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Regional Airlines And Aftermarket In Transition

How are MROs adjusting to introduction of new regional aircraft with longer maintenance intervals while some carriers extend the life of older aircraft?

Many regional carriers were planning to replace their aging fleets of first-generation jets as new models began to be certified a few years ago. But then oil prices tanked and jet fuel was suddenly cheap. Now, as is happening at longer-haul airlines, regionals are reassessing their legacy equipment and in some cases opting to keep flying them longer. 

“The regional carrier MRO market is at the beginning of a transition period in which the new generation of regional jets is coming online,” says Lee McConnellogue, director of aviation services for Flybe, a regional airline and MRO in Exeter, England. “But at the same time, the older aircraft are not going away as quickly as was forecasted 4-5 years ago, due to lower fuel prices and capacity shortages. This will mean that MROs will have to strike a balance between the maintenance of the new and legacy aircraft.”

For MROs, this presents a more stable market because they can service earlier-generation regional aircraft while preparing for next-gen jets to reach their first major inspections. 

Delayed legacy-fleet phaseouts are, in fact, changing some organizations’ strategic direction. “We are looking at expanding into the current production Embraer E-Jet family, as there are operators considering them as replacements for their older Bombardier CRJs, particularly the -200,” says Mike Fox, director of commercial business development for Emery Air. The Rockford, Illinois-based MRO specializes in the Bombardier Q400 turboprop and the CRJ jet family as well as the Embraer ERJ 145. Yet as Fox points out, there is still a viable CRJ 200 support market.

“There are several fleets coming up on their [40,000 cycle] inspections, which includes heavy airframe, repair and modification work,” he says. “The CRJ 200, as well as the [similar capacity] ERJ 145, are going to remain in service longer than anticipated because of low fuel prices. We also understand approximately 20-30 of the older Q400s will be going on the used market and possibly repurposed.”

A similar scenario is taking place at Empire Aerospace in Hayden, Idaho. According to General Manager Reed Chase, the evolving regional airliner MRO market has driven the turboprop MRO specialist toward regional jets. Empire added the ERJ 145 to its operating specifications in December and expects to carry out its first major inspection on that type by summer.

“We targeted the ERJ 145, which we had originally thought would have been phased out, in favor of the larger E-Jet group,” Chase says. “However, we began to see more interest in keeping the ERJ 145 in service now that lower fuel prices are making a 50-seat regional jet economical again. The direction of the regional airliner MRO business in North America is definitely concentrated on jets, with opportunities for major inspections, storage and lease returns.”

Chase adds that under current planning, the E-Jets are the next MRO market Empire is likely to pursue.

“Clearly, the Embraer platforms are accounting for the bulk of regional aircraft deliveries now and for the immediate future,” says Troy Jonas, AAR Corp. vice president of MRO repair and engineering. “As the E175 and E190 fleets grow and the airframes mature, there will be increased demand for maintenance and modification services on these fleets.”

But Jonas also notes the entry into service of next-gen regional airliners such as the Embraer E175-E2 and Mitsubishi MRJ, both slated for 2018. Those aircraft are projected to have major maintenance intervals of 7,500 flight hours. “Little heavy maintenance will be required for 2-3 years, but if you look out to 2022 or 2023, we see significant major maintenance requirements materializing,” he says. “And, over time, those airplanes will make up a significant portion of the worldwide fleet and require a larger share of total MRO and services capacity.”

According to Fox, the MRO industry will not be affected by the coming of the new-generation regional jets for at least their first 18 months of service. “Unless you are an MRO that is tied to the OEM for warranty work, you will not see much of a difference,” he says.

Chase says that, based on discussions he has had with Mitsubishi, the MRJ will fly 3-5 years between heavy checks, depending upon the number of cycles. “In comparison, the heavy check period for the ERJ 145 is 2.5-3 years,” he says. “The longer intervals between inspections will mean that fewer will need inspections during any 12-month period, so MROs will need to fill the gaps with more customers and a greater volume of aircraft.”

C&L Aviation Group in Bangor, Maine, is redirecting its services focus to fill gaps in major inspections generated by the next-gen regional airliners, says Calvin Tuitt, senior vice president of business development-MRO. “As these aircraft enter the market over the next five, 10 or 15 years, we expect that our component repair business will grow faster than our heavy airframe check business,” he says.

C&L specializes in the Bombardier CRJ regional jet family, the Dash 8-100 and -300, and Saab 340 turboprops. It expects to add the ERJ 135 and 145 to its op specs in the second quarter of 2016 and is evaluating ATR 42 and 72 service. In fact, Tuitt says upgrades and modifications on older regional airliners—those involving satcom, Wi-Fi, Automatic Dependent Surveillance-Broadcast, and inflight Internet accessibility installations—are presenting new opportunities. “We are looking into partnering with vendors that specialize in the production and installation of the kinds of systems our customers want us to add to their aircraft,” he says.

Such partnering relationships will likely become more common as regionals continue to pursue cost reductions. “We are working much more with our vendors to have them play a bigger role in our maintenance system,” says Max Svensson, director of maintenance for Nextjet, a Stockholm-based regional operator of 10 Saab 340s and four BAE ATPs. “For example, rather than financing new spare parts ourselves, we want to do this in cooperation with the vendor to split the cost and at the same time secure us as a customer for a longer period. We also want to work closer with vendors that provide consignment services for parts and consumables.”

Svensson notes regional carriers want to avoid maintaining large stocks of costly, seldom-used parts. “If you can reduce the number of parts on your shelf where you bear the cost of the investment, this will reduce the amount of money spent each month,” he says.

Silver Airways President and CEO Sami Teittinen says in addition to strong relationships with key third-party suppliers, the airline is developing a strategic partnership with a key MRO that has a long-term commitment to the regional airline maintenance market. The Fort Lauderdale-based carrier, which focuses on Florida, the Caribbean and some U.S. Mid-Atlantic markets, operates a fleet of 23 Saab 340B+ turboprops. 

“Although we strongly believe that airframe OEM has the desire to continue to be a key player in Saab 340 support, we also understand that Saab’s core business has moved more toward defense and security, and we do not see the regional fleet as part of their long-term strategy,” Teittinen says. “We continue to buy parts and critical engineering support from Saab, but repairs are carried out by third-party shops. That, in fact, was one of the reasons behind our decision to outsource all heavy maintenance on the Saab 340s, while keeping line work in-house.”

Under current planning, the airline will move to a mixed fleet, which will include a 50- or 70-seat regional jet acquired from the used market, says Teittinen. To support the operator, there will likely be a partnering arrangement with an MRO and other third-party providers, under a power-by-the-hour agreement covering all maintenance including engines, landing gear and rotable parts.

“But it will [also] have to be a strategic partnership that will include engineering support, maintenance planning, technicians training and aircraft on ground services,” he stresses. “We are well on our way in that direction now, and we believe that is something that will become more important, especially as the fleet ages.”

Ken Herbert, managing director of Canaccord Genuity in San Francisco, agrees: “It will be especially important to establish relationships with MROs, because the longevity of OEM commitment to the older aircraft presents a big question mark, especially as they choose to focus on newer aircraft. The OEMs are transitioning away from support of aircraft that have been out of production for years.”

For MROs partnering with future operators of the new-generation regional airliners, major investments in tooling and training will be required. “Those will be the highest upfront costs,” says Empire Aerospace’s Chase. “For example, the MROs will have to establish extensive composite repair and nondestructive capabilities.”

Bringing those capabilities onstream, according to C&L Aviation’s Tuitt, should not present insurmountable issues. “When these new airplanes first go into service, in all probability their operators will be those which will maintain them in-house—at least initially. But for those operators that will need to outsource the work, experience on other regional airliners will be a key consideration for the MRO where they will place their business,” he says. 

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