Asia drives regional aircraft demand
While surging fuel prices have damped the global market’s early enthusiasm for certain smaller regional jets, the market for regional aircraft remains strong, writes Andrzej Jeziorski.
The 50-seat Canadair Regional Jet – now better known as the Bombardier CRJ – created a whole new market when it was introduced in 1989.
The aircraft, developed from the Canadair Challenger business jet, tapped an increasing passenger preference for jet aircraft over turboprops (perceived – often mistakenly – to be outdated, unreliable, slow and noisy).
Soon, other manufacturers came up with their own designs, including Embraer with its ERJ family of regional jets. In the case of German-based manufacturer Fairchild Dornier, the company became so convinced that jets would dominate the regional aircraft market that it re-engined its cutting edge, 30-seat 328 turboprop into the 328 JET (a move which failed to save the company eventual insolvency).
But times and perceptions have changed. Skyrocketing fuel prices made regional jets much less attractive than turboprops on shorter routes. The once-unfashionable prop-powered regional airliners, such as Bombardier’s Q-series and ATR’s best-selling 42 and 72 models, survived the 1990s’ surge of enthusiasm for regional jets with 100 seats and fewer, and have flourished in their own niche.
According to Canadian manufacturer Bombardier, the US domestic hub-and-spoke network of air routes was first implemented using the CRJ – which went on to become the “best-selling regional aircraft programme in history”. But now, Bombardier is increasingly looking to emerging markets to sustain its sales.
“Over the last five years, we have definitely seen a shift towards new orders in emerging markets,” says Torbjorn Karlsson, Bombardier’s vice-president of sales for the Asia-Pacific region. “Our recent sales successes in markets such as in China, India, Russia and Indonesia demonstrate this trend very well.”
Most recently, the manufacturer won an order in December for seven of its latest, 70-seat CRJ700 NextGen aircraft from an undisclosed customer in China. Not long before, Bombardier had delivered its first of six CRJ1000 NextGen airliners to Garuda Indonesia, which plans to lease an additional 12 aircraft and holds 18 options on the type.
All told, the Asia-Pacific region accounts for more than 300 orders for Bombardier’s CRJ, Q-Series and new CSeries aircraft, including already-operational machines. The manufacturer predicts that the Asia-Pacific region, including China, will take delivery of almost 4,000 aircraft in the 20- to 149-seat category over the next twenty years.
Excluding China, Karlsson says the region is expected to take delivery of approximately 1,710 aircraft in the next 20 years, with 41 percent of these in the 60- to 99-seat market. China alone will require 2,220 new commercial aircraft, 36 percent of which will be in the 60- to 99-seat market.
“The propensity for air travel is closely associated with wealth and urbanization. As both increase, particularly in emerging markets, the impact on commercial aviation is expected to be significant,” Karlsson says. “In fact, we have already started to see a significant growth in regional aircraft demand in Asia over the last five years.”
“With open-skies policies, improved support infrastructure and expanding middle-class consumer spending, air travel will no longer be a luxury in Asia. The requirement for point-to-point markets service and higher frequencies will be increased, resulting in higher demand for regional aircraft,” he adds.
China is clearly a key market in the region, with huge growth potential, but faces some unique regulatory and infrastructure challenges.
“Airports and air traffic control system capacity are major brakes on the growth of commercial aviation in China,” Karlsson says. “In addition, current commercial airspace limitations, aircrew shortages and other factors have favoured the use and purchase of larger jets, resulting in congested airspace around China’s largest urban centres.”
To develop its domestic air transport system, China “will need to build aggressively and equip a significant number of new airports – some to relieve air-traffic congestion in heavily populated and travelled areas, and still more to develop and extend economic and social links to more remote parts of the country”, the Bombardier official says.
As the regional aviation infrastructure develops in the country, this will stimulate demand for 60- to 90-seat aircraft, as well as for pilots, technicians and an effectively expanded air traffic control system.
Aircraft with 100 to 149 seats are expected to comprise 63 per cent of deliveries in China over the next 20 years, followed by the 36 percent share for 60- to 99-seat aircraft and just 1 percent for aircraft with 20 to 59 seats.
Bombardier, serving all three of those market segments, says it is “strategically positioned to support China’s booming air transport network”.
China’s relatively low requirement for smaller regional aircraft is reflected in the market as a whole.
According, to Bombardier’s Karlsson, the 20- to 59-seat segment of the market is expected to shrink by approximately 66 percent over the next 20 years, from about 3,600 aircraft in 2012, to just 1,200 by 2031. “The 300 expected deliveries in this segment will be more than offset by 2,700 expected retirements,” he says.
Throughout the industry, operators are increasingly favouring larger regional aircraft, in response to the rise in fuel prices. “Regional airlines are gradually anchoring their business models around large regional aircraft in the 60- to 99-seat segment, both turboprops and jets,” Karlsson adds.
Bombardier’s Brazilian rival Embraer agrees, but still sees a niche for smaller regional aircraft.
“The 30 to 60-seat capacity segment has been impacted by high fuel prices and a weak revenue environment, mainly in North America, where some 70 percent of 50-seat jets are in service,” Embraer says. “However, this category will continue to link low-mid density markets to hubs and to help develop the much needed regional aviation in emerging countries.”
Embraer, too, has been actively pursuing more business in Asia, in December naming Ji’nan-based Taikoo (Shandong) Aircraft Engineering (STAECO) as its Authorized Service Centre for the Chinese airline market. STAECO will provide line and heavy maintenance for the company’s family of E-Jets operating in the country.
“The cooperation with STAECO, one of the major MRO providers in China, is the result of Embraer’s continuous efforts to improve its customer services and support to the Chinese market,” said Siu Ying Yeung, chief operating officer of Embraer’s Embraer (China) Aircraft Technical Services unit.
Embraer says its fleet and customer based has experienced “steady growth” and that the manufacturer is constantly strengthening its customer-service and support capability in the country. In October 2010, Tianjin Airlines became Embraer’s Authorized Service Centre for the ERJ 145 and the E190 regional jets.
Since the inauguration of the manufacturer’s regional office in China in 2000, the fleet of Embraer aircraft in the country has expanded to 121 commercial jets, including 75 E190 jets.
“The Chinese regional aviation market will be responsible for 15 percent of the world deliveries of 61 to 120-seat jets in the next 20 years,” the manufacturer says. The company forecasts demand in China for 1,005 new jet deliveries in this size category up to 2031, comprising 455 61- to 90-seat jets and 550 in the 91- to 120-seat range.
Embraer says that over the next 20 years “the centre of gravity for aviation will move eastward, most notably to Asia and, to some extent, southward to Latin America”.
The fastest growth over the period will come in the Middle East, where demand in revenue passenger kilometres (RPKs) will expand at 7.2 percent per annum, followed by China and Latin America – both with 7 percent annual growth, and the remainder of the Asia-Pacific region at 5.8 percent.
“By 2031, Asia-Pacific and China will be the largest markets in the world, accounting for 34 percent of world RPKs. Europe and North America will follow at 21 percent of RPKs each,” the manufacturer predicts.