Analysts warn of impeding 50-seat regional jet glut

London
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Growing concern about a potential glut of 50-seat regional jets in the USA is being expressed by major industry consultants, following moves by mainline operators to slash or optimise regional capacity.

Aviation forecasting firm The Boyd Group says there are "just over 1,600 regional jet airliners operating in the USA, all within the well-defined segment of small jet providers".

Mainline airlines "are leasing out fleets of regional jets that today represent several hundred units in excess of what the market can support".

Based on the company's 2008-2017 Fleet Demand & Trend Forecast, there will be over 800 fewer of these regional jets in the US skies. "This figure may now be conservative with Jet-A [fuel] heading over $3 a gallon," says The Boyd Group.

The bottom line, it says, is that comprehensive network carriers in the USA "will be moving to cut as much leased-in regional jet lift as possible, as soon as possible. It may mean reworking summer 2008 schedules".

The latest indicator of a 50-seat squeeze came yesterday, when Continental Airlines assured it will slash regional capacity this autumn. Republic Airways Holdings subsidiary Chautauqua Airlines, which flies on behalf of Continental, is to begin culling its Bombardier CRJ200s fleet for the US major.

Additionally, Continental is in talks with long-term partner ExpressJet to negotiate "better economics" with the regional for its operation of Embraer ERJ-145s. The potential fallout on ExpressJet has yet to be determined.

Fellow SkyTeam partners Delta Air Lines and Northwest Airlines have announced plans to merge operations. Delta owns Comair, while Northwest owns Compass Airlines and Mesaba. Questions remain about the level of impact this merger will have on regionals. What is clear is that the new combined operator will continue to rationalise its network domestically, and tailor the business plan if fuel continues its unprecedented rise or the US economic situation worsens, say executives.

"Our goal over the long run is for our margins in that business to be equivalent to the margins in the mainline business," says Delta chief executive Richard Anderson.

Additionally, Delta in March decided to terminate a contract with Mesa Air Group unit Freedom Airlines for the operation of 34 Embraer ERJ-145s. Mesa responded by filing a lawsuit.

With the US outlook bleak, Embraer expects growing demand for 50-seat regional jets in non-traditional markets such as Asia and Latin America to help "compensate".