READ” Blog on 2016 Turboprop Market (click General Aviation) for more info on the 19 seat market in the March 9, 2017 issue
Viking Air has announced on May 31, 2017 that it is shutting down production of its $7.5 million Twin Otter Series 400 for 90 days and will lay off 212 starting July 28 and “give the company time to line up more sales” according to Viking’s President Dave Curtis. production has been at only 18 aircraft per year from April, 2015 when Viking Air announced layoffs for 116 employees and cut production from 24 units per year to 18, so this is not the first layoff and production cut back.
BELOW Series 400 Brochure
As of today, around 120 Series 400’s have been built since the first new Twin Otter in 22 years was delivered to Zimex Aviation (Switzerland) in February, 2010, so in 7 years they have averaged around 17 units per year, including slow ramp-up for 2 years and then 24 per year for roughly 3 years and just 18 per year for the past 2 years. Still at $7.5M per unit its has to be a $145+ million a year business.
BELOW Graph – de Havilland DHC-6 production of 844 aircraft
BELOW is a graph of the delivery prices of various aircraft during the boom years with time, no surprise as prices went up and up sales went down and down, exactly the state of the industry today.
The glory days are over for this market, but it has life, as Viking has shown, see my Graph below.
Viking Air bought the Type Certificates from Bombardier for most of the de Havilland products, DHC-1 Chipmunk, DHC-2 Beaver, DHC-3 Otter, DHC-4 Caribou, DHC-5 Buffalo and the DHC-7 in 2006 after manufacturing parts for Bombardier for the line, and is now the OEM and can restart any line at will.
No secret that sales have been slow, and I am not sure what 90 days will do for sales, but given the quickness of the shut down, I suspect it may have something to with the June, 2015 order for 50 Series 400’s by Beijing’s Reignwood Aviation Group or plans to provide Vancouver’s Harbour Air (“world’s largest seaplane airline”) with Series 400’s for its planned operations China have gone bad.
“The strategy is to have the company’s sales team try and catch up with production levels”, you should have AT LEAST 12 months of orders in backlog, and the fact Viking apparently has 7 aircraft sitting around with no customers, which is troubling if true, 5 months of production sitting around ? something went bad recently with orders or one big order.
Harbour Air’s 49% owner is China’s Zongshen Tianchen General Aviation Co., owned by Zuo Zongshen who wants to take the seaplane model to China, with it’s vast urbanization coupled to a long coastline and many rivers, you would think it would be a great opportunity, but smog keeps VFR ops limited, and airways are still controlled by PLA (People’s Liberation Army), so not as easy as it seemed ?
Viking believes that there is a market for 500 Series 400’s in China over 20 years ? which is a stretch for sure, China forecasts I have seen are always +200% over optimistic for some reason (makes financials look real good), as was the 2006 Conklin & deDecker marketing study that forecast 440 aircraft deliveries (using a price of $3.195M) between 2007 to 2016, well that was 300% over optimistic, or would they have sold 440 by now if the price was $3.195M, because for whatever reason that price is today 134% more than 10 years ago that is a 9% per year price escalation to the current $7.5M, why increase price so high ? costs ?
BELOW is Conklin & deDecker 2006 Series 400 Market Study (PDF)
I am the more of a realist and knowing the market and its current and historic appetite and trends, one knows what is and is not realistic.
This is the latest production shut down of 19 seat regional un-pressurized aircraft in a few years, as Polish PZL M-28 Skytruck (a modernized and westernized AN-28) has been on ‘hold’ for several years, while Czech Republic’s LET-410 manufacturer Aircraft Industries has cut back its production of the LET-410 as Russian owner UGMK moves production to Russia for a “Russianized” version (engines, avionics, etc.), while Aircraft Industries is still trying to certify the new L410NG with GE H80-200 engines and Garmin 3000 avionics.
With production rates so low, no wonder costs are so high, what to do, the latest forecast on this segment (JADC) shows 2,035 turboprop aircraft between 15 and 19 passengers in global use (pressurized and un-pressurized), and the forecast for the next 20 years is just 438 new aircraft deliveries or 22 per year ouch ! I think that is too low, but more like 30-35 deliveries, with the LET-410 soon to bow out and Ruag Do228NG remaining a small niche player with just 2 to 4 deliveries per year, so its Viking Air’s Seriess 400 and AVIC’s new Y-12F, much better than a Y-12E but more expensive and 40% bigger !
BELOW Photos L to R, Ruag Do228, Harbin/Avic Y-12E and Aircraft Industries LET-410
In China, Harbin only produced 6 x Y-12’s lat year, the Czech’s maybe 7 or so LET-410’s, RUAG maybe 2 Do-228NG’s, so you have a market today at around 33 aircraft per year between 4 OEM’s and Indonesia is coming out with its new modified Casa 212-200 now the N-219, with 19 passengers, PT6A-42 engines (850 shp) and 210 kts, with no rear loading cargo door, should have flown in April, but delayed, anyway it has a good home market as FAA certification will surely be 5+ years away. (N219 PHOTO below).
The problem with these 19 seaers is the price from a low of $5.3M for a LET-410-UVP-E20 (H80) to $8.5M for a Ruag Do228, you are looking at $279,000 to $447,000 per passenger seat, while a Boeing B737-800 or A320 can be had for around $275,000 per passenger seat, yet fly 11+ hours per day at 460+ kts versus 5 hours per day and 180 kts at best.
No private airline can make that work, only government owned airlines or heavily subsidized airlines where small aircraft are a must, like some islands of Japan and Taiwan for instance, or government agencies (fishing, pollution, SAR, etc.) to military transport/patrol
Lastly, just as Viking Air announces layoffs in Victoria, B.C. on the Series 400, in Alberta, President David Curtis is talking about the possibility of moving beyond just parts and maintenance for the 170 or so CL-215/415 water bombers operation (Viking Air bought the Type Certificates in June, 2016) and possibly restarting the line again for the turboprop CL-415 and that could mean 900 jobs in Calgary ? can kind of bad timing for such a move ? or good PR ? depends if you are the employee being layed off or working on the CL-415 I guess.
They tried to resurrect the DHC-5 Buffalo, modernized with PW 150 turboprop engines and new avionics for the Canadian FWSAR competition won last year by C-295W.
There were just 90 CL-415’s (BELOW PHOTO left) built between 1993 and 2015 or 4.1 per year average, with the last price of $37M per unit for the final 2 that went to Newfoundland & Labrador. The CL-415 is powered by 2 x PW123AF turboprops, cruises at 180 kts and carries up to 13,536 lbs of water and retardant.
There were 125 radial engine CL-215’s built (ABOVE PHOTO right) between 1969 and 1990 or 6.0 per year on average, the PW R-2800 engine has 2,100 hp and the aircraft can do 157 kts .
Interesting note, if they want to build it, they have to look at a passenger version, which Bombardier did not bother with, but there is a certified version, CL-215C Transport for 30-36 seats, two went to Venezuela back in the late 1970s and with a cabin of 1,300 ft2 (same as DC-3), flat wide floor (when fire fighting equipment removed) and un-pressurized, so windows can be added between stringers, why not ? the market NEEDS a real amphibious regional airliner with a turboprop, the DHC-6 floatplane is too small in many places (e.g. Maldives), and the Russian Beriev Be-200 with 65+ seats is too big (for now), and you need a 30 seater now !
Yes, its my specialty having been involved in the Dornier Seastar and Frakes G-73T programs and several seaplane/amphibious airlines, I know what the market needs, from the Maldives, Indonesia, Philippines, to Malaysia, etc. its time for a good 30 passenger amphib (water to land, land to water, water to water), capable of IFR flying and 180 kts.
READ my Blog article of January 5, 2016 on seaplane airlines (under Regional Airlines).
Well, its a tough industry and watching the ups and downs of companies is interesting and sometimes disheartening, and I hope that Viking Air finds its “mojo” and starts to sell more, not an easy job. Till next time, cheers and THANK YOU as always.