Printed headline: Teardown Trends
The regional airliner teardown market is in transition, as first-generation jets are retired or parted out to support those repurposed for cargo service or second careers in niche passenger markets.
Experts who watch this market report a definite shift during the past few years in the makeup of airframes that are reaching their sunset years and becoming sources for parts. To appreciate that, consider some statistics.
Alton Aviation Consultancy projects approximately 100 regional jets will be retired annually over the next 2-3 years, with the numbers reaching 200 aircraft per year over the next decade. On that basis, the total number of retirements is expected to top 1,700 within that time frame.
On the turboprop side, Alton forecasts 55-65 retirements per year in the near term (2-3 years), but that number will double to roughly 120-130 annually over the next 10 years.
“A significant number of in-service regional turboprops are more than 20 years old due to their continued use in recent higher-fuel-price environments,” says Adam Guthorn, an Alton Aviation Consultancy director in New York. “Along with their relatively superior fuel economics compared to regional jets, there is a lack of new replacement options, particularly for smaller turboprop models. It is not uncommon for turboprop economic lives to reach 30-plus years, while regional jets are closer to 20.”
Guthorn notes that for the past five years, the 50-seat Bombardier CRJ 100/200 has been the regional-jet teardown market leader. However, due to a large number of Embraer 135/145s that have exited regional carrier fleets, mainly in the U.S., that could change. For both families, he cites the primary factors of fleet age and shifting airline requirements, along with their higher operating costs and lower revenue-generating potential than newer, larger regional jets.
“In the next 2-3 years, the CRJ100/200 and the Embraer ERJ 135/145 will continue to lead regional jet retirements,” Guthorn says. “By the numbers, we expect to see retirements of 40 CRJs and 30 ERJs per year in the next three years.” He adds that retirements of the larger 66-130-seat Embraer 170/175/190/195 models also will increase from the current 10 per year to 30 per year within five years, led by the E190.
Sharon Green, CEO of GECAS Materials, reports that the company’s statistical models predict less than 5% of the operating regional airliner fleet will hit the market each year for the next several years, with CRJ100/200s showing the strongest trend toward being dismantled, given their age.
“However, ERJs, specifically the E170/175 and E190/195, have trended upward in terms of dismantlement over the last three years,” says Green, noting that five years ago, the predominant models for teardown were the ERJ 135/145 along with the CRJ100/200. “In our estimation, the age of the fleet and related operator economics, rather than parts demand, are what drove the change.”
David Louzado, principal consultant in the aviation practice of ICF in London, sees the E170 and E190 jets as the leading regional airliners entering the teardown market. “Four to six years ago, nobody would have anticipated that,” he stresses. “Over 50 airframes have now been parted out, most of them E170s and E190s. The price of E190 airframes for part-out has also been reduced from $2.5-3 million to $1.5-2 million over the past few years.”
This is attributable to the fact that there is not a lot of demand for the first generation of Embraer regional jets. “You can still place them, but doing so is challenging,” Louzado says.
As a result, many owners are finding it more advantageous to pull the engines—General Electric CF34-8Es on the E170 and the E190’s GE CF34-10Es—and put them on the market, especially those with green time remaining, says Louzado.
“This is an attractive alternative to the costly engine overhauls that, in many cases, would be required to keep the aircraft in service,” he explains. “Engine overhaul costs have a lot to do with driving the decision to part aircraft out.” In fact, some U.S. regionals are buying new spare CF34-8C engines for CRJs from GE to avoid shop-visit costs.
In the meantime, the recent shakeup in ownership of regional airliner programs likely will accelerate the rate of aircraft teardowns, says Louzado. He points to Mitsubishi’s purchase of the CRJ family from Bombardier and the decision to end its production.
“Mitsubishi acquired the CRJ type certificate to get a ready-made product support organization, which they realized was essential for the potential success of its MRJ. That, of course, will drive the CRJ family into legacy status,” he points out.
Consequently, Louzado says, as soon as an aircraft becomes a legacy product and is no longer supported by the OEM, it immediately has “an impact on the desire of airlines” to operate the aircraft type. Usually, when the aircraft goes from the mature to the legacy phase, “it [enters] its sunset era, and that is what forces the aircraft into teardown,” he says.
Looking ahead, Louzado predicts the dissolution of Bombardier’s regional airliner programs—including the sale of the Dash 7 and 8 and Q400-series turboprops to Longview Aviation Capital—will force more of those aircraft into retirement because they are becoming legacy products.
Mark Gregory, managing director of teardown specialist Air Salvage International in the UK, reports that along with the CRJ200, the ATR 42 and ATR 72 turboprops are among the most desirable regional airliners on the parts market. One of the reasons is longevity in service. “The average regional turboprop coming here for teardown is 25-plus years, while narrowbody jets are often sent for teardown after 15 years,” he says. “For example, we just tore down an ATR 42 that was 35 years old. Given what they do and how well-suited they are for shorter-range regional airline service, there are few comparable replacement aircraft available.”
Also bullish on the ATR parts market is Patrik Huiberts, senior technical manager of APOC Aviation, a Netherlands-based teardown specialist.
“Turboprop aircraft will be phased out in most commercial operations due to high maintenance costs,” says Huiberts. “However, they will remain operational in remote areas because of special needs, like short runways,” he says. He anticipates more ATRs will be available for part-out.
Gregory at Air Salvage International notes that considerable operational demand continues for the DHC-6 Twin Otter—formerly produced by Bombardier but acquired by Longview Aviation Capital. “Fewer are coming onto the teardown market,” he says.
Gregory adds that a market for BAe 146 regional jet parts also “continues to exist” but is diminishing. “Five years ago, nearly 1,500 parts off that airplane were highly marketable, but today, it’s more like 400-500 parts,” he says. “At the same time, the parts market for the BAe 146 is saturated because fewer carriers operate it now.”
If fuel prices stay reasonable and pilot scope clauses remain in effect, some older regional airliners are likely to avoid part-out for years, according to Richard Brown, managing director of the Naveo Consultancy in London. As an example, he cites the Fokker 70 fleet, retired from KLM Cityhopper, which has found a new life with Asia-Pacific carriers.
He cites active marketing by Fokker Services. “In addition to their economics—and the fact they have life left in them—the aircraft are in great condition. Similarly, BAE Regional Aircraft has done a good job of encouraging the continued use of the BAe 146 and Avro RJ fleets,” Brown explains. “A combination of competitive lease rates, spares support packages, technical support and maintenance offerings (and unique aircraft performance) has seen those aircraft continue in service.”
The obvious question, then, is whether continued service of largely out-of-production aircraft could lead to a perfect storm of parts shortages. Experts do not see that happening.
“We have not observed any specific parts shortages, but there continues to be strong demand for parts for the larger regional jets such as the CRJ700/900 and Embraer E-Jet families, where the fleets are continuing to grow and age but have had relatively modest retirements to date,” Alton Aviation Consultancy’s Guthorn says.
Of the annual global regional aircraft MRO dollars spent, the two aircraft families account for $3.5 billion, or 60% of the total of $5.5 billion. He expects this to grow modestly through the middle of the next decade.
“High airframe parts commonality within each family makes some of the early-build aircraft attractive part-out candidates,” says Guthorn. “With several operators transitioning their fleets in the next few years, we may see more aircraft harvested for used serviceable materials and access to engine spares.”
Alton forecasts an increase in engine shop visits for the larger CF34s, anticipating nearly 3,000 total shop visits for the CF34-8 and -10 engines over the next five years.