Finlay Grogan, an aviation analyst at IBA advisory, looks back at the historic performance of the DHC8-4000 fleet and how the programme has been challenged in more recent times. What does the future hold for this Canadian built aircraft?
The economic environment was challenging for Canadian manufacturer De Havilland long before the current pandemic. Its struggles exacerbated by the crisis, it instructed suppliers to stop producing parts for the DHC8 in January once 19 outstanding orders had been fulfilled, thus pausing manufacture. Intense competition from European rival ATR, high availability of the type in the secondary market, exposure to international routes, low demand and cancelled orders have been hugely damaging for De Havilland. Although prospective P2F conversions may be considered, with Embraer now considering potential involvement in the turboprop market, the DCH8's future is far from certain.
Embraer now considering potential involvement in the turboprop market, the DCH8's future is far from certain.
Indeed, back in June 2019, Bombardier sold the -400Q program to Longview Aviation Capital as its commercial aircraft division was facing financial difficulties. With data collated by IBA's intelligence platform InsightIQ, we can map De Havilland aircraft deliveries over the last three years to show they've been low, only 15, 14 and 8 being sent out in 2018, 2019 and 2020 respectively. The reducing numbers clearly highlight the manufacturer was struggling to generate new orders for the aircraft type before Covid struck. Conversely, its closest competitor, ATR, has boosted the production of its ATR72-600 aircraft over the last decade, attracting more customers than the DHC8-400Q and increasing the market share gap between the two manufacturers.
A cancelled order from one of the DHC8-400Q's main customers contributed towards its temporarily paused production. In 2020 Indian Low-Cost Carrier (LCC) SpiceJet, who'd placed a firm order for 25 of the type in 2017, announced it will not take delivery of 20 aircraft. In 2019 the Canadian manufacturer also narrowly avoided a cancelled order for six aircraft from the abandoned carrier Angola Expresso; the deal eventually transferred to TAAG Angola Airlines. Angola Expresso was initially planned as a joint-venture carrier backed by state-owned TAAG Angola Airlines and other local airlines but the Angolan President rejected the project.
Aircraft retirements and operator failures boost the DHC8-400Q's availability
The number of DHC8-400s available in the secondary market increased significantly after March 2020 when many of its operators were hit by the pandemic. Some DCH8 operators are independent, regional-only carriers with a weaker financial position than larger competing LCCs or airlines. Furthermore, in March 2020 Flybe, the largest operator of the type with a fleet of 54 DHC8-400Qs, collapsed into administration and ceased operations. Ch-aviation revealed that eleven former Flybe aircraft will be converted to DHC8-Q400(AT) firefighting variants for Conair Aviation. Canadian Porter Air, the 6th largest DHC8-400Q operator, also abruptly stopped all operations because of the pandemic and parked its entire fleet of 27 DHC8s. It has yet to resume operations, having reportedly pushed back any return until May 2021.
Despite the DHC8's relatively low average age of 10.6 years as of early March 2021, InsightIQ's data reveals many operators have announced the type's early retirement. The aircraft's permanent retirement is not impossible.
After Covid prompted Air Baltic to review its fleet strategy, the operator stated its intention to be an Airbus A220 operator exclusively. It has therefore removed its twelve DHC8-400Qs from operations earlier than previously planned.
In June 2020, German regional charter operator Luftfahrtgesellschaft Walter (LGW) ceased operation after its only customer, Eurowings, decided to terminate a wet-lease contract covering fifteen DHC8-400Q. Valuable intelligence from InsightIQ reveals all aircraft were owned by Nordic Aviation Capital. As of late January 2021, two of the fifteen leased aircraft were placed with other lessees while the remaining aircraft will be returned to the lessor by the end of 2021.
In January 2021 LOT Polish Airlines, among the fifteen largest operators of the DHC8-400, announced it will start to retire its twelve models as part of a plan to eliminate the type from its fleet by the end of 2022. InsightIQ data shows the Polish carrier owns all the aircraft and their average age is 9.3 years.
A turboprop aircraft highly exposed to international routes
The current in-service DHC8-400Q fleet includes 539 passenger aircraft with around 42% currently stored or parked. In comparison, the parked and stored ATR72-600 fleet amounts to approximately 28%, over ten percentage points lower than the DHC8-400Q. When both ATR72-500 and -600 aircraft models are considered, the parked and stored ATR fleet is around 33%, nine percentage points lower than the DHC8-400.
In terms of geographical distribution, the DHC8-400Q customer base is well diversified, the North American region being its largest market (32%), followed by Europe (28%) and the APAC region (23%).
InsightIQ Flight module's data shows 23% of flights operated by the DHC8-400 aircraft type before the Covid-19 outbreak were on international routes. During the pandemic's severe travel restrictions last year, routes operated by the DHC8-400Q were more greatly affected than routes served by other turboprop aircraft. In comparison, international flights accounted for only 14% of those operated by the ATR72-600/500 fleet in 2019, demonstrating its reduced dependence on international traffic. As many international routes continue to be suspended due to strict travel restrictions in response to Covid, IBA anticipates the storage ratio of DHC8-400Qs will remain at a high level over the next few months.
Potential entry into the Cargo market
A prospective deployment strategy for available aircraft is conversion. Several DHC8-400Q operators, including Canadian carrier Jazz, have already asked De Havilland to provide a simplified conversion program to temporarily resolve the shortage of cargo capacity from passenger aircraft. These simplified freighter conversions have been approved by the Canadian transportation regulator until mid-2021.
When Bombardier owned the DHC8-400Q program, it offered a combi version of the aircraft type. This could seat up to 50 passengers and carry up to 8,200 lb of cargo capacity. However, the manufacturer did not attract many orders and, between 2015 and 2017, delivered only four combi-configured aircraft to Japanese operator Ryukyu Air Commuter.
In February 2020, De Havilland announced it could start a program converting existing passenger DHC8-400Qs to full-freighter aircraft. The Canadian manufacturer said it is considering package freighters, which would retain existing doors, and full freighters equipped with a cargo door. However, the Canadian's closest rival, ATR, is already a well-established manufacturer within the turboprop freighter market and, in terms of the number of in-service turboprop freighter aircraft, holds a market share approaching 60%. ATR offers freighter conversion programs for older ATR72s as well as a full-freighter version of its ATR72-600.
The supply of available DHC8-400Qs is likely to increase short term after several operators of the type announced planned retirements following fleet restructuring strategies triggered by Covid. Data provided by Airfax in March 2021 shows there are currently 62 DHC8-400Qs available for sale or lease, including examples from carriers who've announced the aircraft's removal from their fleet, such as Air Baltic. This is 53 more than only a year ago.
There is a risk DHC8-400Q production may not resume after we emerge from the pandemic. Weak net order numbers over the last three years and high secondary market availability contribute towards the bleak outlook. Although demand for simplified aircraft conversions exploded last year due to Covid-driven cargo demands, ATR is well ahead of De Havilland in the turboprop freighter market, already offering both converted and new full-freighter aircraft. A few other conversion options will remain for DHC8-400Qs, such as a firefighting variant, but IBA anticipates higher availability will continue to exert pressure on the aircraft's values.
In February 2021, De Havilland reiterated its long-term commitment to the DHC8 and confirmed its current investment in the programme to serve existing and future aircraft operators once the aviation industry recovers. The Canadian manufacturer stated it will resume new aircraft delivery "at the earliest possible time, subject to market demand".
The recent move by manufacturer Embraer towards the potential development of a turboprop aircraft will create yet tougher competition for De Havilland; it already fights against ATR to maintain its market share. A failed merger deal with Boeing in April 2020 has prompted Embraer to enter talks with industrial and financial partners to build a new turboprop aircraft.
If you have any further questions or comments please contact Finlay Grogan
IBA's analysis platform - InsightIQ, flexibly illustrates multiple asset, fleet and market positions, actual and potential, to inform client choices and identify acquisition opportunities. Immediate access to crucial aircraft, engine, lease rate, fleet, and flight data eases appreciation of historic and future aircraft concentrations and operator profiles.
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Using IBA.iQ Fleets, at the time of Flybe's collapse, the carrier's fleet was comprised of a combination of De Havilland DHC8-400Q and Embraer E-Jet aircraft, totalling 68. The majority of the Flybe fleet consisted of DHC8 aircraft. With 54 such aircraft, Flybe was the largest active operator of the DHC8-400, accounting for almost 10% of the world in-service fleet. The parked and stored fleet of DHC8-400s has more than doubled as a result of the collapse of Flybe.