Paul Lewis/SAN ANTONIO/TORONTO/WASHINGTON DC
The regional aviation industry is in a state of transition. Airlines have bade farewell to major manufacturers such as Fokker, Jetstream and Saab, together with an increasing number of their turboprop aircraft. They have been replaced by Bombardier, Embraer and Fairchild, offering a range of new, larger jets that will redefine the regional air transportation business.
If sales forecasts can be believed, the market for 70/100-seat regional jets is set to rapidly expand over the next 10 years. Fuelling this is a combination of projected mainline carrier growth and a knock-on demand for expanded hub feeder services, along with a proliferation in city pair routes that until now have been regarded by the major airlines as too small to be viable.
Bombardier and Embraer each forecast a market for around 2,500 regional jets in the 70-seat plus category over the next 10 years, while Fairchild puts the figure nearer to 3,000. "We see a large number of aircraft in the 70/100-seat size- we think it will be the fastest-growing segment of the market," predicts Fairchild Aerospace chief executive Carl Albert.
The average size of regional aircraft has been steadily increasing over the past 20 years and by last year had surpassed 28 seats. With the US Federal Aviation Administration predicting a doubling in annual regional aircraft boardings to 123 million passengers by 2010 in the USA alone, a clear need will exist for larger aircraft.
"Everyone's forecasts agree that there is going to be continued pressure for a lot of traditional mainline flying. If operations that provide the feed with smaller aircraft grow in proportion, there are going to have to be a lot more aircraft that are bigger, otherwise there will be no room to fly or park them," suggests Bombardier regional aircraft president Robert Gillespie.
As aircraft size has increased, so has range - opening up new routes beyond the 650km (350nm) reach of traditional turboprops, but which are still too small to support mainline jets. The Bombardier CRJ-100/200 is acknowledged to have rewritten the book on regional air transport. Testament to this are the 800 orders and options booked over the past six years.
The 50-seat Canadian jet has not only changed the thinking of regional carriers, it has also proven an enlightening experience for those air travellers more accustomed to the cramped and mind-numbing confines of a turboprop. "Airlines are looking for added passenger comfort and the ability to accommodate carry-on baggage," observes Embraer president Mauricio Botelho.
The three manufacturers are now following through with the development of a new generation of even larger and longer-range regional jets. Bombardier has stolen a lead in the 70-seat market with a 5.8m (19ft) stretch of the CRJ-200. The new CRJ-700 is scheduled for certification by early 2001, by which time Bombardier hopes to be at least 12 months into the development of its next BRJ-X series (above).
Bombardier is planning two baseline versions, spanning 88-115 seats with extended range variants in the pipeline. Providing it gets an end-of-year board approval to proceed with a $1.2 billion programme, the company hopes to be first into the 90-seater market with the BRJ-X-90 by the third quarter of 2003. The larger 3.5m-stretch BRJ-X-110 would follow around two years after that.
"We might be third in formally launching our next family, but we won't be third arriving on the market," asserts Gillespie. "We'll be first with the 70-seater by a long lead and by 2002 we will have delivered about 100 aircraft. With the BRJ-X-90 we'll get there about the same time as Fairchild if they proceed with the 928Jet and we'll be ahead of Embraer."
Fairchild had been developing the 728JET (above) for a year before Lufthansa's launch order in early May for 60 aircraft. On the present timetable the 70-seater is to enter commercial service in May 2002 to be followed by the 95/ 105-seat 928JET by the end of 2003. The $1.2 billion programme includes a third member of the family, the 55/65-seat 528JET, tentatively scheduled for late 2004. "We have a head start," claims Albert. "We didn't make any big announcements to say we're thinking about it as our competitors did. We kept our heads low and before making a billion-dollar investment decision made a much easier $40 million decision two years ago to do preliminary design work and look at the market."
Embraer was the third player to show its hand with the February unveiling of the 70-seat ERJ-170 and 98-seat ERJ-190-100 (below). While this has allowed it to first look at Bombardier and Fairchild's proposed offerings, the Brazilian manufacturer plans an aggressive development schedule to catch up.
"We're thinking about a certifying 38 months from the date of go-ahead. We're talking about October 2002 for the 70-seater and the first half of 2004 for the 98-seater," says Botelho. Perhaps even more ambitious is the programme's $850 million development budget, which now includes a 2.5m stretched ERJ-190-200 version as a 108-seat competitor to the BRJ-X-110.
The question now is whether a fourth runner will enter the regional race which many consider to be just large enough for three competitors. British Aerospace hopes to extend the life of its Avro RJ line with an updated RJ-X, re-engined with the lower cost and more fuel efficient AlliedSignal AS977-1A turbofan engine.
Attention is focused more keenly on BAe's estranged regional partners Aerospatiale and Alenia and the future of ATR. The two companies had been courting Fairchild, but a marriage has proved to be impossible because of irreconcilable differences over how to organise and managing a joint venture structure.
"There was never disagreement on configuration or which engines to use," says Albert. "We couldn't reach agreement on the larger conceptual issues. I think that had much to do with the fact there were differences over approach between a privately owned business and companies that part are partly government controlled."
Embraer's idea of an international partnership is one at a strategic level and not limited to a specific product. "If we go ahead, we'll go alone and based on the risk-sharing partners that we've chosen. If a fourth player comes along it will be a terrible business for all four, but mainly for the fourth," warns Botelho.
ATR, in lieu of resurrecting its earlier Airjet programme, is left only with one alternative - Bombardier, the position of which is ambiguous beyond ruling out who it will not work with. "Clearly, we're not going to partner Embraer or Fairchild on anything," says Gillespie. "Not three months go by in which we don't speak to someone. It wouldn't be news to say that we had."
How big a market there will be in the end for regional manufacturers will be determined by some crucial factors - not the least of which is the sales impact of the recently launched Airbus Industrie A318 and Boeing 717. These 100-seat class aircraft clearly overlap with the upper tier of the new regional jet families.
Traditional thinking has been that mainline carriers would opt for smaller but less efficient versions of Airbus A320 and Boeing 737 families, simplifying logistics and training, while low-cost regional operators would remain confined to below 70 seats. The demarcation line has become blurred by the standalone 717, which is feeling for a market bedrock on which to build, and the convergence of regional carriers expanding upwards and, to some extent, larger carriers extending down.
"We see a demand from both," says Gillespie, who questions Airbus and Boeing's ability to continue to shrink larger and heavier aircraft and still be economically viable. "They seem to be now encountering these limits and that leaves a gap in the market-we've basically conceived our 90/115-seat family of aircraft to fill that gap," he adds.
Botelho sees an "intermediate area" where real competition will likely develop. "I refer to national carriers who operate a lot of older [McDonnell Douglas] DC-9s and that specific area will be disputed by both sides." Fairchild has come to a similar conclusion. Accordingly it has advanced development of its larger 95/105- seat aircraft, which had originally been scheduled to follow on in third position behind the 528JET and 728JET.
"In North America some of the major airlines are looking at the 928JET as a DC-9 or Fokker 100 replacement or as a new 100-seater for those that don't have any. We didn't set out to market the aircraft as a 100-seater, but a number of majors are coming to us and saying it looks like a really good 100-seat jet," says Barry Eccleston, Fairchild executive vice-president.
Another important influence on the demand for larger regional jets will be the future of US airline scope clauses. The top eight US carriers, with the exception of America West, are all subject to pilot union agreements that severely restrict the size and number of regional jets. None presently allow their regional feeder carriers to operate aircraft larger than 70 seats.
Pressure is mounting to remove, or least relax, what the recently formed Proposition RJ coalition lobby has labelled "artificial barriers to competition". The Air Line Pilots Association is signalling it will resist such a move, fearing a loss of work for its mainline members to lower cost regional operators. All airline labour agreements are up for renewal between April 2000 and early 2003.
Critically, this will be the period that the first of the new regional jets will come on-line. Scope clauses represent a delicate issue for manufacturers, which are keen to avoid getting on the wrong side of airlines, which have so far been generally keen to avoid a showdown with pilots. Furthermore, it is a US domestic issue and two of the three companies are foreign-owned and carry little local political weight.
The consensus among the three companies is that competitive pressure, perhaps with some political encouragement, will ultimately force a resolution. "Demand is clearly there and the right kind of aircraft at the right size happens to exceed 70 seats. People who have an enlightened self-interest will figure out a way to make their airline and own future brighter," suggests Gillespie.