50-Seat Lease Rentals May Be Easing Once More

The recent period of stability for 50-seat regional jet lease rentals may be coming to an end as the effect of higher fuel prices and the need for mainline operators in the U.S. to alter their operations takes hold. The 50-seat regional jets were acquired at a time when the price of fuel was low and the...

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The recent period of stability for 50-seat regional jet lease rentals may be coming to an end as the effect of higher fuel prices and the need for mainline operators in the U.S. to alter their operations takes hold.

The 50-seat regional jets were acquired at a time when the price of fuel was low and the passenger preference for jet travel was high. Times have changed. The price of fuel makes the operation of regional jets particularly expensive in comparison with turboprops. The average passenger has become more concerned with price than aircraft choice and with quieter interiors comes passenger acceptance of turboprops. The age of the 50-seat regional jet is also such that the maintenance holiday is no longer evident. Lease rentals are therefore considered to be easing. For the larger regional jets the market remains stable. The demand is still strong and the financial crisis may actually be forcing rentals higher as lessors build into rates the greater cost of financing.

The European market remains the more attractive option for the leasing of aircraft due to smaller quantities, higher specifications and a more fluid market not necessarily driven by tax issues. Lease rates courtesy of The Aircraft Value Analysis Company http://www.aircraftvalues.net.

Regional Jet Lease Rates (Dry) US$ '000s pm - April 2008
Aircraft	Age	Rental	Trend Analysis
BAe146-100	1984-89	45-65	It must be wondered how long the BAe146-100 can keep on going. The type is already well over 20 years of age and features an engine configuration that seems to belong to a science fiction writer. However, the economics of the type have been a known entity for many years. The size of the -100 is not however, the most attractive which makes for more difficult remarketing.
BAe146-200	1987-93	50-80	The market in which the -200 operates is very competitive even if some examples cost three times as much to lease. The -200 has seen some 20 years of service and as such does not offer the same degree of sophistication as more modern alternatives. Lease rentals are considered to have eased back slightly as a consequence of the increased competition. As the type filters to secondary carriers and terms become shorter, net lease rentals can actually rise.
BAe146-300	1988-93	55-90	The larger capacity of the -300 continues to provide sufficient seats to spread ever rising costs. The type may see fluctuations in terms of availability but the aircraft, like other variants, is a known quantity. The type also has considerable support from the manufacturer who tend to be proactive. Lease rentals are considered to have eased back slightly as a consequence of concerns over the preference for alternative types.
Avro RJ70	1993-97	55-80	Lease rentals may have remained unchanged but then they are already low as a result of limited attraction. There are very few in service and the most likely means of placement remains via non-commercial operations.
Avro RJ85	1993-96 1997-01	75-90 75-100	The RJ85 has been the obvious replacement for the BAe146-200 for a number of years and the type is therefore increasingly realizing its potential. The type is still favored by a number of operators such is its ability to meet the needs of user and passenger. Lease rentals may be expected to ease back in the future as competition becomes even more fierce.
Avro RJ100	1993-96 1997-01	75-100 80-105	The 100 seat market may continue to experience problems but at least the RJ100 still has a role to play. Stretching an existing design brings considerable benefits in terms of performance and the RJ100 is no exception.
CRJ200ER	1996-98 1999-05	65-105 90-130	It would be too easy to suggest that least rentals of the CRJ200ER are remaining unchanged. However, the market is being impacted by a changing structure not only in terms of the demand for larger products but also because of the new imperatives from mainline carriers. Lease rentals have weakened and can be expected to suffer from further declines should further units start to enter the market regardless of the effects of the credit crunch.
CRJ700	2000-08	120-215	The market for the CRJ700 remains sufficiently strong as to allow lease rentals to remain largely unaffected. The variant has however, been in service for nearly a decade and as such needs to be seen in the context of an established type, facing new challenges.
CRJ900	2002-08	175-255	The market in which the CRJ900 operates is becoming increasingly competitive and it must be expected that older examples should face weaker rentals. Nonetheless, even with the Embraer 190, the CRJ900 remains a formidable player. The type should enjoy a measure of stability with respect to lease rentals in the near term. The type is well placed to take advantage of the changing market.
ERJ135	1999-04	50-80	The era of the commuter jet has passed though when fuel prices were low, the type had considerable merit. Lease rentals are suffering though as examples filter down to secondary carriers, there should be an opportunity to elicit a premium.
ERJ145	1996-98 1999-05	70-90 90-130	Like the CRJ200, the demand for the 50 seaters may be easing, as clearly evidenced by the practical cessation of production. However, the ERJ145 continues to be a viable product offering considerable operating flexibility for operators, as long as high yielding traffic can be found. While Bombardier have sought other roles for the CRJ200 in terms of cargo or corporate, there appears to be lesser indication of similar proactive moves from Embraer.
328JET	1999-02	30-40	There can be no escaping the dire market conditions facing the 328JET.
F28-4000	1976-80	10-30	The Fokker -4000 still has some merit for a few operators. There are just as many F28-400s in service as there are RJ85s. The type is not so old as might be imagined although the powerplant is a throwback from the dawn of the jet era. Power by hour agreements may be alternative methods of acquisition.
Fokker 70	1995-96	45-65	The Fokker 70 is now well over a decade old and relative youth can no longer play a role in bolstering lease rentals. The type is still of use to a few operators but these are too few in number as to prevent lease rentals from failing.
Fokker 100	1991-96	60-85	The Fokker 100 has staged something of a minor revival but it remains minor.
Commentary reflects change from the last update to Regional Jet Rentals of December 2007.