FLUG REVUE May 2002: Regional jet competition

REGIONAL JET COMPETITION HOTS UP

By Patrick Hoeveler

It is rather like Formula One after an accident: the race continues but at a slower speed. The regionals market has a yellow flag hoisted, but the tempo will pick up again. Despite, and perhaps even precisely because of, the recession in air traffic, regional jets are growing in importance. The bigger airlines are turning to these smaller planes after having somewhat neglected them in the past. As a result alliances between manufacturers are now looking increasingly likely.

Thus, for example, EADS already has a financial stake in Embraer. A possible future agreement between Boeing and Fairchild Dornier would also makes sense because of the industrial competence of the large manufacturer, combined with its marketing experience and its network.

According to information provided by the German-American company, discussions are currently under way with several possible partners. However, Bombardier and EADS appear to be less interested, but in fact EADS has no objection to Fairchild Dornier forming a partnership with Boeing.

Fairchild Dornier is in urgent need of capital. Its turnover of $595 million for 2000-2001 was below the expected $700 to $800 million. In the wake of the events of 11 September, the Chinese Government's reluctance to grant an import licence for the 328JET aircraft ordered by Hainan Airlines is being felt especially keenly. Meanwhile the aircraft manufacturer is threatening to sell the completed aircraft to other interested parties before too long. Again, the postponements of purchase decisions by six months to a year had not been predicted, leaving a gap in financing.

For this reason the company, whose German headquarters are in Oberpfaffenhofen, hopes that an alliance with a strategic partner would improve its market prospects. After all, Air France, British Airways and Qantas are all expected to be making decisions next year about major orders.

Meanwhile the maiden flight of the new 728 flagship is scheduled to take place this summer. But the 728-100, which up to now has been the basic model, has been sacrificed in favour of a strategic shift of emphasis. From 2004 production will be centered on to the 728-200, which has an extra 740km of range, as attention is now focused on larger airlines. This version has reinforced structures and is expected to be delievered in the fourth quarter of 2003.

In November of the same year the larger 928 for 95 to 110 passengers will have its first flight. According to current plans, this type is expected to enter service in 2005. The market strategists are also considering whether to expand their portfolio by a third model called X28. This could take the form of a 55-seater or even a variant for up to 130 passengers. There appears to be plenty of scope for future enhancements.

As Barry Eccleston, executive vice president for business development, commented at the Asian Aerospace show, the regionals are one of the few bright spots on the market. The large airlines are responding to the challenge of the low-cost carriers with increased interest in jets with a capacity of between 50 and 100 seats. Here the company predicts a market value of $200 billion over the next 20 years. Altogether, the company has 125 firm orders for the new jets.

A similar strategy is being pursued by Embraer. The aircraft manufacturer from Brazil took the “RJ” out of the designations of its larger jets at the end of last year in order to stress their qualities as airliners. The first aircraft has just entered its test phase.

Having flown for the first time on 19 February, the Embraer 170 had completed eleven flights without any problems as of the middle of March. A total of six aircraft have been earmarked for the test programme. Even after a two-month delay in the maiden flight, Embraer still plans to deliver the first plane to Crossair this December. Despite the difficult market, the Swiss are going ahead with the 30 jets ordered, according to the aircraft manufacturer. Yet the number of used options might curtailed. Together with the orders from GECAS (50) and Air Caraibes (2), the 70-seater is the best-seller of the four-member family. Crossair's order for thirty 195's (formerly called ERJ190-200 for 110 passengers) stands unchanged as well. This gives the Brazilians 112 firm orders and 202 options. According to the company, it is currently awaiting confirmation of an order from TAM for 25 Embraer 190's. The 86-seat 175 and the 104-seat 190 do not yet have any customers.

All in all, Embraer is taking a cautious view of the coming year. In 2002 they expect to deliver 135 aircraft, and 145 in 2003. This compares with 161 for last year.

Bombardier on the other hand believes that the regional market will grow in the long term. According to their forecasts, 8,345 new regional aircraft will be sold between now and 2020, 33% of them in the range 60 to 79 seats and 11% in the 80 to 99 seat segment. With their CRJ700 and CRJ900 products, they see themselves as well equipped for the future, even if both of these types are less spacious than the competition and Bombardier's own larger project, the BRJ-X, was dropped some time ago.

Bombardier CRJ family

Instead, in Toronto they emphasise the lower operating costs resulting from partial commonality with the 50-seater and the lower weight, which means that the landing fees are lower. Bombardier has a second significant advantage: because of the shorter development time, both products are first to the market. Around 30 CRJ700 are currently in service with five airlines.

A total of 195 firm orders and 354 options have been notched up for the 70-seater. The 86-seat CRJ900 is to enter service with Mesa Airlines in the first quarter of 2003. Two aircraft are currently in the test programme. This leaves the Canadians in the lead in the race for lucrative orders. But the competition in their rear view mirror is getting steadily bigger.

From FLUG REVUE 5/2002

Last updated 10 April 2002

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