You may be wondering why Runway Girl has been looking a little blog-lean these days. She got knocked off the catwalk due to recent illness but is tying her stilettos back on. Now let’s try to fatten her up.
First order of business? Let’s talk about what’s happening to US regional carriers, and how they are being forced to swallow the pain that is trickling down from their major partners. Some of this is tackled in a new Flight double feature, written by myself and ATI US editor Lori Ranson.
But more evidence of a pending 50-seat glut has emerged in the last week. A further 51 of the 50-seat regional jets flown by ExpressJet for Continental Airlines are now subject for removal from its fleet starting in December of next year. ExpressJet has already seen 69 ERJ-145s culled from the contract.
As one pilot observer puts it: When major airlines contracted for 50-seat operations, just what the heck were they thinking? “And if the economics of 50-seaters are so obvious to all, what about the 37- and 44-seaters that enjoy the operating costs of the 50-seaters with only a fraction of the revenue benefits? Such poor equipment choices hasn’t kept our managers from getting their PUP bonuses, however.”
Saab Aircraft Leasing (SAL) president and CEO Michael Magnusson tells me: “This is an issue I have been watching with interest for some time, and I have predicted this would happen as the fuel prices increases. Many keep saying markets outside Europe and US will absorb the glut but what they keep forgetting is that we need to keep in mind the quantities of aircraft involved. As the recent Flight International article clearly pointed out, the US fleet is 1400 30-50seat RJs, the European fleet is just 300 and Asia 100.
“In Mexico there are around 70 and then just a hand-ful in South America and Africa. Despite Embraer’s assurance about Latin America there is not a single 50-seat RJ in airline service in Brazil!(just the Air Force).Conclusion, if the US fleet is reduced by 10-20% (which seems a realistic number), we are talking about up to 300 aircraft (the size of the European fleet today !), where are they going ???”
Magnusson adds: “I just do not buy this stuff about “markets outside North America and Europe will absorb them”, they will not absorb such quantities, based on history so far.”
Life is not completely rosy for all turboprop operators of course. The Raytheon Beech 1900 turboprop is playing a quickly-diminishing role in US scheduled service following the wind down of a trio of operators, and as Colgan Air prepares to retire the type by the end of the year.
In fact, continued challenges at Colgan – which also flies Saab 340s and new Bombardier Q400s – and its sister, regional jet operator Pinnacle Airlines, have forced parent Pinnacle Airlines Corp to revise first quarter earnings estimates below consensus estimates by analysts.
Pinnacle now expects earnings per share in the quarter to fall between $0.12 and $0.15, “which is approximately $0.22 to $0.25 below” Wall Street estimates.
“Colgan’s revenue and non-fuel costs on its branded pro-rate flying have shown improving trends in the first quarter, but the improvements have not been enough to offset the high cost of fuel,” says Pinnacle.
At the end of the day, however, larger turboprops are appearing more secure these days. Speaking in February at the Singapore Airshow, Magnusson said that in the broader market the “supply of Saab 340As is shrinking steadily”, values are going up and “supply of Saab 340Bs is almost nil”.