Part VIII: The market outlook
The regional jet market is difficult to predict, especially after the attacks of September 11th 2001. The author anticipates that the events will lead to a boost in the regional airline business in the United States as especially here major carriers will out-source many routes to lower-cost regional affiliates and will replace mainline planes with smaller Regional Jets to adjust capacity. Earlier market studies predict about 2,600 orders for 100-120 seat aircraft in the time frame 2000-2020..
To get a better look on the potential market I will raise two questions here:
A) What type of carrier will order which Regional Jet?
B) How do the geographical markets look world wide?
What type of carrier will order / operate which Regional Jet?
The major carrier operating the Boeing B737NG:
Here the Boeing B737-600 seems to be the likely choice due to existing family members. Common pilot/crew training, common spare parts and common maintenance regulations lower operating costs. However: the shorter the segments flown the higher the costs due to the higher structural weight compared to “pure” regional jets. At one point it will become more cost efficient to introduce another aircraft than to introduce the B737-600. It depends on the mission the aircraft will be used for, the longer the segments flown are the more likely is the purchase of the B737-600. Still, the plane has a formidable competitor in form of the B737-500, around 380 of them are in service, essentially offering the same mission capabilities at only slightly higher costs with the average fleet age still being low.
The major carrier operating the Airbus A32X:
The A318 is the likely choice due to the existing commonality with the bigger A319, 320 and 321. Common crew/pilot training, common spare parts and common maintenance procedures result in lower operating costs, especially in smaller fleets. But as with the B737-600: the shorter the segments flown the higher the costs are due to the higher structural weight compared to “pure” regional jets. At one point it will become more cost efficient to introduce another aircraft than to introduce the A318. It depends on the mission the aircraft will be used for, for most regional operations the aircraft is oversized and too heavy. Only when very long-range missions need to be flown the A318 would be right-sized.
The major carrier operating the DC-9/MD-8X/MD-90:
Here the choice become obviously more difficult as more options are offered in the 100 seat-segment. Depending on the carrier´s structure it might make sense to introduce Regional Jets at the lower end of the fleet (up to 110-seats) as operating costs are around 20-30% (estimated) lower than the A318/B712/B736 ones. Especially the A318 and B737-600 have to be seen as “add-ons” to their respective families but are both a bit “too much plane” (referring mainly to the higher weight) while the Boeing 717-200 has no family around it which decreases the flexibility within the airline´s schedule, short-term capacity adjustments are not possible without introducing a new type. From 120-seats onwards either the A32X or the B737NG has to be chosen as no RJs of this size are and will be offered.
The regional carrier operating for a major:
The new generation RJs are the obvious choice. Most are limited to a certain number of seats per plane (see scope clauses) due to scope clause agreements and are not allowed to operate the B717-200, B737-600 and A318. If the major carrier demands the offer of seamless travel the ERJs/FRJs have an advantage over the CRJs as they are the most “airliner style” planes. Upcoming decisions at Eurowings, Contact Air (“Lufthansa Group”), Brit Air, Regional Airlines (“Air France Group”) and Air BC, Canadian Regional, Air Nova (“Air Canada Group”) will give a good indication how this segment is likely to develop.
The unaligned regional carrier:
Operators of the CRJ100/200 will more likely look on the CRJ700 and CRJ900 as additions to their fleet due to commonality reasons (especially crew training). Customers of the ERJ-145 will have to turn to one of the three RJ families being offered with the 728/928 and Embraer 170/190 being the most likely choice. The CRJ700/900 have the problem that they are very narrow and cannot be streched further. A lease-and-purchase option is thought to be the most favoured option. An interesting side-note in this context is Bombardier´s attempt to place optional CRJ700s in several European CRJ200 orders (Eurowings, Air Dolomiti).
The start-up carrier:
Depending on the kind of operations the Boeing 717-200 becomes an interesting choice. Most low-cost carriers want to stick with one type of aircraft, if possible with only one version of it. However with the offered flexibility between the 70 – and 100- seat derivates the 728/928 and the Embraer 170/190 could be the deciding factor. Here the financing plays an important role: while the ERJs/JETs are available on lease the number of B717-200s being offered is quite low, AA´s return of 30 B717 does not change this. And it is not known how long this plane will remain in production as the orders flow has been sluggish at best, even Boeing´s recent decision to kept the plane at a reduced production rate of 1.5 frames per month cannot be taken as a long-term signal. American Airline´s early retirement of 30 B717-200 has reduced the chances for new B717-200s, some contracts (the still not confirmed Midwest Express order for example) can be easily covered with these young planes which basically jeopardizes the whole project which is far from its 350 frames break-even target.
The Turboprop operator seeking a Regional Jet
Here the relationship to the current manufacturer of the turboprops employed could play a deciding role. Operators of the Dash 8 series are more likely to be attracted by offerings from Bombardier due to already existing contacts and the possible placement of CRJs as options in former orders. ATR customers are more or less free to decide the manufacturer, if has to be seen if the possible purchase of the FD 728 by Alenia (Italy, 50% stakeholder in ATR) will change this towards the FD 728. Embraer customers are likely to remain with the company, the same arguments as for Bombardier are valid.
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