The regional jet was the star performer at the Paris Air Show. Karen Walker reports on the growing fan club of this relative newcomer and identifies more reasons for turboprop makers to worry.

The regional jet has come of age in Paris. It has established a solid customer base and has all but wiped out the turboprop in certain markets: at least three important US regionals are now considering becoming all-jet operators.

After years of fending off the sceptics, the clouds of doubt over the regional jet sector were finally dispersed by two major US carriers, which lavished praise on the small jet and its potential and endorsed their commitments with orders totalling more than $2 billion. As a sign of the times, the multitude of aviation journalists, gathered at the respective press conferences, didn't even bother to ask AMR Eagle or Continental Express whether they had considered turboprops instead. In each case, the deals were signed after weighing up the relative technical, operational and economic merits of one regional jet versus another; turboprops were not even allowed a foot in the door.

New orders at Paris also signalled the regional jet's expansion, both down into the 30-seat and up into the 70-seat markets. French regional carrier Proteus Airlines is the launch customer for Fairchild Dornier's 30-seat 328Jet, ordering six of an aircraft which is effectively a Dornier 328 stripped of its turboprops and fitted instead with turbofans. The aircraft also found a US launch customer, Aspen Mountain Air, and should secure at least one more customer by the end of August spawning from discussions with one US and three European airlines.

Moreover, both Continental Express and Comair have confirmed their interest in a 30-seat jet, and both are now seriously considering whether to switch to all-jet operations, while Atlantic Coast Airlines is also looking at the possibility.

Meanwhile AMR Eagle, finally free of the American Airlines' pilot union leashes that previously constrained its regional pilots from flying jets, has wasted no time placing its orders. In a surprise move, the airline split its jet order by awarding its firm 50-seat order to Embraer, for 42 EMB.145s, while at the same time becoming the US launch customer for Bombardier's Canadair Regional Jet 700, the only 70-seater on offer to date, with an order for 25 aircraft.

With so much activity focused on the regional jet at one trade show, it is not surprising that many analysts are hailing this relative newcomer as the darling of the industry. 'We don't need to perfume the view that in the next two years everyone in America will have regional jets,' observes one US analyst. 'But we do believe that the regional jet is the most significant product this decade.'

Dave Siegel, president of Continental Express, probably sums up most succinctly why the regional jet has been able to succeed so rapidly. 'The passengers love it,' he says. 'I cannot tell you how overwhelmingly positive their response is. We are finding that they actually prefer our aircraft over older narrowbodies, such as DC-9s, and where we use them to replace turboprops you cannot begin to describe their elation.'

Continental Express signed a deal last September with Embraer for 25 EMB.145s, plus 175 options. The airline began taking deliveries at the end of last year and is running its so-called ExpressJets out of its Cleveland and Newark hubs. The aircraft will go into operation at the Houston hub in September. According to Siegel, the jets have proven themselves almost 'instantly' profitable. 'We have had a couple of months of real profitable operation now. The revenue performance has been exceptional.' In the back of that apparent success, Continental Express chose Paris to turn 25 options into firm orders and says it intends to have 50 aircraft in service by no later than the third quarter of 1999.


Tremendous potential

Pilot scope clauses, which prevent the airline from flying an aircraft with more than 59 seats, mean Siegel is not even considering the 70-seat jet, but the 30-seater is something it is 'extremely interested' in. Siegel confirms the company is talking to both Embraer, which is planning the 30-seat EMB-135, and to Fairchild Dornier. 'We think the 30-seat jet has tremendous potential,' says Siegel, although he admits the carrier has '. . . not yet figured out the economics.' Still, the airline is now looking at the real possibility of becoming an all-jet operator and adds that it would like to make a decision on the 30-seater by the end of the summer.

When it was pointed out to Siegel that Embraer has earmarked August as decision time on whether to launch the EMB.135, his response - in front of Embraer chief executive officer Mauricio Botelho - was immediate. 'I think if Embraer can make a decision by August, then we can too. I have my pen ready,' he said.

Comair, whose recent turnaround is in the main due to introducing the 50-seat CRJ, also confirms that it is looking at the 30-seat jet as part of its strategy to become an all-jet operator. Significantly, another US regional, Atlantic Coast, is also seriously considering this option, spurred on by the demise of the Jetstream 41 - British Aerospace announced the closure of the production line prior to Paris - which makes up half the carrier's fleet.

Comair's switch to jets is already dominating its operations: some 70 per cent of Comair's available seat miles are on regional jets and, according to US regional airline analyst James Parker at Robinson Humphrey, the airline is ripe for further growth. 'They have the best growth situation of all the US regionals,' says Parker. 'Comair is a growth-orientated company . . . it has an appetite for it.'


Growth leader

Comair may be the growth leader but regionals in general, both in Europe and in the US, have been enjoying sustained traffic increases at levels higher than those of the majors - another contributing factor to the success of the regional jet.

The European Regions Airline Association reports average passenger growth at 13 per cent in 1996, while the US Regional Airline Association reports an 8.3 per cent passenger growth for the same year. Added to this, the average stage length of regional carriers on both sides of the Atlantic is also growing - by 5 per cent to 445km in Europe and by 3 per cent to 370km in the US, another factor in favour of regional jets.

Jim Robinson, president of Fairchild Dornier, agrees that the relatively recent prosperity of many regionals is helping to spur interest in jets, but adds that getting the economics right is crucial at this end of the market. The 328Jet, he claims, is actually cheaper to operate than some turboprops. 'I think it has come out at the right time, which is good news for Fairchild. Now we have to prove that it has those economics.'

Still, despite or perhaps because of the abundance of good news surrounding regional jets, there is still plenty of controversy surrounding this segment, as events at Paris proved.

Despite confirmed airline interest in the 30-seat jet, Bombardier chairman Laurent Beaudoin remains a sceptic and says the economic figures do not yet add up for the Canadian company to launch its own product in this niche. 'At the moment, we are not ready to make an investment there,' he says. 'In this case, we are prepared to let the others be the pioneers.'

Bombardier is not afraid of new launches - it has invested in nine new or derivative aircraft in the last eight years - and it makes much of its 'family' of products, so a lot can probably be read into its publicly declared decision to stay away from the 30-seat jet market for the foreseeable future. 'The issue here is operating costs,' says Beaudoin. 'We have difficulty justifying the cost of operation of that size of small jet in commercial operations.'

Beaudoin is also at the centre of another controversy, having accused the Brazilian government of using subsidies to help Embraer to win deals, such as the 50-seat jet order from AMR Eagle. According to Beaudoin, such subsidies have sliced $2.3 million off the $15 million published price of an EMB.145. Beaudoin is now attempting to push the Canadian government to lobby the World Trade Organisation to put an end to such subsidies.

AMR Eagle's decision to buy its 50-seat jets from Embraer and not Bombardier clearly stung the Canadian company and took away some of satisfaction of finding a US launch customer for the 70-seat CRJ-700. After the airline announced the split order. Beaudoin said he was sure the CRJ had outperformed the EMB.145 in the fly-off and the decision was made on price.

But that is not how the customer sees it. AMR Eagle's vice president planning, Peter Pappas, says negotiations were intense and that the fly-off was conducted with a thoroughness which he believes was '. . . unprecedented in Dallas. We left no overhead bin unopened, no tyre unkicked. Frankly, this unique experience was a lot of fun for AMR. But at the end of the day, the 145 ended up as our choice. It's a very efficient, very capable and, we hope, very profitable aircraft.'

Continental Express' Siegel confirms that AMR's due diligence surveys included extensive research of his airline's experience with the 145. 'Both airlines are known for being very thoughtful, rigorous and careful in our selection processes and we both chose the same aircraft; that is not a coincidence,' says Siegel. 'AMR's decision validates the risk we took to be the launch customer for the 145.'


Economics rule

The frisson of controversy that continued at Paris served, in the end, only to keep the focus on regional jet sector, in a way that turboprop marketers could merely sit back, watch and envy (see box). Saab, for example, insists that the turboprop market is buoyant and will remain so '. . . because economics rule this business'. Patrick Gavin, chief executive officer at Aero International (Regional), which failed to launch its planned AI(R)Jet 70-seater at Paris as expected, similarly tried to talk down the excitement surrounding jets. 'We believe that regional jets and turboprops will share the regional market in a more balanced way than the present jet appeal seems to indicate,' says Gavin.

Words of wisdom, perhaps, among the many streams of superlatives that appear to cling to the regional jet sector these days. But with the prospect of up to four more regional jet types being launched by early next year, excitement has probably not peaked yet.

  Mere props to the star of the show?

Turboprop salesmen at Paris '97 could be forgiven for sinking into a mood that matched the predominant weather conditions of the show - grey and dismal. By show close, new orders for regional jets had topped $2.5 billion and launch customers had been unveiled for two new aircraft types. Turboprops, by contrast, logged up a mere 16 sales.

Management at Saab admitted it was a tough show for them. Sales of their 2000 remain treacle-slow, but then none of the other turboprop makers had much to shout about. The Swedish manufacturer spent much of the show trying to play down competition from jets, but runs an ad stating: 'What manufacturers of regional jets need to do to catch up with Saab' next to a picture of a jet with propellers drawn over the engines.

In a bid to boost interest in its product, Saab unveiled its Carefree programme in which the 50-seat 2000 will be sold with a six-year customer support package that covers airframe rotables and engine maintenance and repair. For the first two years the programme is free, then it is provided at stepped levels of discount, with only the sixth year at full price. Such are the pressures facing turboprop manufacturers.

Improvements in noise and comfort levels seem to be the only other thing left to shout about, and both Bombardier and Saab made much of this during the show, extolling the quiet virtues of the Dash 8 and the 2000, respectively. 'Close your eyes and you could be on a jet', suggests a Saab salesman and he is right. The 2000 is quiet and feels solid. But then who is looking to buy a fleet of regional jets with their eyes closed?

Source: Airline Business