Regional Aircraft Market

The regional airliner market de­clined 5.1% by value last year. Much of this weakness was due to the tran­sition between Embraer’s E-Jet E-1 Series and the E-2, which first ar­rived last year. But there are several secular trends that are also damaging this segment, with a -5.2% com­pound annual growth rate (CAGR) in 2014-2018 and a -3.1% CAGR in 2008-2014.

Measured as a percentage of total commercial transport deliveries by value, regional aircraft have declined precipitously. These have been as high at 16.7% of the total value of the airliner market (in 2004); in 2019, they declined to just 5.1% of the to­tal.

The Covid-19 pandemic, and the resulting collapse in air travel de­mand, has not helped, particularly since it has had a damaging impact on the regional airline industry. So far, Compass Airlines, RavnAir Group and Trans States Airlines are three notable casualties. ExpressJet Airlines looks set to follow them into bankruptcy after United decided in June to consolidate its 50-seat feeder flights with CommutAir.

Not only have regional aircraft de­clined in importance; they have al­ways been subject to extremely fickle equipment preferences. The regional airlines seem to equip with new types of aircraft all at once, and then move on to a different concept. The great 50-seat regional jet craze of the late 1990s was one of several such pur­chasing cycles.

A recent preference for larger re­gional jet aircraft has led to problems with scope clauses, the union-man­agement agreements that govern what type of aircraft regional affiliate carriers can operate. This jeopardizes the backlog, even for 70/80-seat jets such as the E175-E2 and Mitsubishi’s MRJ90.

Yet it should also be noted that many of the larger regional jets now on backlog aren’t really regional air­craft, in the true sense of something that feeds a major airline hub. Embraer’s E190/195-E2 will seldom be used in a hub feeder capacity. In­stead, they will serve as point-to-point aircraft, often by mainline car­riers. If these larger point-to-point aircraft were removed from our num­bers, this industry would actually see even more serious shrinkage in abso­lute terms, not just in relative terms.

Several other longstanding trends have damaged the market and will continue to do so. First, smaller US cities have been losing service, at least in frequency. Second, there has been a trend towards consolidation among regional airlines, following the consolidation of the US major air­line industry. As part of this process, a number of formerly important hubs, such as Cincinnati or St. Louis, have been seriously downsized, reducing the need for feeder aircraft.