Low fuel price, may dent demand for smaller aircrafts and diminish profit margins.
It has been reported earlier today, Avions de Transport Regional a French-Italian joint venture amongst AIRBUS GROUP and FINMECCANICA ADR, anticipates sales for its fuel efficient turbo propeller jets to fall in wake of dipping fuel prices.
Avions de Transport Regional, the commercial as well as private transportation provider, also formally known as ATR has topped its sales figure by a staggering $180 million last year as compared to the year before that to stand at $1.8 billion for last year. However, the aircraft manufacturer still expects sales to decline. Industry experts suggest that it is more feasible for airlines to use less efficient aircrafts in the time of cheap fuel costs rather than buying new aircrafts. It is reported that airline cost typically accounts fuel cost to be 30% of the total, but oil prices which have declined more than 50% since the mid of last year, means that airlines around the globe lose out on revenues.
CEO Patrick de Castelbajac of ATR confirms his concerns as he is reported to have said, "It may impact the industry. It may slow down some orders,", but the CEO also recognizes the fact that fuel prices will stabilize in the near future, however aircrafts have a longer span of life, nearly 20 years. So Mr. Castelbajac claims to not be "overly concerned".
Industry pioneers, Boeing Co and Airbus Group have also urged that falling fuel prices will not dent the supply for larger aircrafts, but investor sentiment seems to suggest otherwise as they fear profit margins to thinned out.
ATR manufactures two flagship models an ATR 72 and a smaller ATR 42. ATR 72 accommodates nearly 74 passengers; the aircraft is operated by two pilots. ATR is reports that last year demand for ATR 72-600 was 133.
ATR 42's standard seating capacity ranges from 40 to 52, depending on the layout of the cabin. The aircraft is also powered by twin-engine. 27 of such aircrafts are reported to have been demanded by the manufacturer last year.
Shares are currently being traded at $13.48 per share for the Airbus Group with a 1.10% change in the red as at 12:52 PM EST, reflecting investor sentiment.
The aerospace company is the major manufacturer of turboprop aircraft and sells it internationally as well as in United States. GIE Avions de Transport Régional operates as a subsidiary of European Aeronautic Defence and Space Company EADS N.V. and Finmeccanica SpA.