Plane Conversations

Based on reports in USA Today, The Wall Street Journal and Bloomberg, Delta plans to park a big majority of the 50 seat regional jet fleet, operated by its subsidiary Comair, for economic reasons.

Other regional airlines have already parked, or they are soon to park many of their 50 seat or less aircraft. Michael Boyd of Boyd Group International is quoted in an Arkansas Online article saying that by 2015 US airlines will only be operating 200 regional jets with 50 or fewer seats, down from about 1200 at an all time high.  The 50 seat regional jet does not work in a cost driven airline world, especially when fuel prices are high.

There are two outcomes of these decisions that are interesting to me.

1)      As the airlines park these aircraft, service will be cut to some number of smaller markets. They are not parking all of these aircraft to put larger aircraft on the routes. In an unregulated airline system the airlines are not going to fly where they can’t make money and that is bad news for smaller markets.

2)      There will be a big group of Canadair CRJ 100/200 and Embraer ERJ 135/145 regional jets sitting  stored in the Arizona desert, possibly numbering in the hundreds. Some percentage of these aircraft still have good time left on their airframes.

As I hear from people in the leasing industry, the market for regional airline turboprops  is strong worldwide because the used fleet can be leased or purchased very cheaply compared to new prices. The operating costs of turboprops are much lower than the regional jet, especially on short haul routes that are common in developing economies.

So what do you do with a few hundred regional jets that are parked? At what price point do they become economically viable? Where are the new missions that would bring value and a new life for these aircraft?

Back in the early part of the last decade this same problem existed with the regional airline turboprop fleet as they were parked in favor of the new regional jets. Airlines going to an all jet fleet parked their Saab 340’s, Jetstream32’s and 41’s, Embraer 120’s and Beech 1900’s and the desert was full of stored aircraft. Ten years later you don’t see many sitting around. Most are deployed outside the US meeting the mission requirements of small airlines and government special use operations.  

Eventually the market will figure out how to redeploy these regional jets. It is all about economics. The combination of capital costs (lease or financing) and operating costs have to meet a point where it makes sense in a new use. Lower capital costs allow for lower utilization operations such as air cargo and on demand charter.

It seems that a big opportunity exists for charter operators to use these aircraft for contract flying, corporate shuttles and on demand point to point charter. There is a service gap that continues to grow as airlines focus on high density domestic markets. Could these regional jets help fill the gap?  

What do you think?

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