Turboprop planemaker ATR says demand sufficient to keep production stable

By Tim Hepher and Cyril Altmeyer

PARIS (Reuters) - ATR, the world's largest maker of turboprop planes, said demand in Asia as well as its first U.S. deal in 20 years, will help it maintain production levels following a drop in 2016.

ATR, which has a market share of about 75 percent of the turboprop market, aims to produce around 80 aircraft this year and to sell at least as many aircraft as it delivers, supported by recent deals in the U.S. and India, according to ATR Chief Executive Christian Scherer.

In 2016, ATR's deliveries fell 9 percent to 80 units.

Speaking to the French aerospace journalists' association, Scherer confirmed reports that ATR had won a preliminary deal to supply 20 aircraft to Fort Lauderdale-based Silver Airways, marking its first sale to the United States in 20 years.

The three-way deal was pieced together with Nordic Aviation Capital, a major owner of ATRs which will supply five of the planes from its existing orders for the aircraft and which will place a fresh order with ATR for the remaining 15.

Silver Airways is owned by Versa Capital Management.

Claiming that ATR is the world's most profitable civil plane manufacturer, Scherer said ATR continued to deliver margins "easily in double figures" to its shareholders - Airbus (AIR.PA) and Italian group Leonardo (LDOF.MI).

Revenue at ATR is expected to remain stable after falling 10 percent to $1.8 billion last year.

SHAREHOLDERS DIVIDED

Its strong profitability in part reflects ATR's mature portfolio, though it is expected to face pressure in coming years to invest in new fleets.

Its French and Italian shareholders have so far been divided on the issue, with Leonardo examining possible new developments and Airbus seen as reluctant to invest for the time being.

Scherer said options included a makeover of the existing line-up or new types of plane, based either broadly on existing technology or a costlier leap in advanced features.

No decisions have been taken, Scherer said.

ATR's main rival, Bombardier's (BBDb.TO) Q400, saw a burst of orders at the recent Paris Airshow but continues to lag ATR.

A Bombardier executive said on Tuesday the Canadian company would arrest the decline in Q400 sales, Leeham News reported.

Demand is solid in Asia and Latin America, Scherer said.

ATR recently sold 20 aircraft to Iran, whose flag carrier IranAir earlier this year took four of the aircraft to serve regional cities and is in the process of taking another two.

Scherer said he saw untapped potential for 300-400 turboprop sales in China in the coming 20 years, representing a sharp boost to a global market running at around 100 a year.

But he was cautious about short-term sales in China where few regional airlines are winning licences to enter the business. He said ATR planes, which are not yet certified in China, were also hostage to wider talks between Beijing and the European Union over mutual recognition of regulators.

Some progress is expected in coming months, he added.

ATR is meanwhile studying whether to change its formal status from Groupement d'Interet Economique - a type of consortium under French law - to an 'S.A.' corporation that is more widely used, but no decision is imminent, Scherer said.

(Reporting by Tim Hepher; Editing by Sudip Kar-Gupta and Elaine Hardcastle)