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May 27, 2024
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You would think the absence of De Havilland Canada as an active player in the turboprop market would boost interest, but not so.  If you were a turboprop buyer now, you have two choices – ATR (42/72) and the forthcoming Deutsche Aircraft D328eco.  The Chinese and Russian options are not certified for most markets and are excluded.

As noted by several industry sources, the first segment to see disruptive new power options will be the sub-50 seat market.  In other words, the segment is occupied by the ATR42 and D328eco.   The PWC powers both aircraft.

The sub-50 seat segment is ripe for a solution because regional jets no longer offer the economics required. Moreover, because of this, over 300 communities in the US are losing air service.  The blame for this is controversial. These communities are rallying, though, with a growing coalition of airports, airlines, and other stakeholders.  Forbes notes we can expect air service losses in even more communities.

Now what?

Absent local air service, people in these communities must drive for hours to the next community that has air service.  It’s early days, but almost certainly, this driving will lead to more traffic accidents.   More directly, there will be a direct loss of economic acidity associated with the loss of air service. For example, Politico reports, “Losing air service cost the Dubuque airport nearly 200 jobs and reduced its economic output by more than $26 million, according to an economic impact analysis the city paid for comparing data from 2019 to 2022.’

Undoubtedly, any community cut off from the global economy will suffer.  Jeremy Atack’s Transportation in American Economic History notes, “Over time, technological change within specific modes of transportation and differences and competition between water, land, and air modes of transportation have dramatically lowered shipping and travel costs—eventually by well over 90–95 percent in real terms. These changes have both created and diverted trade, promoting economic growth and shaping development. However, the existence of substantial positive externalities also creates a significant gap between social and private benefits.”

A CATO Institute report notes: Air passenger transport costs declined sharply, and the volume of international travel soared in recent decades. The World Tourism Organization reported 524 million people traveled from one country to another in 1995 and then expanded to 1.3 billion in 2017—a 148% increase over 22 years.

The World Bank data shows international travel growth by people from developing countries was even greater. In upper-middle-income countries, 104 million people traveled via air to a foreign country in 1995, which soared to 348 million in 2017, an increase of 235%. For lower-middle-income countries, the increase in international air travel was even larger, going from 29 million in 1995 to 138 million in 2017 — an increase of 376% in 22 years.

This is to say, no community can exist or grow if it is disconnected from the economy.

Potential Solutions

The issues facing US communities combine airline economics and airline pilot supply.

  • Airline economics are relatively easy to explain. Fuel costs represent about 45% of an airline’s input costs.  Airlines seek the lowest fuel burn they can get.  Generally, larger aircraft offer better fuel burn per seat than smaller ones.  This is the key issue for regional jets with relatively high fuel burn.
  • The pilot supply issue is controversial, as noted above. Oliver Wyman predicts a global shortage of 34,000 pilots by 2025. “In North America, with an aging pilot population and heavy use of early retirements, the shortage reemerges quickly and is projected to reach over 12,000 pilots by 2023.” The Regional Airlines Association, the trade group for US regional airlines, notes that nearly half of today’s pilots are approaching retirement at age 65. Increasing the retirement age to 67 would help; no surprise the pilot unions oppose this.  How they explain that a pilot at 65 is fine to fly but is not at 67 is creative but implausible.

Fixing these two big-ticket issues probably requires some big decisions on a public policy level.  That means no quick moves to fix anything. Public policy does not work fast enough.

Consequently, communities that need air service (in the US and globally) must work with airlines to solve the conundrum.  These two groups are goal congruent and need not be on opposite sides of the solution.  Both sides benefit from more air service.

There are some metrics to consider as we work through ideas to fix the situation.

  • Typically, airlines have 15 pilots per aircraft. If we look at the global fleet growth, these new aircraft need 15 pilots per aircraft.  In the US, a fleet growth of 410 aircraft requires 6,150 more pilots. But the flip side is that regional airlines only use ten pilots per aircraft.
  • The cost of pilot training is very high. So first, channeling this scarce resource through the regional system would be a commercial and timely benefit.  There is a role for public policy to play here.
  • Pilots have the same ambition as any profession; they want to move up in the case of a pilot, which means larger aircraft with higher pay scales.
  • RAA estimates US regional airlines could lose ~65 of their pilots to major airlines because of the more attractive professional opportunities they offer.
Possible Solutions

It should be clear the stakes are very high, and creativity is an obvious way forward.  But any creativity is going to run into vested interests.

A good example is US regional airline SkyWest’s new subsidiary, SkyWest Charter.  We opined on this issue in May. Unsurprisingly, US airline pilot unions reacted negatively to this idea.  The pilot shortage is the best thing ever to happen to the pilot profession, so they oppose the retirement age of 67.  True to form, pilot unions play the safety card in rejecting the Part 135 solution loophole that SkyWest Charter wants to utilize.

SkyWest has an excellent safety record that it would never risk. Moreover, if pilot unions are so focused on safety, why do they feel a 65-year-old pilot is fine and safe, but a 67-year-old pilot is not?  Does something magical happen after 65?

It’s no surprise that the US DoT turned down SkyWest’s plans.  As we noted above, creativity runs into vested interests. What comes next is unclear.  Politics and public policy are now in play; where it goes and how long it takes is anyone’s guess.

What about other solutions and ideas?

Cutting the Gordian Knot might be accomplished by switching aircraft types.  If regional jet economics are upside down, why not use a turboprop?  We are back to the start of this post.  It was important to go through the extensive background to get here.

Typical regional flights are between 200 and 500 miles, and turboprops easily handle this.  Moreover, turboprops use at least 20% less fuel, with a corresponding positive impact on costs and environment.  But, as noted, the turboprop market is unsettled.  Turboprop OEMs face uncertainty – De Havilland Canada seems to be withdrawing.  ATR offers a new engine solution to improve fuel burn, a limited progression for a 40-year-old design.  And Embraer has slowed its electric and hybrid solutions because of engine challenges.

Still, the problem needs a solution.  The following chart illustrates the problems and indicates where a solution must be delivered.  You can see why we spent so much time discussing the US market. Canada and India are key markets for turboprop utilization.

Which aircraft are available in the regional air service sweet spot of 50 seats? The current choice is between the ATR42 with 48 seats and the forthcoming D328eco with 40 seats. While DeHavilland Canada is studying the re-introduction of updated Dash-8-300 and -400 models, their inability to articulate a timeframe results in the market believing that they are no longer a viable player.

The ATR42 is 20% bigger in seat count than the D328eco, but that is not necessarily a disadvantage for the D328eco. In many communities that have lost air service, the 50-seat regional jets did not always fly at 100% load factor. Here are some charts that illustrate the US regional market.

The first chart shows the volume of traffic and stage lengths.  Note the turboprops used in the market operate well below 400 miles.  Even if these aircraft fly slower than a jet, the elapsed time is competitive as turboprops don’t climb as high

But over 400nm, the flight length becomes a factor, as regional aircraft cabins tend to be small.  As a result, about two hours is the maximum passengers would accept before wishing for a large aircraft.  For flights over 400 miles, the higher speeds are a critical success factor, favoring jets.  As one can see in the chart below, the turboprop market is concentrated on smaller stage lengths.  The Embraer EJets, which have similar or better comfort than mainline narrow-body jets, fly the longest segments in the regional market because of their speed and comfort. This holds not only in North America but also for other world regions,

The following chart shows the average load factor by stage length.  Regional jets are deployed to larger communities and should be carrying larger loads.

This pattern reduces the opportunity for turboprops in hub-feeder operations, as regional jets can offer a 500-600nm catchment area, while turboprops typically have a 200-300nm catchment area. But turboprops fill the bill for smaller markets and connect to the closest mainline cities for point-to-point service. While this is currently absent in the US, other parts of the world use this feature.

We offer the following table as evidence of the average number of passengers on US regional flights. The data suggests that the market should embrace a turboprop.  The traffic demand suggests that 50 seats will be sufficient in most cases.

Indeed, regional jets are not close to 100% load factor.  This underscores these aircraft’ poor economics and the risk of high trip costs.

Therefore, deploying turboprops would be more efficient for US regional airlines. Since no new technology regional jets are in production, turboprops will drive technology in the regional market for the next decade. For the sake of definition, let’s define regional as Scope Clause compliant for the US regarding seats and weight.

Let’s explore this option further.

Using airline operational data from Skailark, we find the following. The data reported covers North American and European airlines.  We want you to focus on the red box at the red box at the bottom.

The table shows the relative efficiency of turboprops – even old models that are no longer in production. Comparing Props to Jets of a similar vintage and size (Q400 vs. E175 or D328-300 vs. D328-100.) generally shows at least a 20% benefit in fuel burn in favor of the Prop.

Using the Do328 as an example is especially interesting because the D328eco is its successor.  The D328eco should deliver ~5% better fuel burn than the previous generation, with very competitive economics on a per-seat basis with nearly 1/3rd more seats (40 to 31).  Looking at the Do328-300 jet in the red box, the D328eco should deliver ~30% better fuel burn.  We wrote about this aircraft earlier this week, and we are impressed. This is the step change airlines can expect by deploying state-of-the-art turboprops.  For regional operators, this level of impact turns many abandoned markets back to attractive.

The Bottom Line

Turboprops should be staging a comeback, given their lower operating costs.  While turboprops are more efficient than regional jets, passengers, especially in the US, have been persuaded that jets are “more modern” than turboprops.  That perception is far from reality; it still influences airline fleet choices.  But with small cities needing air service, turboprops should be welcomed as the feeder service to major airports and the rest of the world.

For anyone doubting the modernity of an airliner powered by a propeller,  let us introduce you to the future engine for many commercial aircraft.  Here you see the CFM Rise engine with massive blades that will be quiet and highly fuel efficient.  Propellers are not old-fashioned or dated technology.

Perhaps electrification, which utilizes electric motors and propellers, will also help change perceptions.  Electric airplanes will become the next competition for turboprops, but battery technology isn’t quite ready for larger aircraft today.  Proposed electric-powered regional models lack speed and range due to battery limitations, but that will change as battery technology improves.

Finally, not to be overlooked, airline economics are key; regional “hub feeders” using the same energy source as used at the hub (Jet A1, SAF) make them versatile and easier to finance.  The future of regional air service is surely the turboprop.


author avatar
Addison Schonland
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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