Forecasting the MRO market for specific aircraft and engine types used to be relatively straightforward. Assuming the equipment was well-received in the marketplace with a diverse customer base, one could safely project 20-25-year life spans involving multiple levels of operators, from mainline carriers to niche operators and, in many cases, even cargo haulers.
But forecasting the airline business—while never easy—continues to grow more complex. A good example is the 50-seat regional jet. When Bombardier drew up plans for its CRJ in the late 1990s, oil cost about $30 per barrel and airlines had precious few options to fly short-haul routes to secondary cities without relying on turboprops or larger jet-powered aircraft. The CRJ, and its only true competitor accepted in the market, Embraer’s ERJ 145 series, changed the game.
By mid-2008, the U.S. regional aircraft fleet was dominated by the Bombardier and Embraer 50-seaters, according to Regional Airline Association figures. Together, the types accounted for 1,200 aircraft, more than the next 12 aircraft types combined.
But clouds were forming on the horizon. Oil prices climbed steadily during the decade, and the onset of the Great Recession in late 2007 sent them higher still; West Texas Intermediate (WTI) topped $150 per barrel in mid-2008 before plummeting briefly and climbing again.
In mid-2009, WTI started a 66-month run of prices well above $70, while the global economy began a slow improvement. Airlines, eager to get back into the black, saw 50-seat regional jets as an impediment to profitable operations. They were inefficient and not built for the trend toward ancillary revenue potential: First-class cabins—if they existed at all—were cramped. They also did not fit well with plans to streamline networks and cut frequencies.
With larger regional jets entering the global fleet and scope clauses limiting the number of small aircraft airlines could use—and higher-capacity aircraft usually taking priority-—the 50-seater’s fate seemed sealed. They were parked as fast as carriers could shed them.
By the end of 2014, airlines were, for the most part, profitable again. Oil prices were headed down; WTI fell below $50 per barrel in January 2015 and has stayed there for all but a few months. Airlines largely stuck with plans to park their smaller regional jets, but surging demand has given new life to most aircraft in decent condition. An Aviation Week analysis shows that airlines retired 510 aircraft last year, or 1.7% of the active fleet—the lowest figures since 2007, the end of the last upturn. And while 50-seaters are not queueing up to return to active service, the pace of their retirements seems to be slowing. A UBS survey indicates both CRJ and Embraer 145-family parked-aircraft totals were roughly flat for the 12 months ended March 31. While this does not mean aircraft are not being retired—scraps reduce parked-aircraft totals, while retirements boost them—it suggests that the outflow has stabilized.
While few are predicting a small-regional jet renaissance, lower fuel prices have helped prolong their usefulness, with the CRJ finding newfound life (InsideMRO June 22-July 5, 2015, p. MRO18).
A look at projections for Embraer suggests that Brazil’s original regional jet still has some life. Aviation Week’s Fleet Discovery database shows about 600 ERJ 135s, 140s,and 145s in commercial service. Aviation Week’s aftermarket forecasting tool MRO Prospector predicted the in-service fleet would generate about 60 airframe overhauls in 2016, ramping up slightly in 2017-18.
Associated revenue is forecast at $864 million in 2016, but it drops off quickly: By 2020, it will fall to $460 million, a 47% decline. This is due primarily to the model’s projected phaseout, driven in part by operators avoiding heavy checks that come due by parking their aircraft.
The ERJ 145 is not alone. As operators shift to boosting capacity by flying larger aircraft instead of more flights, smaller regional jets will continue to feel the pinch. Larger Bombardier and Embraer models are already grabbing spots from 50-seaters, and turboprop manufacturers are poised to take advantage of rising fuel costs. Bombardier’s Q400 is soldiering on, and ATR—its calendar year record of 160 orders in 2014 fresh in its mind—is ramping up efforts to interest operators from several major markets in its newest models, most notably North America.
“Going forward, the number of dots on the airline map will be fewer,” a recent InterVistas study of the U.S. airline market says. “This will have some impact on airports of all sizes, with the disproportionate impact being felt at the smaller markets”—and by extension, the smaller aircraft that serve them.