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Airline Management, General Aviation, Regional Aircraft, UPDATES

UPDATE: The Czech Republic’s remaining 2 aircraft manufacturers are each facing an uncertain future for different reasons. Evektor struggles to finance its EV-55 Outback as its Malaysian investment partners have proven to be unreliable and “dubious” in their plans for the company and its EV-55 Outback program, while Aircraft Industrie’s (ex-LET Kunovice) new L-410NG is in certification, but Russian owners are already building an assembly plant in Yekaterinburg, while Russian owner is also talking about a Chinese assembly line in China after a recent order for 20 x L-410 UVP-E20’s with GE H80 engines, 3 assembly lines each doing what 10-12 units a year ? Russia is looking to be free of western supplies, as more economic sanctions are a real possibility but “Russianisation” of its own and western aircraft will not be easy or go down well with western customers should they wish to export them one day. Both the EV-55 Outback and L-410NG are partially funded by the Czech Ministry of Industry and Trade, and Czech Government needs to make sure both programs stay in the Czech Republic and not be moved to Russia, China or Malaysia, as that would be a major blow for the Czech Republic’s Kunovice region, the center of the Czech aircraft manufacturing industry today. A quick look at the 19 passenger regional un-pressurized market (+ 4,389 aircraft delivered since 1963), which today has 4 of the original 10 aircraft programs in production with 2 more programs to be resurrected in the next 3 years. While the totally new Chinese AVIC Y-12F is now FAA certified and it is impressive indeed. Finally, a look at original factory prices versus used prices today which in the case of the DHC-6-300 Twin Otter are 100% to 140% higher than when they rolled out from the factory 35+ years ago, jet airliners cannot touch the resale value retention of some of the 19 passenger regional turboprops, why ?

READ: Latest Articles on Evektor and its EV-55 Outback program problems (April 11, 2016) plus articles on 2015 General Aviation Market turboprop deliveries (February 16, 2016) and the 19 seat regional turboprop market.

READ: Article on Eastern European commercial aircraft industry, June 2, 2015 and on the Chinese Y-12E and new Y-12F, November 27, 2014.

My blog of a few days ago on the Evektor EV-55 did not cover the new Czech built Aircraft Industries L410NG 19 passenger twin un-pressurized twin enough, so I want to give credit where its due and give criticism and warnings where they are due as well, it is what I do and have done for over 37 years as a former airline analyst, airline executive, commercial turboprop and jet aircraft salesman founder and owner of 2 business jet charter/management companies, 3 aviation services companies in 3 different countries and to my current job as aviation consultant to airlines around the world.

LET-410-3let410ng

The manufacturer Aircraft Industries is Kunovice, Czech Republic based company that used be known as LET Kunovice, the manufacturer of the LET-410 range of 19 passenger turboprops, in fact they are the #1 small regional aircraft manufacturer in the world, with 1,138+ built and all over the world, the only place it has never been operated is North America. Today, there are as of last summer, 178 Let-410’s in service around the world still (73 in Africa, 41 in South/Central America, 27 in Russia, 31 in Europe and 6 in Asia/Pacific/Middle East).

The most popular model is the Let 410-UVP-E series (UVP stands for STOL), as the aircraft is capable of operating in an out of runways as short 1,673 feet (T.O. to 35 feet, ISA, SL) powered by the Czech Walter M601E engine, which today is now part of General Electric and the new designation for the re-engineered engines is H75 (750 shp), H80 (800 shp) and H85 (850shp), which until recently have only powered western Agricultural aircraft from Thrush and others.

Success has been achieved with the Nextant King Air C90A program where the original PT6A-21’s/135’s are replaced with the GE H75 (flat rated to 550 shp) and a Garmin G1000 avionics package, giving the $2.8 million refurbished C90XT lower fuel burns, +10 kts at cruise, 4,000 hour TBO, direct climb to FL 250, single channel electronic engine control and no fuel nozzles to clean, a good deal against Textron Aviation’s $4.0 million C90GTx with PT6A-135A’s.

nextant-1

But GE’s decision to take on Pratt & Whitney’s PT6 line which has had a monopoly on latest turboprops, and GE has scored a big win by being selected to power the new Textron Aviation’s SETP (single engine turboprop) which is in development now. In the future GE will have turboprop engines from 750 shp to 1,500 shp, and manufacturers will now have a second choice, which is good, as it has already pushed complacent P&W to upgrade and improve its PT6 line, like the PT6A-140 for the Grand Caravan EX, all good stuff for the industry.

Aircraft Industries is today 100% owned by Russia’s Ural Mining & Metallurgical Company (UMMC) which is owned by Russia’s billionaire Isrkander Makhmudov who in 2014 according to Forbe’s Magazine was worth $6.4 billionaire and 22nd richest in Russia and very close to President Putin, naturally.

The latest announcement by China General Aviation Supplies (CASC) for 20 x L-410UVP-E20’s for Xinjiang General Aviation raised my eyebrows as the Chinese are talking about building an assembly line in China, when there is one in Kunovice, Czech Republic is already building no more than 14-18 units per year at best, and the new L-140NG is being partly funded by the Czech Ministry of Industry and Trade through the MOSTA project which like the Evektor EV-55 brings in other Czech aerospace companies to benefit a larger cross section of the industry.

Like the EV-55 Outback, the Czech Republic will NOT look upon any move of the L-410NG program to another country with understanding as the program is partly funded by the Czech taxpayers to keep a Czech aircraft manufacturing industry alive. Below is link to the information on the L-410NG

L410NG

On this issue there has to be some RED FLAGS on both the EV-55 program and the L-410NG especially asd UMMC is already building an assembly line in Yekaterinburg, Russia under Ural Works of Civil Aviation (UWCA), part of Oboronprom a Russian Aerospace company holding company that is part of the Russian Military Industrial Complex, owned by Rostec, which is on the EU/US sanctions list for Russia’s annexation of Crimea, and the company has holdings in the following 7 and several other Russian defense firms:

  • Defence Systems (75%)
  • Mil Moscow Helicopter Plant (36%), a design bureau.
  • Kamov (49.46%), a helicopter company.
  • Kazan Helicopter Plant (29.92%), assembly plant for Mi-8’s
  • Ulan-Ude Aviation (75.09%), assembly plant for Mi-8’s and 171’s
  • Rostvertol (17.13%), assembly plant for Mi-24 attack helicopters
  • Vpered Moscow Machine-building Plant (38%)

The plan is for the L-410-UVP-E20 (with the newer GE H80-200 engines) to be built there by 2017, the facility is to build the 1st 6 units in 2017 and after that it expected to produce 12 units per year with a capability to do 20 units per year by 2019.

The 1 billion ruble ($US 15 million today) investment is 30% covered by the Russian Ministry of Industry and Trade, and calls on over 50% of the production to be sourced from Russia, from avionics and engines, yet the the engine is a GE product, which goes against what Russia wants and that is a western free aircraft, free of possible future economic sanctions, which could cause production shut downs in Russia of aircraft with western components. The Russians have no engine in the 750-850 shp range so the engine will have to be GE, though they talk of changing the avionics and engine on the L-410 ?

It is surprising to me that at Ural Works of Civil Aviation’s (UWCA) Titanium Valley special economic zone in Yekaterinburg, they will also be have a Airbus Helicopters (H135’s)and Bell Helicopters (Bell 407GXP’s) assembly line for the Russian market, again not sure how successful the “Russianization” of those programs may work, as their program of IMPORT SUBSTITUTION is really difficult in our global world economy today, they cannot just shut themselves off from the world like they did from 1917 to 1990, that was a different time and place.

Russia is trying to get Russians to fly on Russian aircraft, but they have neglected the bottom end and after the deal to build Bombardier’s Q400’s in Russian fell through due to the tense political climate after the annexation of Crimea by Russia, the Russians turned to their long dead 64 passenger IL-114 program (photo below) its 1st flight was in 1990 and are now they are resurrecting it, and it was bad aircraft then then and it will be bad again.

It is powered by the Klimov (Ukrainian) TV7 engine with 2,466 shp and the P&W 127H was installed in 1999, but of 20 built, 4 out of 7 are operational still flying with Uzbekistan Airways, the aircraft will now become a priority and will replace IL-20 and IL-38’s as an MPA (maritime aircraft), and with cargo and artic (with skis attached ?) versions planned.

The aircraft has a 270 kts max. speed, cruise is 254 kts and a range of 540 nm with 64 passengers and a MTOW of 51,809 lbs. it is a poor substitute but its all Russia has in this category today.

il114_teemutuuri

In fact, this was the issue back in 1969 when LET Kunovice was designing the original Let-410, as the big customer was going to be Aeroflot, the Russians insisted on a ‘non-western’ engine, as the first batch of 31 Let410A’s (4 prototypes, and 27 production models) were powered by the P&W PT6A-27 engine (same engine on DHC-6-300’s as well), The Czechs went to work and sort of re-engineered the PT6A-27, and came up with the M601 line of turboprops, and that was the only engine of choice until recently, when the switch to the more modern GE H75/80 line was made.

I should point out the M601 was also used on the Polish 2 seat PZL Orlik military trainer with 59 built and also some after market work re-engine work on the New Zealand manufactured Pacific Aerospace FU-24 Fletcher Agricultural aircraft  (from which the turbine PAC Cresco 08-600/750 emerged) , and as I have already many many Ag planes in the USA as well were re-engined, as Walter failed to get beyond the after market retrofit market and get on any other OEM aircraft project.

LET Kunovice also ventured into the 40 seat market in the late 1980’s with their L-610M, which was initially powered by the Czech Walter M602 engine (1,822 shp) for operations by Aeroflot and after the fall of communism the manufacturer had to start focusing on the western market and in 1992 they launched the L-610G a GE CT7-9D powered L-610, which had a max. speed of 265 kts, 236 kts cruise, 1,305 nm range and a MTOW of 32,000 lbs, and could have been a good competitor to the DHC-8-100, Saab 340A/B had it gone into production, but only 8 were built.

Let-610G

In 1998, US based agricultural aircraft manufacturer, Ayres Corporation bought LET Kunovice in 1998, which stunned many including myself, as years earlier the Czech Government turned down an offer from Fairchild Aircraft led by Chairman Carl Albert in 1993 to form a joint venture with LET Kunovice, to produce a line of good regional airliners from the Metro 25, L-410 to L-610 (photos below), but by 1995 the JV went nowhere and the plans were dropped, which would have been a very good marriage indeed.

metrolet-445let-l-610-02 ayres 7000

In 1996 Fairchild Aircraft bought German manufacturer Dornier, which was a good marriage of Metro 23, Do228 (270 built), Do328 (217 built) and the 328Jet 9110 built), but declining interest in the 328Jet forced Chairman Carl Albert to sell to Allianz AG and US private equity firm Clayton, Dubilier & Rice Inc. for $1.2 billion ($400m in cash and $800m debt), and they tried to develop the D0428/528 and 728 line of regional aircraft, but global events of September 11, 2001 forced the company to go bankrupt in 2002, too ambitious with its plans.

Fairchild assets were bought M7 Aerospace in 2003 and in 2010 that company was bought by Elbit Systems (Israel), while US based AvCraft bought the rights to the D328/328Jet in 2003 and continued production and support until it declared bankruptcy in 2005, and then M7 Aerospace (USA) bought that company only to spin off the type certificates of the D0328/328Jet to 328 Support Services GmbH which has been supporting the 32 seat 328 line very well until February, 2015.

The new 328 type certificate is now owned by US based Sierra Nevada Corporation, and plans to put the 328 turboprop and 328Jet into production in Turkey in the near future as the TRJ-328 and TR-328 (turboprop), with plans to develop the 60-70 seat TRJ-628 and TR 628 in a few years time, the Do 328 continues and as a former Airline Analyst for Dornier Luftfahrt GmbH (Daimler Aerospace), I am happy to see that.

So, in 1998, LET was desperate for help, and along comes Ayres Corporation of Albany, Georgia, run by Fred Ayres who bought the agricultural aircraft manufacturer from Rockwell International. Ayres Corporation was working on a “wild” cargo aircraft called the Ayres LM-200 Loadmaster, a twin engine (LHTEC CTP800-4T comp[osed of 2 x CTP800 engines) driving a single Hamilton Standard 5 bladed propeller through a combining gearbox.

LET-1-ayres-lm200-loadmasterLET-2-ayres-lm200-loadmaster

The LM-200 was ‘project” that was put together by Fred Ayres and his old Vietnam war friend Fred Smith (Founder and Chairman of Fed Ex), and FedEx ordered 50 of these LM-200’s, but Ayres was probably over its head on this, its products were old radial engine ag aircraft like the S-2R.

So from 1998 Ayres owned LET and they worked on the L-410 and the L-420 (FAA version with more powerful Walter M601), and the Ayres 7000 (L-610G rebranded), but as expected it was going nowhere, and it all collapsed in 2001 with bankruptcy for Ayres Corporation, the LM-200 was too complicated, it was a twin, but now the single prop was the issue, one could have a both engines running but a prop problem could be worst than losing both engines ! certification was always going to an an issue, and poor management was highly responsible for the demise.

As you see manufacturing regional aircraft is a tough business, many bankruptcies, but we are now seeing a re-emerging market for the 19 seat un-pressurized aircraft, a market that produced 3,286 aircraft between 1968-1992 (average 126 units per year) with a peak in 1982 at 260 units between 9 manufacturers from 9 different countries (Brazil, Canada, Czech Republic, Israel, Spain, Australia, Germany, UK and USA), and that is good sign, as many of the majority of the aircraft today are +35 years old !

Below you will see the the 10, 19 seat regional un-pressurized aircraft, 4 of which are in production today with 2 more planned by 2018, by row, left to right :

  1. de havilland (Canada) DHC-6-300 Twin Otter – IN PRODUCTION TODAY as Viking Series 400 /  Embraer (Brazil) EMB-110 Bandeirante  /  Aircraft Industries (Czech Republic) L-410-UVP-E20 – IN PRODUCTION TODAY with new GE H80 engines
  2. Shorts (UK) SC.7 Skyvan  /  AVIC (China) Y-12E  – IN PRODUCTION  /  PZL (Poland) M-28 Skytruck
  3. Dornier (Germany) 228-200 – IN PRODUCTION as RUAG Do228NG /  GAF (Australia) N24A Nomad – PLANNED PRODUCTION as Mahindra Aerospace GA18  /  IAI (Israel) 102 Arava
  4. CASA (Spain) 212 – PRODUCTION PLANNED as Indonesian Aerospace N219 with no rear cargo door anymore.

dhc-6-3EMB-110-11Let 410-sss

shorts-11Y-12-air vanuatupzl m28-4

RUAG 228-1t-ga18 n24a-001076673IAI arava

casa 212

19-1

The Delivery GRAPH of the 9 aircraft up to 1999 that I have put together.

 

Hopefully, the Czech Republic will retain its two manufacturers, but with financial and other difficulties at Evektor and unknown direction of Aircraft Industries (ex-LET) due to its ownership and plans for production in Russia, its all up in the air. The Czechs have an incredible history of aircraft manufacturing that goes back to 1918, and it would be sad to see that industry die out. Too many opportunities have been lost in the Czech Republic and the EV-55 and the L-410NG today have a huge potential to become big players in their respective market segments, but can they pull it off ? is the big unknown today.

As for current production rates today, they are a fraction of what they once used to be:

1.Viking Air (Series 400 Twin Otter) at 18 units per year at $US 7.5 million per unit, though latest 400S (seaplane version) is priced at $US 6.0 million, VFR, composite floats and PT6A-27.

2. RUAG(Dornier 228NG) is planning 4 units per year, prices are at $US +8.0 million per unit.

3. AVIC (Y-12E) at an estimated 12-14 per year, latest price was $US 3.7 million per unit.

4. Aircraft Industries (L-410-UVP-E20 with GE80-200 engine) at an estimated 8-10 at best these days as workers are now part-time, latest price quote was $US 5.9 million. The Chinese also have just FAA certified the new Y-12F, which is a totally different airplane than the Y-12E, much bigger (photo below), still a 19 passenger un-pressurized aircraft, but more of everything, it is powered by 2 x PTA-65B with 1,100 shp per side, MTOW of 18.522 lbs, max. payload 6,615 lbs., max. cruise of 259 kts, normal cruise 232 kts, max. range 1,432 nm and it can carry 3 x LD3 standard containers.

Y-12F-8

The above current production rates in this segment leaves a production for 2016 at around 42 to 46 units, which is not much, it calls into question the viability of such programs, but then the high price for some makes it worthwhile, but for commercial operators, the current pricing is NOT economical, only government agencies or wealthy private buyers can afford the current prices, remember these are 19 passenger un-pressurized airliners with cruise speeds between 165 kts to 240 kts, so CASK (cost per available seat km) is high, and requires very high yields ($/RPM) in scheduled service, and high hourly costs require high hourly charter rates per hour.

In my Price graph below, I show original factory prices for the 7 of the 9 regional 19 passenger un-pressurized turboprops by year manufactured. Note that a 1980 built de Havilland DHC-6-300 Twin Otter went for $US 1.0 million in 1983, today that same aircraft in a average condition is priced above $2.1 million on the used market, over 100% of its original sales price, and that is the norm today, because there is a market for these rugged 19 passenger aircraft, demand is good but supply is low, when demand >supply we get high prices, still cheaper than a new Viking Air Series 400.

There is obviously a good correlation between the delivery graph (above) and the price graph (below), as production went down after 1981 the prices started to rise, as fewer aircraft were produced but fixed costs stayed the same, each aircraft had to carry a ever increasing fixed cost burden, and by the 1990’s the CASA 212 and the Dornier 228 were both over $US 3.5 million a piece, as you can imagine simple price elasticity of demand, the higher the price the lower the demand, and eventually it lead to the programs being shut down, with DHC-6-300 by 1988 and the EMB-110 in 1990, and then just the CASA 212 and the Dornier 228 continue, as did the Czech LET-410 and Chinese Y-12 and Polish AN-28 all in small numbers off course.

The production of the 4,389+, 19 passenger un-pressurized turboprop airliners:

  1. de Havilland DHC-6 Twin Otter, 1965-1988 (300 Series), 2008-present (Series 400) 844 + 85 (400’s) =929 aircraft
  2. Embraer EMB-110 Bandeirante, 1968-1990 = 501 aircraft
  3. LET Kunovice/Aircraft Industries, 1971-Present = 1,400+ aircraft
  4. Shorts SC.7 Skyvan, 1963-1986 = 153 aircraft
  5. AVIC Y-12 models, 1985-present = 220 aircraft
  6. PZL AN-28/M-28, 1984-2003 = 176 aircraft
  7. Dornier / Hindustan 228, 1991-1998, RUAG 2010-present = 288 aircraft
  8. GAG N24A Nomad, 1999-1985 = 39 aircraft
  9. IAI Arava, 1972-1988 = 103 aircraft.
  10. CASA/IPTN 212, 1971-present = 580+ aircraft

The jet airliners do not have such value retention, they are half their price after 10 years and here we have a 35+ year old Twin Otters with 100% to 140% asking used prices above original prices. Says a lot about demand and supply and off course pricing of new and used aircraft.

19 seaters prices

 

Till next time, thank you for reading my blog.

 

 

 

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About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 25+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (45+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems be in the business, and help with restructuring for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com and I comment a lot on Google+, my Facebook and LinkedIN.

Discussion

One thought on “UPDATE: The Czech Republic’s remaining 2 aircraft manufacturers are each facing an uncertain future for different reasons. Evektor struggles to finance its EV-55 Outback as its Malaysian investment partners have proven to be unreliable and “dubious” in their plans for the company and its EV-55 Outback program, while Aircraft Industrie’s (ex-LET Kunovice) new L-410NG is in certification, but Russian owners are already building an assembly plant in Yekaterinburg, while Russian owner is also talking about a Chinese assembly line in China after a recent order for 20 x L-410 UVP-E20’s with GE H80 engines, 3 assembly lines each doing what 10-12 units a year ? Russia is looking to be free of western supplies, as more economic sanctions are a real possibility but “Russianisation” of its own and western aircraft will not be easy or go down well with western customers should they wish to export them one day. Both the EV-55 Outback and L-410NG are partially funded by the Czech Ministry of Industry and Trade, and Czech Government needs to make sure both programs stay in the Czech Republic and not be moved to Russia, China or Malaysia, as that would be a major blow for the Czech Republic’s Kunovice region, the center of the Czech aircraft manufacturing industry today. A quick look at the 19 passenger regional un-pressurized market (+ 4,389 aircraft delivered since 1963), which today has 4 of the original 10 aircraft programs in production with 2 more programs to be resurrected in the next 3 years. While the totally new Chinese AVIC Y-12F is now FAA certified and it is impressive indeed. Finally, a look at original factory prices versus used prices today which in the case of the DHC-6-300 Twin Otter are 100% to 140% higher than when they rolled out from the factory 35+ years ago, jet airliners cannot touch the resale value retention of some of the 19 passenger regional turboprops, why ?

  1. I am an aircraft enthusiast myself and find your blog interesting other than for the “Soviet/ Russian Bashing” which inevitably finds its way through some of your articles especially when anything relating to the Russians or East European is the subject of your writing.

    There are not many places left where an airline is not the subject of financial crisis of one sort or the other. This is a capital intensive industry which needs more than “private capital”.

    Since the Reaganization of the world, many countries borrowed on the American ‘free market model” of what should otherwise be state owned enterprises (education/ utilities (electricity/ water/ gas/etc) public transport and health). The results have been tragic if not entirely disastrous in most of the world (including in the US).

    There is a rationalization ( a shakeout if you will) of the airline industry going on. Those who diversified (like Singapore Airlines) have done well. The US chapter 11 protection against bankruptcy has seen many forced mergers or total liquidations and the loss of investor money over the years in the billions. Braniff. TWA and Pan Am to name a few come to mind even though they are well over the horizon and the memories of a generation or two.

    They are examples of overspending, overly optimistic management and a mindset that the US would continue to dominate everyone, every nation, every industry and that growth would have a one direction trajectory (up). The airline industry is dotted with failures of a business model in a system that is so free enterprise it is oppressive of business realities and devoid of common sense.

    You and I could have done better for LET than its current management has done for it. But that’s a moot point.

    Keep your publication going. It is an excellent source of commercial intelligence. We may not agree on everything, but that’s part of the spirit of blogging as it is with everything else.

    Gopal

    Like

    Posted by grkumar | April 15, 2016, 4:36 pm
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