Considering the speed with which airlines have been parking 50-seat regional jets (RJ) to help meet a variety of converging goals, an uptick in Bombardier CRJ maintenance demand seems about as likely as a run on Boeing 747-400 spare parts. But while 747 parts are seemingly cheaper and more plentiful by the day, regional jet MRO providers could see a short-term bump thanks to market forces that may prolong a few planned parkings.
The smallest RJs are being parked for several reasons. Arguably the two most influential are their high unit costs and, more recently, major airline partners’ desire to have their regional feeders more closely mimic the mainline experience, which means providing two classes of service. While the latter factor will not change, the lower fuel-price environment that has settled in since mid-2014 has put small RJs in a slightly better economic light. One short-term ramification is higher demand for used parts, especially for CRJs. Once plentiful because of the steady retirement rates, quality used serviceable material and engines with green time remaining are becoming harder to find, creating a pleasant, though likely short-lived, surprise for some providers.
“Those aircraft are now a little bit more popular over the last year than the last 4-5, especially on the engine side of things,” says Ken Hein, vice president of supply chain programs for AAR. “When aircraft were being parked, there were lots of engines available, lots of components available. That pipeline, over the last six months or so, has started to dry up. What’s left in the market, the majority [of aircraft and engines] need an overhaul or other work.”
Aviation Week’s Fleet data shows that of the 1,300 CRJs in service, about half of them—610—are 50-seaters. Despite a brief respite from lower fuel prices, that number—which has fallen fast in recent years—will continue to dwindle. When Delta Air Lines and Northwest merged in 2008, their combined fleet alone had nearly 500 50-seaters, many of them CRJs. The latest Delta pilot agreement limits the 50-seat fleet to 125 aircraft. United Airlines and American Airlines also are shifting to larger regional jets as part of bigger-picture strategies.
As airline plans change, MRO providers must adapt—and the regional airline space may be the most extreme example. While all airlines crave cost-certainty, regional operators—especially those with capacity-purchase agreements (CPA) that pay fixed fees for their flying—count on it to stay in the black. This has driven them to embrace long-term, cost-per-flight-hour service agreements at a much higher rate than their mainline counterparts, especially in North America.
The result is a mixed blessing for aftermarket suppliers. A 10-year agreement with a regional operator could be derailed if the mainline partner’s strategies change. AAR’s Hein says flexibility on the supplier’s part is paramount, and he points to his company’s long-term relationship with Mesa Airlines as an example.
The Phoenix-based regional operator was one of the first to leverage a large 50-seat CRJ fleet, but the 2008-09 economic downturn left it with aircraft that its major airline partners did not want. Following a bankruptcy restructuring, Mesa is growing again, with 105 regional jets—only one of them a 50-seater. All but 26 of the rest are larger CRJs, and the carrier ordered seven CRJ-700s in February.
AAR is among the suppliers that shifted to meet Mesa’s needs, finding new homes for suddenly surplus inventory when times were lean and helping the carrier transition to new aircraft types as prospects improved and market dynamics changed.
Examples such as Mesa and PSA Airlines—the wholly owned American subsidiary that is transitioning from 50-seat CRJs to larger versions and growing in the process—illustrate the CRJ market’s prospects. The high-growth years are over, but long-term potential remains to support a reasonably sized fleet of the model’s larger variants.
Aviation Week’s MRO Prospector calculates that the CRJ airframe aftermarket’s size will be $2 billion in revenue in 2015—with half of it provided by the venerable 50-seat models. The CRJ-700, at $470 million, is the next-largest sub-market.
In five years, the total figure will slip to about $1.6 billion, with the 50-seat market still having a majority of the share at about $600 million. The 2019 CRJ-900 airframe market is projected to top $500 million, however, so shifting retirement patterns in the next few years could see the 50-seat market fall behind that of a larger CRJ derivative.
By 2025, the entire CRJ aftermarket pie will be just under $1 billion annually, with only about 20% coming from the now-dominant 50-seaters. The CRJ-700 and -900 will each total about $350 million, splitting most of what is left and leaving less than $100 million for the CRJ-1000. c