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Nifty at fifty

Following the official launch of Bombardier’s CRJ550 regional jet, Alan Dron looks at the strategic reasons for the development of this new variant and where it fits into the Bombardier CRJ product range
 

This year’s launch of Bombardier’s CRJ550 regional jet was a bright spot in what has been a tough recent history for the Canadian aerospace manufacturer, which is steadily reducing its status as a commercial aircraft OEM.

 

Having ‘bet the farm’ on the CSeries new-generation regional jet project, only to see it end up in Airbus’s hands as the A220, earlier this year it decided to sell its Q400 regional turboprop to Longview Aviation Capital, where it will join the DHC Twin Otter utility aircraft and CL-415 water-bomber, whose continued production is managed by Viking Air, one of the Longview group of companies. The CRJ range remains Bombardier’s sole remaining product line.

 

Earlier this year, Bombardier CEO Alain Bellemare made it clear that the Group’s future aviation focus would be on executive jets, not commercial aircraft, signalling the eventual end of another airliner manufacturer. Bombardier also announced in May that it would divest its aerostructures businesses in Northern Ireland and Morocco.

 

So, what is the rationale behind the new CRJ550 model? Is it an attempt simply to squeeze a few more sales out of what is now a mature design, or could it betoken a final flourish that will result in more variants of the twin-engined regional jet?

The CRJ550 essentially takes the existing CRJ700 and reconfigures its interior to reduce its capacity from a typical 70 seats to 50, allowing the installation of a three-class cabin typically seating 10 first-class seats, 20 economy-plus and 20 economy passengers.

This configuration has been driven, at least partly, by the US regional airline industry’s scope clauses, which limit the number of passengers and weight of aircraft that the nation’s regional carriers can operate.

 

Bombardier and industry analysts differ on the degree to which the aircraft’s existence has been influenced by these restrictions.

The head of Bombardier’s marketing team for the Americas, Antoine Chereau, points to the fact that 30% of the current CRJ700 fleet operates with carriers outside the US: “People have been looking only at the US market. It’s true that today, almost two-thirds of the fleet is there, but one-third is outside the US and they don’t necessarily have the problem with scope clauses and can go way above the limitations that they have in the US.”

Others are not so sure.

 

“This is very much an aircraft for the North American market: specifically, the US majors and their feeder operators, exemplified by United’s interest in the model,” says Mike Yeomans, Head of Valuations at UK-based asset management and aviation intelligence specialists IBA Group.

 

“The aircraft is a solution to a labour agreement,” agrees Samuel Engel, Vice-President, aviation practice at US consultancy ICF. “The CRJ550 represents the story of regional jets coming full-circle. The birth and growth of 50-seat regional jets was largely the result of contractual arrangements with the pilots’ unions and the slow expansion of the 70-plus, even 90-seat regional jets have always been a function of the union agreements.”

Indeed, Chereau admits that, “we know today that the 50-seater market was maybe artificially shaped with scope clauses in the past. The question today is, what is the role of that [50-seater] fleet within the regional fleet?

 

“There’s a 50-seat fleet that’s getting old, so what’s the future for those markets?  Nobody is producing a brand-new 50-seater, as the [Embraer] ERJ-145 is no longer in production.” There are roughly 700 ageing 50-seaters currently in the US market, he says.

Chereau adds that Bombardier was receiving increasing feedback from the US majors that the small, single-class cabins of older regional jets were unpopular with passengers. That, together with the need to replace ageing 50-seaters such as previous-generation Embraer’s and CRJ200s, made the new CRJ550 an attractive proposition.

 

For airlines, he added, the fact that the CRJ range shared a common type-rating and that minimal training was required to convert a pilot from a CRJ200 to a CRJ700, made the prospect of a new 50-seat CRJ550 an attractive prospect.

 

The first to order the type has been United Airlines, which will reconfigure some of its existing CRJ700s as two-class CRJ550s. Not only will this provide better seating, the CRJ’s extra 18 feet of cabin length compared to the CRJ200 will allow for considerably greater overhead locker space, reducing one of the major complaints of passengers on regional jets, the lack of accommodation for carry-on bags.

These factors will potentially give United and its regional affiliates the ability to raise yields on thin but profitable routes.

United initially plans to induct 50 CRJ550s that will be placed with regional partner GoJet. At least 25 of the aircraft will be reconfigured CRJ700s already operated by the St Louis, Missouri-based carrier.

 

Also looking at the CRJ550 is Utah-based SkyWest Airlines, some of whose fleet of 100 CRJ700s could be converted. The carrier has said it is studying the new variant “very closely”. During a recent earnings call, SkyWest’s CEO Chip Childs spoke warmly of the CRJ550’s potential.

ICF’s Engel repeats that the only reason United was putting 50 seats into a 70-seat aircraft was to stay within scope clause limits. There were two interesting, or timely, elements to United’s decision, he says.

 

“United is either in, or entering, negotiations for a new contract right now. The fact that they chose to put 50 seats on this suggests that they know they are unlikely to win scope clause relief in this round of negotiations. It shows that the pilots right now…have the stronger hand. And yet, United could have chosen to give up and they didn’t, so in that sense I think it’s a little poke to remind the pilots that ‘We’re not done with these discussions.’”

Bombardier’s Chereau says that while there were around 700 50-seaters in US service, there were only 240 CRJ700s, so the need for 50-seat replacements could not be met simply by converting existing aircraft.

 

This meant that the CRJ550 represented “definitely more than marginal sales” for Bombardier. “I think there’s demand for new aircraft; we say beyond 150-200.”

 

IBA’s Yeomans agrees that “the 50-seater fleet in the US is ageing and Bombardier has clearly seen this is an opportunity to revive some demand for its CRJ family.

 

“Scope clauses impose limits on the number of regional jet aircraft that can be operated by American, Delta and United, based on passenger capacity and weight. The CRJ550 will fit within the smaller scope band of aircraft with 50 seats or less yet will offer the space to provide a first or business class product, offsetting the higher seat-mile costs associated with smaller capacity regional jets.”

Like Engel, Yeomans agrees that “It appears increasingly unlikely that the pilot unions will consent to relaxation of the current scope clauses, so we may see some uplift to demand for the CRJ family.

 

“The CRJ is fast-becoming a generation removed from aircraft such as the Embraer E2 and Mitsubishi MRJ. However, the Embraer E175 E2 and MRJ90 do not comply with the scope clauses as they currently stand.” The E2 range, he adds, had sold somewhat more slowly than analysts had predicted. “So, for Bombardier, to get anything out of this is good news.”

 

Yeomans continues: “Due to its niche nature, it is unlikely that the CRJ550 will gain traction outside of the US and demand is likely to remain centred around the larger-capacity CRJ variants in EMEA and Asian markets.”

 

Engel agrees: “I think it’s unlikely we’ll see that aircraft with 50 seats anywhere you don’t need it. If you can put 70 on it, why wouldn’t you?”

He believes that the CRJ550 represented marginal benefits for the Canadian OEM: “This is definitely a few bonus sales for Bombardier.”

One factor that may stand in the CRJ550’s favour is the lack of other new 50-seat designs in the marketplace. Another is that the longer sector lengths in the US compared to Europe means that regional jets have an edge over turboprops. (Additionally, turboprops tend to have a poorer image and lower level of passenger acceptance in the US.)

 

One reason that Bombardier is confident of sales is that it can fit its new Atmosphère cabin, revealed in 2018 on Delta’s CRJ900s. This gives significantly more seating and baggage space (among other innovations) and Bombardier believes it is a major factor in attracting passengers.

The full Atmosphère package cannot be fitted on a used CRJ700, but Chereau says that, “We’re looking at and discussing with airlines about retrofits. There are [Atmosphère] features we can retrofit. It’s up to the airlines to decide.”

 

Additionally, Bombardier can use the greater internal space in the CRJ550 to install features such as a self-serve beverage and snack station, together with what the manufacturer says will be more legroom than any other 50-seat aircraft flown by any other US carrier.

Regional flights are extremely important for the US majors as feeders for longer sectors. Just 20% of passengers flying on 50-seaters are on point-to-point flights. The other 80% are making connections. And it is those second, longer sectors flown on narrowbodies or widebodies of the US majors that bring in more money.

 

By way of example of how a CRJ550 could help both the regional airline operating it and the major carrier benefiting from its connecting passengers, Chereau cites services from Fort Wayne, Indiana, to London in the UK.

 

At present, three different airlines operating out of Fort Wayne connected to London flights via Chicago, Atlanta or Philadelphia, he says. If one of the regionals started offering a triple-class CRJ550 that attracted passengers prepared to pay first-class or economy-plus fares for a more pleasant flight, other airlines not operating the type would have to drop their prices to compete.

 

Perhaps significantly, Chereau mentions the possibility that in future, the CRJ700 to CRJ550 process could be replicated one step up the range, with existing 90-seater CRJ900s being converted to 70-seat configurations with a similar multi-class cabin. That domino effect could further extend the longevity of what is likely to be Bombardier’s last commercial airliner.


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