Turboprops: Could ESG concerns help their commercial outlook?
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It is often said that the best solution to a problem is the easiest one, and yet as the airline industry pours time and effort into strategies to decarbonise short-haul flying, one readily available option is seldom mentioned: re-fleeting with turboprops.
Large turboprops carrying between 72 and 82 passengers can be up to 45% more fuel efficient on a per-kilometre passenger basis than similar-sized regional jets over distances of less than 500 km and match those of latest-generation narrowbodies. Additionally, their lower cruising altitudes – particularly for ATR – result in minimal contrail formation, one of aviation’s largest climate impacts.
Ishka examines the case for turboprop re-fleeting on sustainability grounds and ponders what market dynamics could revive demand for the asset type.
The studies calling for turboprops
Much of the research into aviation’s decarbonisation levers has centred on SAF’s scale-up and new propulsion technologies, but some independent observers have also been making a case for turboprops.
Last June, prominent French climate consultancy Carbone4 published an educational blog post (in French, ‘What if a less carbon-intensive plane already existed?’) on the environmental benefits of turboprop aircraft, from lower fuel burn and CO2 emissions to the non-CO2 effect advantages of flying at lower altitudes. Its overall argument: that lower speeds and ‘slightly degraded’ passenger comfort are worthy trade-offs for environmental advantages.
A month earlier, in May, Germany-based Sustainable Aero Lab, a pioneering accelerator for start-ups and projects in aviation sustainability, published its Bridging the Gap to 2050 white paper, which proposed reintroducing more turboprop aircraft as one pathway to aviation decarbonisation. “With the comfort levels that modern turboprops can offer and potential faster travel times for distances up to 600 kms due to more optimal flight routes, there is an obvious benefit in building new turboprop designs with the most modern conventional engines and larger seat capacity, drastically reducing emissions compared to the smallest jets,” the white paper lays down.
These are recent examples, but the environmental case for turboprops goes back several years. In 2014, researchers at the International Council on Clean Transportation (ICCT) were already singing the praises of turboprop fuel efficiency in the US regional market, and believed “a move towards more efficient regional aircraft, namely larger turboprops,” could allow regional jet operators to “significantly” close the fuel efficiency gap to market leader Horizon Air, which at the time operated a turboprop-heavy (DHC Dash 8) fleet.
In all cases the comparisons are against regional jets, as high-density narrowbodies are often more efficient from a CO2 emissions perspective. To give one example, Ishka compared flights by ATR72-600 operated by Indonesian carrier Wings Air (a Lion Air subsidiary) between Banda Aceh and Medan with Airbus A320ceo operated by Indonesia AirAsia in the same route. According to CO2 data powered by PACE, the A320ceo delivered 83 grams of CO2 per available seat kilometre (ASK) on this route compared to 88.4 grams of CO2 per ASK on the ATR.
A lessor’s sustainability case for ATR
The environmental case for more large turboprops today is inevitably conflated with the case for ATR aircraft, the only large passenger turboprop still in production (after the suspension of DHC-8 Q400 production in 2021) and the most fuel-efficient in the market. Those attributes do not escape the attention of marketing teams at ATR and many of its operators and lessors – the aircraft is marketed as having distinct environmental advantages versus rivals – in particular regional jets –through lower fuel burn, minimal contrail formation, as well as less noise and NOx pollution.
In aviation finance circles, some of these attributes call to mind the 2019 green loan financing for ATR72-600s delivered to lessor Avation and on lease to Swedish airline Braathens Regional Airlines (BRA) (see Insight: ‘ATR makes the case for green aircraft financing’). To Ishka’s knowledge, this transaction remains the only ‘green loan’ aircraft financing.
Since then, London-listed Avation has made its ATR orderbook a cornerstone of its sustainability growth strategy, and it believes that higher fuel costs will increase demand for turboprops in years to come. “Our strategy is to go as green as possible, as quickly as possible, because clearly the writing is on the wall for old technology,” Jeff Chatfield, executive chairman of Avation, tells Ishka. In late October, the lessor disposed of its oldest ATR72-500 further consolidating its turboprop offering around the more modern ATR72-600.
Avation believes Europe is where demand for turboprops on sustainability grounds will materialise first, thanks to ETS changes and mandated SAF blending. An increase in ETS compliance costs in the coming years is expected to add thousands of euros in monthly operational cost differences between aircraft with different fuel efficiencies (see Insight: ‘Briefing: Rising EU ETS prices – a boon for neos and MAXs?’). If from 2028 onwards non-CO2 impacts are also levied, this cost difference could widen further, putting fuel-efficient turboprops in a more favourable position. “I reckon they’re all [airlines in Europe] looking at it, they’re saying ‘what do we do next?’,” Chatfield shares.
However, the change in aircraft demand patterns will not be immediate. Today, fuel efficiency alone is not a sufficient imperative for regional airlines to pivot to turboprops. Doing so would mean downsizing in capacity (the BRA case) or making up for lower per-aircraft daily capacity with a larger fleet and more pilots. “Ultimately the [operational cost] mathematics does play out, but it’s just not quick enough […] it takes a while for it to blow through,” comments Chatfield.
ATR aware of sustainability advantages, but warns against taxation
ATR too is aware that the lower contrail impacts of their aircraft put them in a favourable position. “The contrail impact of ATR aircraft is close to zero,” ATR CCO Alexis Vidal tells Ishka, alluding to a recent Estuaire’s analysis of Nordic Aviation Capital’s (NAC) regional aircraft contrail impacts, which showed that ATR aircraft represented only 1% of NAC’s contrail impacts versus 14% of their Bombardier Q400 fleet and 24% for its Embraer E190 fleet. Dutch regional aircraft lessor Truenoord also lists lower contrail generation among the strengths of current turboprops in a recent market report.
However, questioned by Ishka on whether non-CO2 levies via the EU ETS could improve ATR’s market prospects relative to jets, ATR noted that it opposes government levies. “The air transport industry is under significant economic pressure, and we, at ATR, believe that taxation is not necessarily the answer to the current challenges, especially when you consider the essential need for air connectivity worldwide,” Vidal says.
The conditions for a turboprop revival
It would be premature to talk about a possible turboprop revival without stating the obvious: the share of large turboprops in operation has declined in recent years. According to CAPA Fleets data, the number of in-service passenger turboprops with more than 20 seats has remained level over the past decade, and as a share of the global aircraft fleet it has declined from 11.5% in 2010 to 8.1% today. Over the same 13-year period, the number of ATR and DHC turboprops in service increased by 64% and 21% respectively, but to a large degree as a replacement for other discontinued turboprop models.
Purely on commercial terms, the industry’s view is that to grow sales and leases beyond fleet replacement among existing airlines a few things need to change for turboprops, such as expanded aftersales and MRO support or larger seating capacities through new product offerings. Nevertheless, ATR is confident that environmental pressures will also support sales. “We are very confident that the demand for turboprops will pick up, because our aircraft are a compelling choice for addressing regional market needs, all whilst contributing to a more responsible way of flying. The paradigm is changing, this is what the society expects,” shares Vidal on ATR’s outlook.
Turboprops as a gateway to decarbonised flight
An opportunity for turboprop growth noted by Ishka is that of airlines with ‘sustainability’ as the centre of its business model and aiming to be early adopters of low or zero tailpipe emissions propulsion.
Carriers like Air Cahana in the US or Ecojet in the UK are aiming to build scheduled passenger networks with in-service turboprops initially before moving to hydrogen or electric powerplants currently under development. In the case of Air Cahana, the airline is aiming to serve secondary regional airports with ATR aircraft on 30% SAF before transitioning to 100% SAF and, eventually, ZeroAvia hydrogen-electric retrofitted powerplants. Part of what could make the ATR choice compelling in these cases is that, together with Pratt & Whitney Canada, they are the only OEMs targeting 100% SAF certification by mid-decade. Currently, aircraft may only fly with up to 50% blended SAF.
While still sceptical of new propulsion technologies becoming commercially viable this decade, Aviation’s Chatfield agrees that turboprops are the logical starting point for these airlines. “[New] airlines should not gamble on technology […] the sensible thing for them to do is start their business with normal turboprops and then if a technology emerges that’s really commercially viable and safe, they can go for it then,” he comments.
The Ishka View
There is no denying that turboprops have a role to play in the decarbonisation of aviation. Purely from an environmental perspective, there are advantages to replacing many short flights operated by regional jets and even some narrowbodies with modern turboprops. By ATR’s estimate, if its aircraft were to replace regional jets on intra-Europe flights, they would be able to save 1.5 million tonnes of CO2 per year, equal to the CO2 sequestered by a forest the size of Crete. Indeed, it is not unthinkable for a region like Europe that is already dipping its toes in restricting short-haul flying where competitive rail alternatives exist to eventually intervene through policies to discourage regional jets in favour of turboprops in viable routes.
However, without policy intervention, the commercial advantages of regional jets will continue to limit the turboprop’s revival. Regional jets fly faster, accommodate more passengers, and are a more versatile aircraft for route planning (see the case of Horizon Air, lauded by the ICCT in 2014 for its turboprop-driven efficiency, but now entirely a regional jet operator). Even if more airlines wanted to switch to turboprops, new deliveries would be hard to come by. ATR’s delivery rates are significantly down on 2019’s 80-per-year, at only 25 in 2022 and 40 targeted for 2023. The OEM hopes to get back to an 80-per-year target by the end of the decade when the new hybrid-electric EVO variant is expected to enter into service. However, the go-ahead decision for the EVO family has been delayed from 2023 to 2025, following Embraer’s decision to delay the launch of its 70-90 seat next-generation turboprop.
On those delays, there is something to be said about the impact of the pandemic on regional airlines, which may have deferred plans for fleet renewal or expansion. On the bright side, the market appears to be making a good recovery. ATR tells Ishka that the second-hand market for its aircraft is “very sound” with “over a hundred transactions of second-hand aircraft since the beginning of the year – a level that is similar to pre-Covid trends.” According to the OEM, there are currently “almost no ATRs available” on the market and values are on the rise, which they hope will lead to new aircraft sales.