RJs remain under pressure

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

The market for regional jets remains under pressure. Availability of the regional jets is dangerously approaching 200 aircraft now and trading aircraft is becoming increasingly difficult.

At March 2010, there were 195 aircraft offered for lease or sale, almost a third more than at the end of the first quarter of 2009.

The 30 to 50-seat regional jet market has been under severe pressure as over the past two years ability to fill smaller aircraft at premiums has rapidly diminished. Currently half of the 'advertised' fleet comprises Bombardier CRJ-100/200s and Embraer ERJ-135/145s.

Availability Mar-09 Mar-10
146-100 2 0
146-200 17 15
146-300 9 6
Avro RJ70 1 3
Avro RJ85 1 6
Avro RJ100 4 3
ERJ-135 6 22
ERJ-145 23 28
Embraer 170 6 8
Embraer 175 0 0
Embraer 190 5 1
Embraer 195 0 0
CRJ100 15 19
CRJ200 38 29
CRJ700 8 3
CRJ900 0 4
Fokker F70 3 3
Fokker F100 10 45
Total 148 195
Source: Airfax

37-seat market

Availability of the Embraer ERJ-135s keeps increasing and there are now more than 20 aircraft offered in the market. There has been successful placement into the Latin and African markets over the past year. ECC Leasing inherited 14 ERJ-135LR aircraft that were previously operated by Chautauqua Airlines. It has sold two aircraft to the Brazilian Air Force, two aircraft to Servicos Executivos Aereos de Angola and four ERJ-135LRs to South African Airlink since the beginning of the year.

The ERJ-135's availability is concentrated in the North American market. There are eight ExpressJet aircraft available along with four Chautauqua aircraft and five American Eagle aircraft. All are 1999/2000-vintage aircraft. Non-US availability is limited to one Luxair aircraft as well as two 2000-vintage aircraft operated by Air France's Regional. The lease rentals are believed to be below $50,000 a month depending on the credit on the 10-year old aircraft while a 2002-vintage could lease in the $70,000 a month range.

Embraer is exploring the Shuttle market with the ERJ-135 variant and it converted one aircraft last year in a 16-passenger configuration. Considering the size and the value, it says that the ERJ-135 is a good application. A second aircraft is in the pipeline at the Nashvile conversion centre.

50-seat market

The ERJ-145 now sees availability nudging towards 30 aircraft and despite being a younger aircraft than the CRJ-100, the challenge for operators remains the same: making money with a 50-seater. The older ERJ-145s are now 14 years of age and the concentration, mainly in the US market, is a consideration given the current environment.

However there are aircraft coming out of the European fleets such as Flybe, Regional and Andalus with prospects in Northern Europe, Russia and the Commonwealth of Independent States (CIS). Ukrainian operator Dniproavia has absorbed a fair amount of the ex-Flybe aircraft over the past two years and has acquired the Alitalia 14 grounded ERJ-145LR fleet, built between 2000 and 2003, for $37 million via Brassox. This 'bulk purchase' included 'as-is where is' condition of aircraft and technical records, ARC (C of A) suspended by Italian Authorities, no export C of A from Italian Authorities. No boroscope inspections on engines were allowed prior to the purchase as well as no testing of systems or flight test. The Alitalia fleet sale was an exception and the ERJ-145 market is mainly a lease market. More recently Swedish carrier City Airline has added a pair of ex- Flybe Embraer ERJ-145s to its fleet.

Lease rates are between $50,000 a month for the old models up to $100,000 a month for the late vintages. A 10-year old aircraft could lease between $80,000 and $85,000 a month.

The number of CRJ-100/200s offered in the market is now around 45 aircraft, compared with last year's 53 aircraft. There are still some ex-Alma aircraft in the market while the major focus is on the deployment of the Lufthansa Cityline, Mesa and Comair fleets.

Russian carrier UT Air has signed a seven-year finance lease agreement for 15 CRJ-200LRs with Panorama Leasing. The aircraft operated were originally delivered to Lufthansa Cityline between 1996 and 2000. Last year Lufthansa sold one 1999-vintage aircraft to Armavia as well as two 2000-vintage ex-Cityline CRJ-200LRs to Rwanda Air. The carrier still has five aircraft in its fleet while Lufthansa Group partner Austrian has 10 aircraft. Eurowings' fleet comprises 17 aircraft of the type but eight of them are under dry-lease contracts.

The Comair/Delta old fleets are not easy to place but the newer aircraft are finding new homes. Another Russian carrier Ak Bars Aero has committed to take five ex-Comair CRJ-200ERs that were built in 2003, as it seeks to replace its Yakovlev Yak-40 fleet.

The Mesa Air Group bankruptcy protection has exposed Bombardier and Embraer and particularly the already stressed 50-seater market. The Phoenix-based listed as idle 17 CRJ-200s, 12 ERJ-145s as well as 23 turboprops and a further 25 aircraft. No announcement has been made but CAO understands that all aircraft were rejected and that the Group is in discussion to take some aircraft back.

The CRJ market is primarily a lease market as the market develops with new carriers. In addition to applications in Russia and the CIS, Bombardier and some specialised traders have found new homes in Africa with Air Mali, JetLink or Rwandair.

Uruguay's Pluna is reportedly evaluating the 50-seat jet and has approached the market for up to eight aircraft, in addition to a new order for three CRJ-900s.

The Mesa CRJ-100 fleet is a major issue and one would need to invest $1.5 million to $2 million to operate the aircraft again. Lease rates for CRJ-100s are into the $55,000 to $65,000 range mainly.

Depending on the condition and the vintage, the CRJ-200s are trading between $75,000 and $90,000 a month for operating leases. Extensions will probably be negotiated lower. The European Aviation Safety Agency (EASA) aircraft are commanding a premium over the Federal Aviation Administration (FAA) compliant aircraft.

70-seat market

The oldest member of the BAe 146 family, the 146-100, is now a type that is traded rather than leased. The 146-100 model has had its days and most stored aircraft need substantial investment. The current environment does not favour four engines and ageing aircraft, but depending on the condition of the aircraft, a totally fully serviceable aircraft can be purchased in the $1.2 million to $1.5 million range. Lease rates are 'uneconomic' below the $40,000 per month mark.

Availability of the Avro RJ-70 model has increased and now represents almost 30% of the total fleet. The RJ-70 is described as an 'ultra-niche' aircraft BAE Systems is increasingly looking at Avro Business Jet applications. An RJ-70 typically can command a lease rate of $50,000 per month.

The availability for the Fokker F-70 model is restricted to two passenger aircraft (two-ex-Malev aircraft owned by Gladiator Leasing) after Carpatair acquired three aircraft from AWAS. Two corporate aircraft are also being remarketed. In addition to Carpatair, The F-70 operator base is limited to KLM Cityhopper, Tyrolean Airways and Vietnam Airlines. KLM will keep its aircraft until 2015 at the earliest. The market is a lease market and in theory aircraft would lease in the $55,000 to $65,000 range.

The CRJ-700 model is stable. There are no purchase transactions and availability is limited to three 2001-vintage Horizon Air aircraft. Two aircraft have been placed to SA Express while the remaining 15 are still in operation. The Maersk Air aircraft were placed in 2008 an 2009 with Air India and Eurowings. Lease rates are in the $145,000 to $155,000 a month range.

The Embraer 170 programme is now six years old and its market has been stable. However as operators tend to favour larger aircraft, the type is now starting to experience its first signs of pressure. There are only eight aircraft advertised for sale or lease, albeit three more than at this time last year. Finnair placed two 2006-vintage aircraft late last year to Finncomm Airlines, a year after it offered the aircraft in the market. The aircraft is well in demand but lease rates have dropped. When entering service at the end of the first quarter in 2004, monthly lease rates were estimated between $180,000 and $200,000. As the market for Embraer 170 developed lease rates gradually improved above the $200,000 mark. CAO has heard that the Gulf Air aircraft are leased new at $230,000 a month on three-year leases but one would assume that this included a package of services. The market for used aircraft is more into the $150,000 to $170,000 a month range for older aircraft and $160,000 to $190,000 for youngest models. Aircraft have been offered at $180,000 a month assuming three years of operating leases.

Little activity has happened in the Embraer 175 market although more aircraft could hit the market after the Indian authorities grounded the three Paramount E-175s leased from GECAS. Last year ECC Leasing Company placed one ex-Cirrus Airlines with Brazil's TRIP Linhas Aéreas. Typically, the Embraer 175 commands a $8,000 to $10,000 premium in lease rates over the Embraer 170 model.

90-seat market and above

A fair amount of 146-200s has traded in the marketplace over the past two years but availability has increased. Flightglobal's ACAS database says there are about 40 aircraft currently parked or in transition out of a 95 aircraft fleet. There are 15 aircraft openly advertised for sale or lease. The 146-200 market is a selling aircraft market as values have dropped to a $1.4 million to $1.8 million range. The lease rentals of the 146-200 model hover around the $45,000 to $50,000 a month mark.

The RJ-85 market will have a 'challenging' 12 months with the scheduled returns of RJ-85s from Lufthansa and the two British Airways aircraft. BAE Systems Regional Aircraft sees a market for the type with Russian carriers as an immediate replacement for ageing aircraft operated on domestic and regional routes. It says the ex-Lufthansa aircraft are fitted with long-range tanks, are fully EASA compliant as well as are capable of meeting the proposed Stage 4 limits. Lease rates are in the $70,000 a month range.

The market for the CRJ-900 has been stable until now. Hardly any aircraft had moved but two fleets with AtlasJet and Myair.com, albeit not in large quantities, have recently become available. The AtlasJet Airlines CRJ-900 fleet has now been placed: two with Argentina's Andes while French carrier Brit Air has taken one aircraft. The CRJ-900 appetite in Uruguay and Argentina appears strong after Pluna placed an order for three more aircraft. The Myair.com aircraft are believed to be under a contract. The CRJ-900 market has seen lease rates 10% down compared with the beginning of last year. Lease rates are now in the $200,000 a month range for new aircraft and the $180,000-$185,000 a month range on long-term leases.

Availability for Embraer 190 aircraft has been restricted to new aircraft and the market, depending on the credit is believed to be in the $220,000 to $250,000 a month range for new aircraft. Older aircraft will be expected to lease below $200,000 a month. Jetscape has been the main player in this market with placements at AeroMexico and Air Astana last year in addition to some ex-JetBlue aircraft placed with Azul Linhas Aereas Brasileiras over the past two years. Last year saw also DVB Aviation Asset Management placing three new Embraer 190-100LR aircraft with Republic Airlines and another two with Azul Linhas Aereas Brasileiras. The aircraft were originally ordered by M1 Travel for operation by its affiliate, Baboo.

The market for the 146-300 model is contacting and currently a third of the fleet is inactive. Lease rates are in the $50,000 to $60,000 range but the 146-300 is more a selling market now.

The RJ-100 market is no longer a leasing market, because the assets have dropped in value. Despite this BAE Systems has placed two aircraft in Australia on six-year leases and signed extension on a 146-300 aircraft. The aircraft can command a lease rate between $70,000 and $80,000 per month. British Airways' CityFlyer is to release the last of 10 BAE Systems Avro RJ-100s by June. Availability is currently around 13 aircraft out of a 67-aircraft fleet. The Swiss 20 aircraft fleet will stay for few more years but the type is more than ever exposed to competitive and newer products. The drops in value have been more dramatic on the Avro regional jets than on the BAe 146 family. The RJ-100 is now valued at $4.25-$5.25 million assuming mid-time condition and fresh check, where a year ago an RJ-100 could fetch $5-10 million. The BAe 146-300 values hover around the $2 million mark. This time last year, fully serviceable aircraft of this type were trading at in the $2.3 million to $2.6 million range.

The Fokker F-100 market is traditionally divided into two markets relative to the engines. The Tay 620 engine-powered aircraft are more difficult to remarket. Its market is only Europe and KLM have started dismantling some aircraft with the intent to keep the engines for its F-70 fleet. Availabity of the Tay 650 engine-powered aircraft has increased and is set to further grow as the Mexicana fleet is being returned. The youngest F-100s have been placed over the past year and in today's market available aircraft are 1989 to 1992-vintage. The days of lease rates at $100,000 are gone and lease rentals would be more into the $75,000 range today. There has been some encouraging activity on the sale side since the beginning of the year with the Germania fleet eventually moving. Also Aircraft Finance & Trading has acquired two aircraft from Regional and sold them to Helvetic. The rental market has been quieter but there are some prospects in Europe and South America.