Air Transport Publications
Contact
Login   |   Register
jobs Jobs
events Events
bookmarks
My bookmarks
feature_main_image
Airlines

Regional trailblazer

The first commercial flight of the ERJ 145 occurred 20 years ago with US airline Continental Express. Angus Mackay and Stuart Rubin from ICF International provide a market review of its commercial operations
 

During the late 1990s and first half of the 2000s, the ERJ 145 and its main competitor, the Canadair CRJ200, enjoyed considerable success, particularly in the North American market. These aircraft were employed in high-frequency, short-sector airline hub-and-spoke operations to secondary airports and offered an alternative to turboprops, which formed the backbone of regional carrier fleets through the 1980s and early 1990s. Key to the market acceptance for the ERJ 145 and CRJ200 were restrictive pilot scope clauses, which limited the size of aircraft regional carriers could operate – primarily in the US and Europe – as well as an environment of relatively low fuel prices.

 

As fuel prices rose in the latter half of the 2000s, the operating economics of 50-seat regional jets such as the ERJ 145 became increasingly challenged. The relaxation of pilot scope clauses in the US resulted in a marked shift to larger-capacity aircraft. Demand, values and lease rates for the ERJ 145 have declined and suffered significant and permanent impairment.

 

Despite the recent drop in the price of fuel, it is unlikely that the legacy US carriers will be bringing these aircraft back into their fleets. In the US, most legacy carriers are increasing the jet size operated by their regional partners, such as the larger capacity E175 and CRJ700/900 aircraft.

 

With respect to residual values of 50-seat regional jets, a key concern is the geographic concentration in the US market where nearly 70% of the regional fleet is operating. Over the past several years there have been a number of developments with some of the large US regionals that have adversely impacted values and demand for 50-seat regional jets. The bankruptcies of several US regional carriers and operators of 30- to 50-seat regional jets have resulted in significant numbers of the type being parked and offered up for sale.

 

While access to capital for aircraft acquisitions has been easy for many types, major banks have turned their backs on the 50-seat regional jet market. As result, residual values have been driven down in the face of high operating costs and low yields, despite healthy economic conditions. Disposal opportunities for the ERJ 145 are often only realised in secondary and tertiary markets and, even then, only for newer aircraft of  higher specification.

 

ERJ 145 series values and lease rates have fallen precipitately over the last several years, a decline which is expected to continue in the medium term, as increasing numbers of ERJ 145 aircraft enter the market. General market demand has shifted to larger 70- and 90-seat regional jets and large turboprop aircraft such as the ATR 72-600 and Bombardier DHC-8-Q400.

 

By way of example, ERJ 145LR aircraft trade in a band between $900,000 and $2.7 million, dependent more on engine condition and options fitted than vintage, given that Rolls-Royce exerts considerable OEM control over the AE 3007 engine overhaul process, with negligible third-party MRO support available. 

 

Lease rates range from $30-35,000 on three-year terms to reasonable credits with brokers reporting growing interest in those aircraft with integral air stair doors from operators in remote and austere regions, and for aircraft fitted with optional thrust reversers.

 

Embraer’s asset management team is actively seeking alternative uses for those aircraft coming onto the market, including their repurposing as package freighter, VIP and corporate shuttle as well as multi-mission roles such as medevac. Given the generally higher specification of European aircraft and a predilection there for larger aircraft due to disproportionately high navigation and landing charges, and reconfiguration costs, remarketing efforts are generally directed at the emerging Eastern Europe and Southeast Asia market.

 

As of April 2017, there were 43 ERJ 145 variants on the market, which represents 9% of the active fleet of 476 aircraft. A further 182 aircraft are inactive.



This article was contributed by:

 

Angus Mackay 

T: +1 617 218 2121 | E: angus.mackay@icf.com

 

Stuart Rubin 

T: +1 703 934 3015 | E: stuart.rubin@icf.com

 

icf.com/aviation


To download the PDF file for this article, you have to pay the amount by pressing the PayPal button below!


Filename: Regional trailblazer.pdf
Price: £10

Contact our team for more information!


The Airlines channel

Industry blog
Highlights from the Cabin Refurbishment & Repair Conference
Jobs
Events

Comments

You must be logged in to post a comment.

Please login or sign up for a free account.

Disclaimer text: The views expressed in the above comments do not necessarily express the views of Air Transport Publications Ltd. or any of its publications.