-600 trades at a 17.3% discount compared to the Q400. As is well known, list prices bear no resemblance to the prices at which orders actually occur. But the gap is important to note.
The chart illustrates why this is important. Although the “list” gap is over 17% in favor of the ATR72-600, professional appraiser values show that a 2013 model of each aircraft in service this year only sees a 2.7% value difference, in favor of the Q400. Looking out to 2024, the gap moves to 11.7% in favor of the Q400. This tells us that the Q400 needs to initially sell at a significantly higher discount than the ATR, but tends to hold its value better over the longer term.
These estimations are based on current perceived market conditions. ATR told us:”Higher list price of Dash8-Q400 is to attract customers by showing larger discount during negotiation. Increased gap in aircraft value after 10 years is not unanimously accepted by appraisers.”
Why does the Q400, which seems to start off at a disadvantage in price terms, able to hold its value better over time?
For this analysis we used data from Collateral Verifications and Jetrader. We also note that ASCEND shows the value difference being under $500,000. We examined a few ratios to allow for comparison between the two aircraft, as follows:
- Q400 has a 13.2% maximum payload and a 29.7% MTOW advantage.
- ATR72-600 has an 12.7% advantage in payload/MTOW
- The Q400 has a 35% range advantage. Assuming a mission uses full range and fuel, the Q400 uses 13% less fuel per mile flown than the ATR72-600.
- The Q400 has 84.4% more shaft horsepower than the ATR72-600.
ATR notes: “Above data show better structural efficiency of ATR72 (best ratio Payload/MTOW) and better propulsion efficiency (about half the power for slightly lower payload). The supposed 13.3 less fuel flow per mile of the Q400 is based on erroneous assumptions. ATR strongly refuses this statement. Also, 13.3% “better fuel” for Q400 on full range is not relevant to actual utilization (200NM ATR; 250NM Q400, respective fleet average).”
As is well known, the Q400 is a larger and more powerful aircraft. But the ATR72-600 has outsold it by large margin in recent years.
In the above table we compare the appraised values of a 2012 aircraft and developed some computations based on those prices. The price differential for a 2012 model is much closer than the list price differential, at 5.9%.
- The Q400 has a 12.2% lower appraised value per pound of payload.
- Comparing base models, the Q400 has an 8% lower appraised value per seat.
- Comparing base models, the Q400 has a 33.2% lower appraised value per pound of cargo.
- Comparing base models, the Q400 has a 23.6% lower appraised value per NM range.
Consequently it appears to us that the Q400s list price puts it at a disadvantage. Once market process are at play with used aircraft pricing, the Q400 is a much more compelling competitor. While the appraiser community holds the Q400 at higher values over time, the appraised levels justify a much smaller premium than the 17.3% list price differential. We understand that deal pricing is much closer than the difference in list prices, and this supports the much tighter differential that the appraiser community estimates.
Although the two aircraft are competing worldwide, the Q400 typically is more popular in North America. The ATR72-600 is popular outside North America. North American routes require longer distances and Q400s are frequently used to feed jet services. This means an aircraft needs faster performance to match network speeds. Outside North America the ATR likely benefits from operators who work in a less tightly managed network time constraint and can take advantage of the economic benefits from low speed operations.
ATR added: “The result of the above analysis seems that the ATR72 sells better because its lower list price. We remind that list price is not a driver in airlines’ choice. Main drivers are:
- ‘Negotiated’ price, which is equivalent for both aircraft
- Operating costs which are by far lower with an ATR72
Though from basic ratios on value per payload, range … it should mathematically, “real world” shows that despite huge discount on list price, Q400 is not compelling enough. Hence the operational cost of the two aircraft is actually the main reason for differentiating both solutions depending on network type.”
Bottom Line
When asking for input from both OEMs, both firms emphasize their advantages as one would expect. But in as close to “apples to apples” terms, we summarize our findings as follows. Incidentally, our findings were described as “spot on” by a leading turboprop lessor with whom we did a fact check.
The Q400 and ATR remain very competitive, with the ATR having a substantial sales advantage in recent years. While pricing appears to be a key issue, the two airplanes are quite different in their operational profiles. The Q400 is larger and offers higher speed, while the ATR offers low cost operations at lower speeds.
Each has its market niche, and each holds value well over time. Both are good airplanes. But the market shows that the price differential between them should be much closer than their differential in list price. While ATR’s price is an advantage, the Bombardier offers compelling value.
What is the main source of the price differential?
Rationale for the query being; if BBD offered a different engine choice (less powerful at less cost), could they then sell at a significantly lower price and try to cover both ends of the market?
A lower power engine might reduce purchase price and operating costs slightly, but the Q400 will remain a heavier aircraft, so the efficiency advantage would still go to ATR. In doing so the Q400 would give up its advantage in speed, range, and climb rate that give it a slightly different market niche than the ATR. The speed in particular is essential to the Q400’s value, because not only does the faster trip create a passenger appeal, but it also usually allows operators to get one more flight in per day, which means few aircraft are required to fly a given number of stages.
Basically, a budget Q400 probably still wouldn’t beat an ATR on costs, but the current Q400 finds its own niche by creating extra value via its higher performance.
I think the assumption the ATR72-600 is 25% more fuel efficient and 20% cheaper to purchase than the Q400 has some ground. Also it seem quieter and to have a significantly wide cabin / seats.
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The backlogs confirm the airlines don’t give a thing about speed, climb performance on 99% of the flights.