Aviation Specialists Examines the Saab 340

Editor’s note: this month, Aviation Specialists President Fred Klein looks at the Saab 340. The Saab 340 is a low wing, twin engine, pressurized modern technology turboprop regional airliner. It can be configured for 30-37 passengers, offers stand up headroom, makes extensive use of composites, has an EFIS flight deck and can be equipped with a hot galley. There are three models in service, the 340A, 340B and 340B+, which can be flown as all-passenger airplanes, QCs (quick change) which can be changed between all-passenger and all-freight configuration, and fixed-installation combis capable of carrying 19 passengers and 1,500 kilograms of freight. The factory cargo door is 53 inches by 51 inches and the floor does not need additional strengthening for freight use. A freight handling system has been designed for the 340 which allows up to 24 containers to be loaded; cargo can also be tied down conventionally.

The aircraft was initially a joint venture between Saab and Fairchild Dornier and was originally designated the Saab-Fairchild 340 when the program was launched in 1980. Saab took over control of the program in 1985 and in 1987 the aircraft designation was changed to Saab 340. The first prototype, the 340A, flew in January 1983 and was introduced into service by Switzerland’s Crossair in June 1984. It had a maximum takeoff weight of 28,000 pounds and a cruise speed of approximately 275 knots. Produced from 1984 to 1990, it was powered by the General Electric [GE] CT7-5A2 engine which was rated at 1,735 shaft horsepower. Engine inlets on the early models suffered icing problems but a redesign and service bulletin resulted in the reconfiguration of these inlets. Because of the 340A’s range-payload characteristics, it is most effective in a 30-seat configuration.

The 340B model,, which began with construction number 160, entered service in September 1989 with Crossair. The 340B has a maximum takeoff weight of 29,000 pounds, improved interior and is powered by the CT7-9B engine which develops 1,750 shp at takeoff. The CT7-9B has an automatic power reserve (APR) of 1,870 shp and improved specific fuel consumption over the CT7-5A2 engine, which is no longer in production. With higher takeoff weight, more powerful and economic engines and an extended horizontal stabilizer, the 340B cruises at about 285 knots and has better payload-range capability and hot and high performance than the 340A.

The 340B+ model began with construction number 359 and was first delivered in April 1994 to Wings West Airlines. In addition to further interior refinements and an active noise control system which dampens interior noise while requiring less sound deadening material, the 340B+ has wing root design changes which allow the installation of optional wing tip extensions. These extensions add about 120 pounds to the weight of the aircraft and result in better hot and high performance. The designation 340B+ is primarily for marketing purposes - the 340B and 340B+ have no operational differences.

Table 1 summarizes Saab 340 series demographics and specifications:

Deliveries:

Values and Risks

For a number of years, there was only a moderate amount of aftermarket activity in the Saab 340 market. In the last 1 to 2 years, however, there has been increased used activity as operators such as Comair [DAL], Crossair and American Eagle [AMR] have moved 340s out of their fleets and airlines such as Kendell, Hazelton, Chautauqua and Air Nelson have been buyers. During 2000, ATA’s commuter airline Chicago Express purchased a group of nine 340Bs, all of 1990 vintage, from American Eagle for about $32 million and took options on several more. As of January 2001, Airfax reported 16 340As and 9 340Bs available for sale or lease, which at over five percent of the fleet is a substantial number.

ASG believes that the Saab 340 is a very competent regional airliner but there are a number of challenges facing it over the near to medium-term. From a financier’s viewpoint, here are ASG’s views of its positives and negatives. First, it has very good market mass, that is, a very substantial fleet population and user base.

Second, it is a good quality 30-seat turboprop airliner which should retain its utility - its ability to economically transport passengers - over the long term. Third, Saab has an economic interest in slightly over half of the fleet which should keep it interested in technical support and residual values. Some of its exposure, however, has been covered by an insurance wrap known as a FRIP (financial risk insurance program) which was put in place in December 2000 on about 200 airplanes.

On the negative side, all 30 to 70 seat regional turboprops are being challenged by regional jets. The 340's challengers, the ERJ 135 and Fairchild-Dornier 328JET, entered service in mid-1999. While it is still too early to divine what effects these jets will ultimately have on demand and pricing of competing turboprops, the order backlog for 30-seat turboprops has fallen sharply during the last few years while that for the jets has grown substantially. Chart 2 shows periodic snapshots of the regional airliner order backlog in 1997 through late 2000. The turboprop backlog in each category except 70-seaters is clearly declining as the jet order backlog grows.

While a used 30-seat turboprop costing several million dollars may be more economically efficient than a new 30-seat regional jet costing in excess of $10 million, the jets have become very popular with both passengers and operators. ASG believes that the market’s pricing mechanism will ultimately result in a turboprop versus jet equilibrium but this dynamic has not yet played out in the 30-seat market.

In addition, there is the potential for substantial numbers of Saab 340s to come into the market over the next few years. American Eagle, the largest 340 operator, plans on becoming an all-jet operator and therefore will ultimately phase out all of its turboprops. Eagle shut down Business Express, which it owned, at the end of 2000, took over the BusEx routes itself and planned to park a number of BusEx’s Saab 340s. If Eagle places a substantial number of 340s on the market, or if the market believes that Eagle will do so over a compressed time period, the result could be substantial pricing indigestion.

With respect to current and future values, Table 3 shows ASG’s value opinions. These values make the usual assumptions, that is, the aircraft is in good condition, it is half-life half-time, the market is in reasonable balance and for this aircraft, that the engines are on GE’s ECMP program.