ANALYSIS: the Bombardier CRJ200 aircraft report

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ANALYSIS: the Bombardier CRJ200 aircraft report

The CRJ has been heavily impacted by high fuel prices during the past five years as well as increased aircraft retirements in the US market. While a special freighter conversion is on the horizon, the market is uncertain about how much the aircraft needs to be acquired for in order for a conversion to make economical sense.


The 50-seat CRJ100/200 series is based on the Canadair Challenger design, which was purchased by Canadair from Learjet in the mid 1970s.

Although a 24-seat version failed to launch Bombardier began studies for a larger configuration aircraft, leading to the formal launch of the Canadair Regional Jet programme in spring 1989.

The CRJ100 is a stretched 5.92 meters (19 feet 5 inches) aircraft, with fuselage plugs fore and aft of the wing, two emergency exit doors, plus a reinforced and modified wing. It features CF34-3A1 turbofans.

Bombardier offered three versions: the CRJ100 standard followed by the CRJ100ER variant, with 20% more range, and the CRJ100LR model with 40% more range.

The CRJ200 series is identical to the CRJ100 except for the engines, which were upgraded to the CF34-3B1 model.

Limited remarketing

According to Flightglobal's Ascend database there are 780 CRJ200s currently in operation. An estimated 690 aircraft are in service, while 90 aircraft are reportedly in storage or in transit between operators.


The North American market has already endured the fleet retirements of Comair and Mesa, but more fleet changes are on the cards.

Pinnacle Airlines operates a 140-aircraft fleet, which it plans to exit in the next couple of years. The carrier is transitioning into a fleet of 81 Bombardier CRJ900 aircraft on behalf of Delta Connection. Pinnacle will become a Delta Air Lines subsidiary when it emerges from bankruptcy. Delta is reducing its active 50-seat CRJ fleets by 218 aircraft during the next three years.


The good news is that the other US regional carriers are keeping their fleets for the time being.

SkyWest Airlines is the largest CRJ200 operator, with 153 of the aircraft type in its fleet, including 26 -ERs and 127 -LR aircraft.

ExpressJet Airlines, is the second largest operator with 106 aircraft, followed by Air Wisconsin, which operates a fleet of 71 CRJ200s, according to Flightglobal's Ascend Online database.

The North America region, where scope clause amendments have moved the seat-limit from 50-seats to 76-seats, represents 79% of the total in-service fleet with 544 aircraft.

The second largest market is Europe with 87 aircraft in service, and another 25 units are in storage or transition.


Asia Pacific accounts for a total of 34 aircraft, while Africa has 19 aircraft in operation.

The operator base continues to fragment as an increasing number of aircraft find new opportunities in emerging markets, such as Africa and the CIS.

Spain's Air Nostrum is retiring its final CRJ200s this year. Flightglobal understands that all aircraft are moving to Russia.

While there is some remarketing potential for the aircraft in Russia and the CIS, as well as Africa, this remains fairly small scale, relative to the volume of aircraft coming out of North America.

"Aircraft younger than 10-years-old head to the Russian market. Beyond 10-years and Africa is next destination," says a trading source.

According to Ascend, about 28% of the fleet belongs to operating lessors. Sources indicate the high level of lease returns scheduled in 2013 and 2014 (117 aircraft) could further exacerbate the surplus of aircraft on the market in the near term.

Ascend expects the parting-out of a significant numbers of aircraft for spares in the medium term, particularly for older North American aircraft, or those close to overhaul limits.

Potential exists for the conversion of passenger aircraft to alternative roles such as corporate shuttle, VIP and freighter, but these are small-scale niche markets that are unlikely to fully absorb the current and future excess capacity.

Freighter conversion

Conversion specialist Aeronautical Engineers (AEI) launched a Bombardier CRJ100/200 special freighter (SF) programme last month, which entails cutting a large cargo door in the aircraft.

The CRJ100/200SF will feature a 2.39m (94in) by 1.96m (77in) cargo door into the fuselage's left side and will be able to carry a maximum payload of 6,080kg (6.7t).

AEI is expecting the certification process for the first aircraft to take about two years.

The aircraft will be used on long and thin routes. Customers from Europe, Africa, Canada, Mexico and the USA have shown interest, according to AEI's head of marketing Robert Convey.

Canada's Cascade Aerospace has been offering a freighter modification for the aircraft type since 2007, but only five aircraft have been converted under that programme. AEI and Bombardier are hoping that market factors - such as the CRJ fleet reaching mid-life and coming off of lease from North American operators - will spur greater interest in the conversion.

Secondary trading

The used market for 50-seat CRJs has been depressed since 2007 and, with each year passing, prospects for asset owners and remarketing companies to find new operators are more and more challenging. Also, with the retirement announcements by Pinnacle in particular, feedstock is expected to further increase over the next two years.

Bombardier has worked hard to maintain the surplus of CRJs at a reasonable level during the past six years despite falling asset values. The Canadian manufacturer even ventured into a freighter conversion programme with Cascade Aerospace for the design, certification and build-up of the CRJ200 package freighter.

At the time, it was perceived as an opportunity and Bombardier estimated about 25-50 of its 50-seat jets could be converted to package freighters.

West Air Sweden was the launch customer of the CRJ200PF variant after successfully bidding for a postal contract.

The full Class E bulk-loading freighter does not have a large freight door fitted, so the conversion cost is $500,000 per aircraft.

The CRJ200SF kit conversion is priced between $1.6 million and $1.8 million.

Convey says aircraft will have to be priced between $1.5-2 million to make the freighter viable. "Given that the oldest aircraft are still relatively new, operators will initially be looking at the oldest aircraft first. This is purely a price play," he says.

The CRJ200 has reached 'engine value', meaning that an operator can acquire the aircraft for the value of the green time on the engines, he says. "The airframe holds little cash value and this combination signals the perfect time to convert into a freighter aircraft."

Ascend sees the aircraft "zone of conversion" slightly higher at $2.7 million and $3.4 million as a converted aircraft should be available on the ramp price, which includes engine and maintenance checks.

Ascend argues that even at $4.5-5 million, the economics of the aircraft will not make sense compared with a turboprop competitor. "However the additional speed of the CRJ may just make sense in markets requiring that additional speed to achieve the route(s) in a single night turn," says Rob Morris, senior aviation analyst at Ascend.

He also points to the two-year timeframe to develop and certificate the aircraft, by which time there will be plenty of potential feedstock on the market and values (and thus prices on the ramp) may be even lower. "That could potentially improve the market proposition. But balancing that who knows where fuel prices will be in 2015 and any increase can only damage the market proposition," he says.

Convey sees interest from all over the world. "Initial contact have come from the USA, Mexico, Central America, Africa, Europe and the Middle East. I have interest to sign up 35 orders in the next six months. The overall programme will convert between 75 and 100 units," he says.

AD impact?

US-based operators of CRJ100 and CRJ200s could be faced with a bill of more than $29.2 million to comply with a US Federal Aviation Administration (FAA) airworthiness directive (AD) that requires replacing liners in the aircraft's Class C cargo compartment.

The AD, issued earlier this month, requires operators to change the liners installed in the original aircraft's baggage hold because they do not meet flammability requirements. These liners "may not provide adequate fire protection and could lead to an uncontrolled baggage bay fire", said a Canadian AD referenced in a July notice of proposed rulemaking.

The FAA estimates that 574 US-registered aircraft would be affected by the AD and foresees required parts alone costing operators more than $43,500 per product. When adding in labour, the cost would increase to nearly $60,000 per product, or $29.2 million for the entire fleet.

The AD applies to series 100 and 440 Bombardier CL-600-2B19 aircraft with a Class C cargo compartment. Airlines must comply with the AD within 28 months from 17 April, when the directive becomes effective.

Values and lease rates

Market source indicate that passenger aircraft lease in the $45,000-$55,000 range regardless of the vintage, although the youngest vintage can trade up to $70,000 a month. One lessor source says youngest aircraft with green time on the engines have traded at $90,000 a month.

According to an aircraft trader, the CRJ market is a sales market. "Below $2 million it is a sales market, not a lease market," he says, adding: "The 2004-05 vintage aircraft can attract $5.5 million or $6 million if the engines are in good condition."

The package freighter lease rates range from $75,000-90,000 a month, according to a trading source. A large cargo door would need a $20,000 a month premium to make it worth the investment, he adds.

The aircraft can be purchased for $1 million, but an investment of up to $3.5 million would be needed before conversion, says the trader.

"Any aircraft at least 10-years-old is only worth the price of the engines," he says.

Each engine costs between $1.3 million- $1.5 million, according to him.

In the part-out market, aircraft are purchased below the $500,000 market, according to another trader.

Aircraft built in late the 1990s, with reasonable time left on the engines, are in the $1.5 million-$2 million range. "With 5,000 to 6,000 cycles left, aircraft can be purchased for $1.5 million," says a trader.

The CRJ200's market values further eroded in the final quarter of 2012.

Collateral Verifications says values and lease rates have dropped by about 20% during the past year. "Many of the older vintages of the type have and continue to be parted out to support the existing fleet. This will help lower the aircraft availability and should also help stabilise values and lease rates in the remaining in-service fleet," says Gueric Dechavanne of Collateral Verifications.

The market for the CRJ200 continues to be "dogged" by high oversupply levels, in terms of storage and availability, says IBA Group's Alice Gondry.

"This has continued to suppress values and lease rates," she says.

Stuart Rubin, principal of ICF SH&E, says the market outlook for the 50-seat regional jet segment has been challenging for several years and should continue to be so for the foreseeable future. "As operators have removed CRJ100/200s in favour of larger equipment, demand, values and lease rates for the type have softened," he says.

The CRJ200LR, as the most capable member of the CRJ100/200 family, should perform somewhat better than other 50-seat regional jets with respect to current and residual values, Rubin indicates.

"The only competition is the ERJ 145, which except for the -XR version exclusively in airline service with ExpressJet, has less payload/range capability than the CRJ200LR," he says

A point of concern is operator concentration in North America as nearly 85% of the -200LR fleet operates with four carriers: Skywest, Pinnacle, Air Wisconsin and PSA Airlines. Skywest and Pinnacle both operate CRJ200LRs on behalf of Delta Air Lines, which has announced the removal of 140 50-seat jets from its operations during the next several years.

"As these aircraft transition out of airline service, there will be additional negative pressure on demand, values and lease rates for CRJ200LRs," adds Rubin.

Ascend says a 1992-vintage aircraft equipped with -3B1 engines and a 51,000 lb maximum take-off weight has a half-life market value of $2.5 million, compared with a base value of $3 million. Collateral Verifications values the aircraft at $2.9 million.

Ascend says lease rates are $45,000 a month for a 1992-vintage aircraft, while Collateral Verifications has a rental of $40,000 a month.

A 1996-vintage model has a current market value of $2.48 million, according to ICF SH&E. Ascend maintains a CMV at $2.5 million, while IBA values the aircraft at $2.95 million. Collateral Verifications appraises the aircraft at $3.5 million.

Lease rates range from $30,000-$40,000 a month, says ICF SH&E. Ascend and IBA Group have monthly rentals of $45,000 a month for the aircraft, while Collateral Verifications has a rental rate of $46,000 a month.

Appraisers show a $1.2 million value difference on a 2000-vintage model. Ascend has the lowest value at $3 million, followed by ICF SH&E with $3.4 million. IBA Group values the aircraft at $3.9 million, while Collateral Verifications has a $4.2 million appraisal for the 13-year-old aircraft. Lease rates are in the $40,000-$50,000 a month range, says ICF SH&E. Ascend has a rental of $45,000 a month, while IBA opines the 2000-vintage aircraft rents at $55,000 a month. Collateral Verifications has a rental rate of $52,000 a month.

Collateral Verifications is the highest of the appraisers with a $4.74 million valuation for a 2002-vintage model. Ascend is the lowest at $3.55 million. IBA values the aircraft at $4.4 million while ICF SH&E says the value is $4.08 million.

Ascend and Collateral Verifications say lease rates are $55,000 a month for a 2002-vintage aircraft. IBA opines the 2000-vintage aircraft has a $60,000 monthly rental. ICF SH&E says the range is between $50,000 and $60,000 a month.

A seven-year-old aircraft has a half-life market value of $5.25 million, according to Ascend. IBA Group puts the value at $5.4 million. ICF SH&E has the highest value at $6.24 million while Collateral Verifications offers a $5.83 million valuation.

Ascend and IBA agree lease rates are $70,000 a month for a 2006-vintage aircraft. ICF SH&E says the range is between $60,000 and $70,000 a month, while Collateral Verifications is at the bottom-end of the range with a $61,000 a month rental.

"Based on the current environment and risk averse financial institutions, there has been very little appetite for many in buyers to purchase these aircraft. The leasing market, however, has been fairly active as the demand continues to be stable for the type from many developing markets," says Dechavanne. "We expect this trend to continue for the foreseeable future with the expectation that values will return to a more normal level of depreciation in the next 12 months as the availability of aircraft continues to diminish."