Regional jet manufacturers Bombardier and Embraer agree that the 50-seater era is over, but differ in their approach to meeting carrier requirements for larger aircraft
There are a few things regional aircraft makers Bombardier and Embraer agree on: carriers buying their products are moving to larger-size aircraft and the once-lucrative market for regional jets with up to 50 seats has matured and will never see heady growth again. Beyond that, their strategies for meeting requirements for aircraft with more than 70 seats – where they both think growth will occur – diverge sharply.
Embraer thinks it has the right product mix with its 170/190 family seating 70-110 passengers. Three versions of the new-technology jets have entered service and the fourth and largest is set for certification in mid-year.
Bombardier, which revolutionised the regional airline industry by creating the first small regional jets over a decade ago, thinks it can tap carriers’ requirements for larger aircraft with enhancements to its 70- to 86-seat regional jets and its 70-seat Q400 turboprop.
If current orderbooks reveal the true picture, however, Embraer seems to have the right horses in its stable. The Brazilian manufacturer’s backlog of orders for its new larger jets stood at 322 at the end of 2005, with 72 already delivered. Bombardier’s backlog for 70-plus seat aircraft stood at 74 jets and 64 turboprops at the end of January.
The order backlog at both companies for jets of 50-seats and under, recently the backbone of regional fleets, particularly in North America, are sharply reduced. Embraer had a backlog of just 25 ERJ-series aircraft, while Bombardier had a backlog of 17 50-seat CRJ200s.
Despite the decline in new orders for smaller jets, Pierre Beaudoin, president of Bombardier Aerospace, says 50-seaters will continue to play “a crucial role” in the USA, where 90% of US domestic traffic is on routes of 100 or fewer passengers a day. “With its low trip costs, the 50-passenger jet can offer two or three roundtrips a day,” he says. “All the airlines we have had discussions with intend to keep a very large fleet of 50-passenger jets.”
Beaudoin is optimistic that carriers will sign on for the larger aircraft. He cites the huge installed base of CRJ100/200/440s – more than 1,000 have been delivered – as well as their commonality with the 70- to 78-seat CRJ700/705s and 86-seat CRJ900 and their operating economics. “A typical 70-passenger jet requires eight more passengers to break even,” he says. Most discussions the company is having with carriers focus on larger regional jets with typically under 76 seats, he says. In courting new orders, Embraer’s heavy backlog and Bombardier’s earlier delivery positions could be a factor in Bombardier’s favour, one airline source says.
Although the CRJ700 has been in service since 2001 and the CRJ900 since 2003, Bombardier has implemented enhancements that have improved their take-off and landing performance, range, payload and engine maintenance costs. A total of 292 of the 70-plus seat models had been delivered by the end of January.
Bombardier has begun investigating potential options for stretching the CRJ900 and Q400 into derivatives seating 80-100 passengers, and has assigned a large part of the team that had been working on the CSeries to these tasks. “This is what our customers are asking us to look at,” Beaudoin says.
But he contends that the programme to develop the 110- to 130-seat CSeries aircraft is not dead. “We are continuing to evaluate the potential launch of the CSeries,” he says. “We have a team of 50 people working on it, and we believe this market represents a great opportunity.”
Embraer’s new family of jets has been selling sufficiently well for it to be preparing to increase the 170/190 production rate from eight to 10 a month soon, says Embraer chief executive Mauricio Botelho. Embraer is also seeking to shorten its production cycle of 4.4 a month by 25% to the same level as its 50-seat jets.
“This product line is well received everywhere,” Botelho says. “There is a lot of activity in different parts of the world. The biggest hurdle is how to get airline financing. It’s been sort of a struggle to have these campaigns become reality.”
In the past year, however, additional sales of the new Embraers increased their presence in North America, Central America and Europe, and opened promising markets in China, India and the Middle East.
Passenger acceptance
The aircraft have won plaudits from carriers and passengers. The wider cabin gives the feel of a mainline jet and offers flexibility in configuring the aircraft. 170s being flown on behalf of United Airlines by United Express partner Republic Airways Holdings, for instance, are equipped with three sections – first class, economy plus and economy. Republic also operates 170s in two classes for Delta Air Lines and one class for US Airways.
JetBlue Airways has one-class seating in its 190s, but the 100 passengers, sitting in a two-by-two layout, have the same amenities as passengers on its Airbus A320s, including seat-back video displays with 36 TV channels and over 100 channels of satellite radio for free.
JetBlue, launch customer for the 190, had teething problems because of its overly ambitious start-up schedule – it sought to operate the aircraft 14 hours a day – but scaled back to get to grips with reliability. Now adding new routes with 190s, the airline is pleased with its performance. JetBlue chief executive David Neeleman says the aircraft’s fuel burn per block hour is lower than expected and that “RASM [revenue per available seat mile] performance is better than projected in virtually every market we’re flying in”. JetBlue’s 190 utilisation was close to eight hours a day in February and is rising.
Although supplementing some A320 services, the 190 has also been used to start JetBlue services linking airports previously unserved on a nonstop basis, such as Boston-Nassau and New York JFK-Austin, Texas, or routes served nonstop by small regional jets or turboprops, such as Boston-Washington Dulles and New York JFK-Richmond, Virginia. Next month, JetBlue will start 190 services on New York JFK-Pittsburgh and Boston-Buffalo routes. It is these routes, served by small regional jets, that represent “an imminent threat” to major carriers, says Douglas Abbey, a partner with Velocity Group. “This airline, plus this aircraft, equal an industry game changer. This is a potentially lethal market development tool that will be difficult for first-generation regional jets to compete with.”
Abbey sees JetBlue’s expansion with 190s as “striking at the heart of mainline”. Majors can now extract a yield premium on these feeder routes that will disappear, he says, because JetBlue provides both lower fares and an overall better travel experience. “Legacy major competitors will have to respond to the threat on like-terms, which is nearly impossible to do today.”
Elsewhere, Air Canada has 15 Embraer 175s and a growing number of 190s in its mainline fleet, while its Air Canada Jazz operates 15 CRJ705s as part of an all-Bombardier regional fleet of 129 aircraft. At the end of February, Air Canada had six 190s, with 39 more on firm order.
The airline operates its 175s with nine seats in executive class and 64 in economy class, primarily on routes from Canada to the USA, such as to Atlanta, Boston, Chicago, Dallas, New York and Washington. The 190s, seating nine in executive and 84 in economy, are deployed primarily in Canada, but also on some transborder routes, the carrier says. They will be used to begin routes to add frequencies on existing routes and introduce two-class service on routes previously served with one-class aircraft.
The Embraers are premiering amenities that will become standard across Air Canada’s fleet, including a Thales seat-back in-flight entertainment system, offering audio and video on demand.
Latin customer
Another satisfied customer is Panama’s Copa Airlines, which equipped its 190s with 10 seats in business class and 84 seats in economy. “The Embraer 190s are doing great,” says Copa chief executive Pedro Heilbron. In the first 18 weeks of operation, he says, Copa had a maintenance dispatch reliability above 99%, half the time at 100%. “We’ve done a very measured introduction of the fleet type,” he says. “We were careful. We’ve been operating only two aircraft eight hours a day. We did not extract the last juice from a brand new aircraft. It has its bugs like any new aircraft…but we’ve been prepared for it.”
Copa used 190s initially on routes operated with Boeing 737s, but is increasingly using them to begin new routes from its “hub of the Americas” in Panama City to Brazil, Colombia, the Dominican Republic and Trinidad and Tobago.
Copa has ordered 12 190s, and AeroRepublica, Colombia’s second-largest carrier, which Copa acquired last year, has ordered five 190s to replace Boeing MD-80s. More orders are expected, Heilbron says. “We have a large number of options. We expect to be firming up additional options for 2007 and 2008 as deadlines approach.” ■
CAROLE SHIFRIN / WASHINGTON
Source: Airline Business
