Kevin O'Toole/LONDON
Julian Moxon/TOULOUSE
THESE ARE interesting times in the regional-aircraft market. Even without the crisis at Fokker, manufacturers were facing some fundamental questions about exactly where their market niche lies.
Regional jets form a case in point. Only a few years ago, the debate was about which manufacturer would be first to top-out its range with a 130-seat aircraft. Recession ended those plans, and manufacturers' attentions have steadily shifted downwards.
Now Henri-Paul Puel, chief executive of Aero International (Regional) (AI(R)), has been thinking out loud about the possibility of making the consortium's first launch that of a 70-seat regional jet.
When British Aerospace pooled its Avro and Jetstream businesses with ATR into the (AI(R)) marketing consortium, the promise was that its first new product would be a 100-seater.
Whether any of these launch ambitions come to fruition remains to be seen. Besides the issue of finding funding of at least $1 billion, there will be questions as to where the programme's centre of gravity is to lie. Daimler-Benz Aerospace (DASA), having extracted itself from its support of Fokker, has signaled its desire to develop regional aircraft within the Airbus group. A further complication would be a decision by Asian partners China and South Korea to opt for the AI(R) bid to help it build a 100-seat regional jet.
Puel nevertheless appears intent on building a consortium around AI(R), and of using a 70-seat regional jet as the kingpin. He argues that such an aircraft, with a stretch of up to 85 seats, could be used to tap a world demand for up to 450 aircraft over the next 15 years.
There is some evidence that he could be right to consider looking below the traditional middle ground of 100 seats. Fokker was the last to launch a new 70-seater at the end of 1992, and a glance across the order books shows that it has indeed been outselling the Fokker 100. Roughly twice as many Fokker 70s were sold in 1995 and, by the end of the year, the smaller aircraft accounted for 44 of Fokker's backlog of 60 regional jets.
The reasons behind this switch in attention are not difficult to trace. Regional airline customers looking to upgrade from turboprops and major carriers looking to fill holes in their network need a smaller, slicker, aircraft. The point is being proved by the success of Bombardier's 50-seat Canadair Regional Jet. With 41 deliveries and almost as many orders in 1995, Canadair has some claims that it is the single biggest-selling regional jet.
Embraer has also picked up an initial 18 orders for its EMB-145 - its long-awaited 50-seat jet offering. Embraer still holds more than 130 letters of intent, which it could start to convert if and when the aircraft proves itself in service.
Canadair has already taken on the turboprop makers in the 50-seat sector, but is also nibbling away at the bottom of the traditional regional-jet range. Major carriers such as Lufthansa and Air Canada have chosen it to operate on their thinner routes. With plans for a stretched 64-seat CRJX taking shape, the competition could heat up further.
Perhaps most worrying for Puel is the damage which manufacturers of the new breed of regional jets are inflicting on ATR's traditional 50- to 70-seat turboprop market. ATR had been considering following its customers into jets long before the formation of AI(R), but the issue appears to be gathering a new sense of urgency.
In particular, Puel complains that around 40% of the US market is now denied to AI(R) because, it does not have the right 50- to 70-seat jet aircraft. Turboprops have never been a favoured option in the market, and the USAir ATR 72 crash in 1995 has not helped their popularity. He adds that the existing RJ70 is "too heavy", since it exceeds the "scope-clause" limit set by US pilots' unions for regional jets.
Whether the need to avoid a US pilot limit is justification for launching a new aircraft programme is debatable. What seems more plausible is a need to help AI(R) expand, by bringing down the entry cost into the jet-aircraft range.
The Canadair Regional Jet retails for less than $20 million and the EMB-145 is selling for under $15 million - not far off the price of a new large turboprop. Puel says that AI(R) would aim for a price of around $17-18 million for the 70-seater and $20 million for a stretched 85-seater.
By contrast, the existing RJ and Fokker products have catalogue price tags in the $25-30 million range. In reality, the manufacturers have been lucky to achieve prices of $22-25 million, one of the reasons why both companies have been under such financial stress.
The British Aerospace board, which now openly admits that ramping up regional-jet output in the late 1980s was suicidal, is keeping a tight rein on Avro RJ production. Avro hopes to be back at break-even by 1997 at the latest, but, in the meantime, BAe has decreed that its production rates remain pegged at around 18 aircraft a year and that the business concentrate on cash deals with blue-chip airlines.
"We will only change the production rate if there are very substantial, worthwhile, orders," says Avro's Jeff Marsh, now heading sales and marketing at AI(R). He admits that worthwhile prices are still rare.
There is certainly little relish in the BAe boardroom for the prospect of rebuilding the massive liabilities, which its regional-aircraft division racked up in the early 1990s through a series of desperate lease deals and resale guarantees. Fokker's filing for protection from its creditors is a stark reminder of the risks of optimism within the regional-aircraft market.
Even if Fokker cuts back or quits the regional-jet business, there seems little prospect of a sudden surge in prices. It has been the big-three airliner manufacturers, rather than their regional counterparts, which have made the running in the 100- to 124-seat market over the past year.
Avro walked away from the Scandinavian Airlines System regional-aircraft competition in 1995, not because of competition from Fokker, but because of a battle between Boeing and McDonnell Douglas (MDC). The bidding had reached around $20 million an aircraft, before Boeing emerged with a launch order for 42 of its new-generation 737-600s. MDC went on to launch the 100-seat MD-95 with ValuJet in a competition with Airbus and Boeing which again left prices ducking below $20 million an aircraft.
Prices are unlikely to stay as low for other deals, but the fight for major customers, such as British Airways with its proposals for a 60-strong European regional-aircraft fleet, shows few signs of easing.
The prospect of such future battles has raised issues within Airbus over whether to protect its back by extending the range down below the 124-seat A319. The size of the A319 and the extent of MDC's discounting are widely blamed for Airbus' failure to tie-up the ValuJet deal.
DASA chairman Manfred Bischoff has already said that the group wants to centre its future airliner work "on the further development and expansion" of Airbus. DASA appears to be contemplating using this as a route back into the 70- to 120-seat jet-aircraft market.
That may not rule out a separate regional venture being set up below Airbus, rather than an extension to the existing line. The military-transport division, newly formed to oversee work on the Future Large Aircraft project, provides a possible blueprint. That had the added advantage of bringing in Italy and others, which have so far been left outside the consortium. A regional arm could also help give greater focus to European attempts to find an Asian partner.
Puel appears to be contemplating such a grouping with DASA and possible Asian partners, but based around AI(R) rather than Airbus.
He adds temptingly that the issue of a European partner will be "clarified" during the Singapore air show.
Whatever plans eventually emerge for regional jets, it seems certain that the turboprop market will continue to be squeezed into an increasingly narrow niche, dominated by smaller, low-cost operators. That, in turn, puts pressure on aircraft prices and deals.
Bombardier is pressing ahead with the high-speed 70-seat Dash-400 with help from Mitsubishi Heavy Industries, while Asian money is also funding IPTN's development of the 68-seat N-250.It is difficult to see, however, who would fund a new turboprop programme within Europe's weak and fragmented industry.
The likelihood of a new ATR turboprop launch would seem extremely remote if AI(R) presses ahead with an expanded jet-aircraft range. Fokker is still producing a dozen Fokker 50s a year, but its future is uncertain. The fast new Saab 2000 was the best hope of proving that there is life in the large turboprop market yet, but has lagged disappointingly in battles with the 50-seat Canadair Regional Jet - in 1995 it netted only five new orders.
At the smaller end of the market, Jetstream has effectively called a halt to production of the 19-seat J31. BAe's more pressing problem is to keep its leased fleet of nearly 300 J31s in the air. The 30-seat J41 is still selling, but not making money, while DASA is looking to off-load most of Dornier and its costly Dornier 328 programme.
With world overcapacity running at as much as 200%, the prospects of anyone making serious profits out of turboprops in high-cost Europe appear remote. Some within the industry are already privately raising doubts that turboprop manufacturing will stay in Europe in the long term. That would indeed mark the end of a era in the regional-aircraft market. market for some time
Source: Flight International
