As the air transport industry slowly recovers from a sagging global economy and persistent geopolitical unrest, regional airlines have recast themselves as agents
for change in a business often criticized for its inflexibility and lack of fiscal discipline.
But despite their robust traffic gains, regional airlines can hardly boast of windfall profits, as the rise of low-fare carriers and a newfound emphasis on cost control by mainline partners continue to suppress yields. Consequently, from the end of 2000 through early this year regional aircraft order books showed little more than cancellations and delivery deferrals as customers struggled to negotiate reasonable financing terms.
Meanwhile, new regional aircraft designs conceived during the 1990s market stood ready to vie for airline acceptance. Unfortunately for those who staked their futures on costly new aircraft programs, the timing
couldn’t have been worse, as apprehension in both the consumer and financial markets spelled the demise of such programs as the BAE Systems RJX and the bankruptcy of Germany’s Fairchild Dornier.
While defunct startup ventures such as Earl Robinson’s Alliance Aircraft never really stood a chance in this barren lending environment, even the best established companies enacted capacity reductions and employee layoffs. Although much of Bombardier’s predicament arose from a slump in the business aircraft market, for the first time in recent memory a prolonged lull in demand for regional airliners forced the Canadian aerospace giant–as well as its chief rival, Brazil’s Embraer–to slash production rates.
This year, however, a breakthrough came when US Airways placed landmark orders for 170 regional jets, split equally between Embraer and Bombardier. Even more encouraging, the deal called for deliveries of new designs from both manufacturers–Embraer for the 70-seat 170 and Bombardier for a 75-seat version of the CRJ900 known as the CRJ705. But after the pilots of US Airways invoked their scope clause to challenge the existence of the 25 CRJ705s at the wholly owned regional unit, the airline opted instead to assign an equal number of 70-seat CRJ700s to independent affiliate Mesa Air Group. The move again left Bombardier without a new customer for the CRJ900 ever since Mesa, coincidentally, placed the program’s first airline order in March 2001 for its America West Express network.
Just weeks after US Airways placed its orders on May 13, another of Embraer’s new products–the 98-seat Embraer 190–drew the Brazilian manufacturer’s first sale in the burgeoning low-fare market. The order for 100 airplanes from New York-based JetBlue carried special significance not only because it validated Embraer’s long-held belief that its new line of jets would appeal to low-fare carriers, but because it proved a so-called regional jet manufacturer could effectively compete with Airbus and Boeing.
Of course, major airlines have long played an active if not dominant role in negotiating RJ acquisitions for their regional partners, so the likes of Embraer and Bombardier selling jets directly to US Airways, for example, came as no surprise. But the extent to which their products eventually fly in mainline networks remains a matter for speculation. Differing opinions about the direction of the airline industry have led to varied approaches to new products, ranging from completely new, “clean sheet” designs to less costly derivatives.