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Bombardier, Regional Aircraft, Regional Airlines

Is the 50 seat Regional Jet Really so Bad with No Future ?

The demise of the 50 seat Regional Jet market is accelerating at a rapid pace as once again scope clause changes ratified by the pilots unions at Delta Airlines and United Airlines clears the way for more 70 to 76 seat jets to be operated by the regional affiliates. Once again a market is changing not because of market forces but because of artificial scope clauses that gave birth to the 50 seat regional jet in the first place and now it will kill it in North America anyway, but opportunities exist globally for both the Bombardier’s CRJ line and Embraer ERJ line.

With values of 50 seat regional jets now below $5.0 million and as low as $2m on the early CRJ-100’s and ERJ-135’s, lease rates are now $30k-45k per month for CRJ-100’s, $35k to $55k for CRJ-200’s and $40k to $55k for the ERJ-145’s, the ‘new’ economics of the aircraft is a little better than when lease rates were $150k to $190k per month and many airlines tied themselves to long term leases at the high lease rates. The difference in the lower lease rates of up to $1.2 million a year can compensates for a lot of fuel and maintenance costs, in fact based on 2,400 flight hours a year that is a lease cost  saving of $500 per block hour, so there is life in the RJ aircraft, if it is below the 40,000 cycles for instance on the CRJ’s, and you have long sectors with good yields.

Lots of routes around the world can use a 50 seat jet, long thin routes, and I think its time to re-evaluate the 50 seat RJ’s economics, and negotiate hard with lessors as they are looking at parking hundreds, yes hundreds over the next 4 years (1,200 in service in North America) and better for lessors to get something than nothing or just scrap them, which many will be and that in turn will make 50 seat RJ parts more readily available and cheaper, again driving down operating costs.



With hundreds 50 seat RJ’s to be taken out of service, values and lease rates are tumbling as 70-76 seat RJ’s start to replace the 50 seaters in the US market and elsewhere. Lower lease rates and cheaper parts will make the aircraft more economical and worth exploring, specially for long thin routes and emerging markets where traffic will take time to grow to a level to justify larger aircraft.


This development may sound like a wonderful opportunity for Bombardier and Embraer to sell more regional airliners, in this case the CRJ-700/900’s and the EJet 170/190’s. Yet it is a double edged sword, for as new 70-76 seat regional jets are ordered, many more 50 seat CRJ-100/200 and ERJ-145’s will be returned to the manufacturers and leasing companies, and then what do you do with them all ?

The news lately about this segment has been all about how uneconomical the 50 seat regional jet is today in a time of increasing fuel prices, apparently not enough seats to cover the costs of fuel and overheads. I do not agree with the fact there is no place for 50 seat regional jets and that they are obsolete due to their high operating costs and high fuel burn per seat, just rubbish !

Yes the the CRJ’s maintenance does go up after 40,000 cycles and its up to Bombardier to fix the fatigue check issues and as more CRJ’s hit this “wall” we can hope Bombardier will have a better understanding of the integrity of its aircraft and hopefully they have life to 80,000 cycles. Remember the CRJ was stretch of the Challenger business jet and originally never designed or constructed for 40,000+ cycles as business jets at best will do 500 cycles a year and not 2,000+ that is routine for commercial aircraft.

The CRJ then was stretched to be the CRJ-700, then stretched again to be the CRJ-900 and then again stretched to be the CRJ-1000 ! from a 12 seat business jet to 100 seats is a big long stretch ! and maybe a one stretch too long ? Anyway Eric McConachie the Canadair engineer and “father” of the CRJ would be proud and his vision and determination to make a 50 seater jet airliner out of the CL600 Challenger business got him into the Canadian Aviation Hall of Fame.

The Bombardier CRJ’s first rolled off the line in 1991 and became a big hit with regional airlines, which operated them for the large legacy carriers like Delta, Northwest, United, American, etc. In fact they became so popular that over 1,100 were built and latest numbers I have show that there are 788 CRJ active around the world with over 60+ operators:

  1. Africa with 30
  2. Asia/Middle East with 34
  3. Europe with 116
  4. North/South America with 610 or 77% of the total global fleet


One of the early operators of the CRJ was Comair an affiliate of Delta which was closed down a year ago and one will find many of its aircraft parked in the dry desert heat of Arizona today for “storage” but really most will be scrapped as there is no way all the 1,200 50 seat RJ’s in North America will find a home.


Embraer has three regional jet models in the 37-50 seat category, ERJ-135 (37 seat), ERJ-140 (44 seat) and the ERJ-145 (50 seat) and 738 are in service, with the geographical breakdown as follows:

  1. Africa with 22
  2. Asia/Middle East with 49
  3. Europe with 80
  4. North/South America with 587 or 80% of the total global fleet


Couple of things to get straight, these regional airlines are really NOT an airline in the true sense, they operate aircraft for the legacy carriers under contract, they do not fly under their name or flight code, but that of the legacy carrier with whom they have contracted out their service to and fly for them their color livery and flight code. They are told where to fly and how frequently to fly there by the legacy partner. The regional does no sales, marketing, and some cases the aircraft ownership, fuel and ground handling are paid for by the legacy partner.

In short they are ACMI operators, that is Aircraft, Crew, Maintenance and Insurance and they are responsible to keep costs down as they work under long term, fixed fee contracts called Capacity Purchase Agreements (CPA’s) where the regional has no revenue risk and leaves them to concentrate on keeping costs to a minimum for the legacy partner airline.

The regional airlines have till recently outperformed their legacy partners in profitability, keeping EBIT margins (earnings before interest and tax) anywhere between 6%-9%, while legacy carriers struggled to breakeven. These regional airlines became huge, with hundreds of aircraft and revenues above $US 1 billion a year. It was a great aviation business to be in, keep costs under control, fly on time, fly safe and look after the aircraft. Six US based regional airlines are the top 6 in the world in terms of revenue with companies such as Mesa, Horizon and Air Wisconsin in the top 20 as well.

This has dramatically changed in the past 3 years and 2011 operating margins dropped as follows :

  1. SkyWest Airlines, Revenue $US 3.6 billion, 2011 margin 1.1%, 2010 margin 7.3%.
  2. Republic Airways, Revenue $US 2.8 billion, 2011 margin -3.7%, 2010 margin 5.0%.
  3. American Eagle,   Revenue $US 2.2 billion, 2011 margin 5.0%, 2010 margin 7.6%.
  4. Pinnacle Airlines,  Revenue $US 1.2 billion, 2011 margin 0.1%, 2010 margin 6.0%.

As a side note to interested Canadians, Jazz/Chorus the Canadian regional for Air Canada has 138 aircraft, $US 1.7 billion in revenue and its operating margin in 2011 was a nice 6.1% and a few years back it had one of the highest margins of any regional globally, thanks to the generosity of Air Canada. Though Air Canada is now is free to source other CPA partners, and it has signed up Sky Regional  to operate 15 EMB-175 regional jets for Air Canada on routes to the USA starting this March, after flying 5 Q400’s (ex-Lynx) between Ottawa and Toronto Island for Air Canada, so I believe margins at Jazz/Chorus will be squeezed over time with real competition from another ACMI operator.

United Airlines deal will allow an additional 80 regional airliners in the 70-76 and under a complicated formula for each additional 76 seater above 154 the airline has to let roughly 3.0 to 5.2 of its 50 seat regional airliners go, complicated yes, in short the 50 seater is out!

Now Delta has order 40 CRJ900’s with 76 dual seats from Bombardier plus 30 options potentially worth $US 3.3 billion at the list price of $42.8 million each or $US 563,000 per seat ! soon Delta will start withdrawing its 50 seat CRJ’s from service, they have 466 of them ! where will they go ? The logic of paying $300,000+/- a month lease for a brand new 76 seater when you have 50 seat regional jets now down to $50,0000 a month is beyond my comprehension.

You will not eat up the $250,000 a month difference in fuel and maintenance, and at even a high 250 block hours a month for the new CRJ900, the capital cost is $1,250 per block hour, while fuel is maybe $US 1,450 per block hour (at assumed $US 3.00/USG) for the CRJ-900 and $US 945 for CRJ-200.

As you will see below, the CRJ-900 (78 seats) on gallons per seat hour, is only 1.6% more efficicient than the CRJ-200, but with only 76 seats for Delta Airlines, the CRJ-900 is actually at the same fuel efficiency as the CRJ-200, 6.2 USG per seat hour ! so

Before I get to get where they go I want to touch on a myth in regard to the high fuel burn of the CRJ per seat, as per a study by PlaneStats let’s look at Gallons per Seat Hour of various Regional Airliners and put that myth behind us. Please note, the more seats an aircraft has the better the number generally will be, and that plus/minus all the regional aircraft have the same speed per hour.

Gallons per Seat Hour Table

  1. EJet-175 with 80 seats   = 5.5   -12.7%
  2. EJet-190 with 100 seats = 5.7   -9.5 %
  3. CRJ-700 with 66 seats   = 6.1   -3.1%
  4. CRJ-900 with 78 seats   = 6.2   -1.6%
  5.  CRJ-200 with 50 seats  = 6.3   BASE
  6. EJet-170 with 72 seats   = 6.8   +7.9%
  7. ERJ-145 with 50 seats   = 7.0   +11.1%
  8. ERJ-140 with 44 seats   = 8.5   +34.9%
  9. ERJ-135 with 37 seats  = 10.1  +60.3%

Interesting to see the 72 seat EJet-170 burning 7.9% more fuel per seat hour than the CRJ and there is a case for the ERJ-140/135 to be taken out asap, but the stories about the 50 seaters burning a disproportionate amount of fuel per seat is just false, thank you.

Regional jets and turboprops have always operated in higher yield markets than narrowbodies of legacy airlines, to offset the higher CASM (cost per available seat mile)  of having fewer seats over which to spread the operating and overhead costs.

As an example where a legacy airline has a Yield of $0.1273 and a passenger load factor of 83.7% for a PRASM (passenger unit revenue per available seat mile) of around $0.1066 and a CASM (cost per available seat mile) of $0.1040 for a 2.5% margin from passenger services, a regional airlines numbers would be a lot different.

A sample regional may have a Yield of $0.2800, a passenger load factor of 75% for a PRASM of $0.2100 and CASM of $0.1950 for a margin of 7.1%. Note the higher yield and higher CASM, as these smaller aircraft must have higher unit yields to cover the higher unit costs of operating smaller equipment. Therefore, ideal for new markets where demand is not yet known or where demand is known and does not justify a larger aircraft.

Its why regional jets have been used to open up new markets and fly low traffic markets, but they cannot compete with the low cost airlines like Spirit, Virgin America of JetBlue.

The place to put these is where you have long distances and low traffic, like many parts of Russia, Africa and even South America, opening up new routes and serving small communities far from any large city. Russia has taken many CRJ’s as it had to get rid of its lousy YAK-40/42, AN-26’s and TU-134’s on safety grounds. In Russia the CRJ is a luxury compared to what they had from their own manufacturers.

Emerging markets need smaller aircraft, and that needs to be accelerated as well as the the conversion to freighters with a cargo door, 5 CRJ’s are already flying as freighters and with prices coming down turning a CRJ-200 into a business aircraft looks promising. Flying Colors in Peterborough, Ontario has done well converting CRJ’s into beautiful business jets and it is a great airplane for the money, get a CRJ for $6 million and put another $6 million in a new interior and exterior and you have a great deal for $12 million. Just need to be creative.

The aircraft have a future, but lease rates cannot be $US 100,000+ a month anymore, more like $US 40,000 a month  would make it very attractive as well as introducing new maintenance programs to lower maintenance costs on older aircraft. Here it is up to Bombardier and Embraer to stand behind its products and help to keep them alive or face 788 CRJ’s and 738 ERJ’s sitting in the desert like so many DC-9’s, early B737’s and B727’s.

The aircraft have life in them, most narrowbody airliners are good for 25 years and this has been pretty steady for many years, but given that many 50 seat regionals are coming up to 40,000 cycles and expensive jumps in maintenance that life can come down quickly. The oldest CRJ’s are now almost 23 years old and those are already parked or being scrapped, and even 15 year old’s are in danger of being “parked” a nightmare for both manufacturers and leasing companies.

Ultimately, finding a home for all the North American 50 seaters is NOT possible and many of these 1,200 aircraft will sadly have a short life and end up on the chopping block.

The sad part is that we have already stopped manufacturing 19 seat airliners, 30 seat airliners, just one 50 seat turboprop manufacturer left, ATR though AVIC of China is trying, and the 50 jet manufacturers have stopped manufacturing as well.  So what will we do in years ahead when markets need 19, 30, 50 seaters ?

I will cover these segments in the coming next few weeks, stay tuned.


About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 30+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (50+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems in the business for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com I write a lot of Articles and Posts on LinkedIN: https://www.linkedin.com/in/tomas-chlumecky-3200a021/


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