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Airlines give propellers another spin

Horizon Air is North America's largest operator of the Bombardier Q400 turboprop, with 33 in service, and has operated the type since 2001.
Horizon Air is North America's largest operator of the Bombardier Q400 turboprop, with 33 in service, and has operated the type since 2001.Alaska Air Group
/ Source: Business Week

Queue up at Newark, N.J., for the 8:10 a.m. Continental Express flight to Baltimore, and you may be startled to find what many people consider a throwback to the 1970s: A plane driven by propellers, not jet engines. Get ready for more of them. The soaring cost of fuel is rapidly reshaping the landscape for regional flights at many airlines, leading to interest in a new generation of turboprop planes.

Most of the props are being deployed on trips of less than 500 miles. Beyond that, the economic advantages of a small jet kick in. For example, turboprops are now used heavily on routes such as Newark to Toronto; Seattle to Portland, Ore.; and San Jose, Calif., to Boise, Idaho. The two main beneficiaries of this trend are Montreal's Bombardier and the French-Italian aerospace joint venture ATR.

Alaska Air Group's regional subsidiary, Horizon Air, announced on Apr. 24 that it would convert its entire fleet to Bombardier's 76-seat Q400 prop within two years. "Through its combination of passenger comfort, speed, and efficiency, the Q400 is the best aircraft for the majority of our markets," Horizon Air President and Chief Executive Jeff Pinneo said in a prepared statement.

In October, German discount carrier Air Berlin decided to supplement its 124-jet fleet with its first-ever turboprops on shorter hauls, selecting the Q400. Earlier this year, Continental began deploying Q400s from its Newark hub to 10 cities served by regional partner Colgan Air, in a move to add greater seat capacity without the expense of larger jets. That airport's traffic is now controlled by federally supervised slots, as are other New York-area airports. "One of the main things we like about it is that, compared with a regional jet, we get almost 50% more seats in the air for each arrival/departure slot used," Continental spokesman Dave Messing said in an e-mail message. "We also get that extra capacity with virtually no extra cost vs. the jet."

These shifts are a nod to the airline industry's radically changed finances as crude oil flirts with $120 a barrel. The cost of jet fuel is up more than 60% in the past year. The move from smaller jets to larger craft—both jet and turboprop—is coming as airlines race to cut costs and find new revenues. Fares have surged 10.2% in the past 12 months, including a 3% jump in March, according to new inflation data from the Bureau of Labor Statistics. The airlines have also imposed a bevy of new luggage and seat-assignment fees this year.

The backbone of U.S. regional flying, the 50-seat jet, made a splash in the 1990s as a way for airlines to serve smaller destinations and to bolster frequencies on heavy-traffic routes. The higher fuel-burn rates of jets wasn't much of a factor then, since crude oil traded below $12 per barrel in late 1998 and didn't breach $40 until 2004. On Apr. 29, crude was at $115.61 a barrel, a day after setting a new record of $119.93.

This explains why the 50-seat jet has become a financial albatross on many routes. On shorter trips, a jet's operational advantages quickly disappear. A jet uses large amounts of fuel on its departure "climb out" and works best financially when it's able to reach thin-air altitudes above 30,000 feet, zipping along at a normal cruise speed of 500 mph to 530 mph with a full payload. Regional jets work well on routes such as Los Angeles to San Francisco, Chicago to Dallas, Atlanta to Denver.

Shorten the route, though—and triple the price of fuel—and a new-generation, large turboprop starts making a lot more sense. "A, it holds a lot of people, B, it goes pretty fast, and C, it's more efficient on shorter routes," says Roger King, an airline analyst for CreditSights, an institutional research firm in New York.

A Q400 cruises at about 415 mph at an altitude of 25,000 feet. Alaska says the Q400 is the most efficient craft in Horizon's fleet, using 5.8 gallons of fuel per passenger on a 400-mile route, compared with 6.2 gallons on a larger, 88-seat CRJ900 Bombardier regional jet, and 7.7 gallons on a 72-seat E170 Embraer jet. Horizon acquired its first turboprops in the 1990s when it was unable to secure any 50-seat regional jets, says Rudi Schmidt, vice-president for finance at Horizon Air. Now, says Schmidt, "I have folks approach me all the time and say: 'Hey, you want 100 of them?' And I say: 'No, I don't even want one of them.'"

Of course, what makes sense financially to an airline may not wow a passenger. Many fliers recall turboprop travel as an unpleasantly cramped, noisy, smelly, bumpy proposition. Advocates of the new generation of props say technology has rendered those hardships a thing of the past. Vibration-tamping techniques help smooth choppiness from the plane's lower flight altitudes, while new noise-damping technologies muffle engine noise. The Q400 is "a turboprop that thinks it's a jet," quips Robert Deluce, CEO of Toronto's Porter Airlines, which flies the plane.

Public indifference?
Customer acceptance will be key, much as it is with the new generation of clean-diesel auto engines that are slowly making their way back into U.S. dealerships. Turboprops will become even more mainstream "when passengers become indifferent ... and they are indifferent on short-haul flights," says Donald Carty, former CEO of American Airlines (AMR), who now serves as chairman of Porter and Virgin America. "I think you're going to see a lot more of these types of aircraft these days."

Another factor that might work in prop planes' favor is that some consider them "greener." Bombardier says its plane burns 30% less fuel than comparably-sized jets and emits 30% less carbon. A turboprop's maintenance costs run slightly higher than a jet, but pilot training and crew costs are lower.

The company says Q400 orders more than tripled, to 80 planes, in the 12 months ended Jan. 31 compared with the year-earlier period, giving it a total of 300 firm orders for the aircraft. The $27 million Q400 retails for slightly less than Bombardier's three regional jet models, which come in sizes between 70 and 100 seats and cost $30 million to $39 million. The company is studying whether to launch a stretched, 90-seat model, the Q400X, but no decisions have been made.

Still, don't expect all small, short-haul jets to disappear even if fuel prices continue climbing. They hold a certain appeal that goes beyond bottom-line economics. "Jets are sexy," admits Schmidt, the Horizon VP. "They're fast, they're pretty, blah, blah, blah."