Recent interest in BAE Systems' BAe 146 and Avro RJ is helping those aircraft retain their value, with the lower price of the aging BAe 146s making it attractive and affordable to airfreight operators.

Three major BAe 146/Avro RJ operators have now reaffirmed their commitment to continue operating the aircraft at least for the next several years, well into the second half of this decade. Lufthansa CityLine, a regional partner of the German flag carrier, intends to retain its fleet of 18 RJ85s and increase the aircraft's capacity from 85 seats to 100 seats.

The CityLine announcement followed similar announcements by THY Turkish Airlines and UK-based FlyBe that they would continue to fly their Avro RJ/BAe 146 fleet. SWISS also reaffirmed its RJ85/100 operations when it kept those aircraft flying, but grounded its 17 Saab turboprops and cut back its order for Embraer regional jets.

Australian Air Express also has renewed its leases on a fleet of three BAe 146QT (Quiet Traders) for operation until at least 2010, while WDL Aviation acquired a fifth BAe 146 to be operated on behalf of Air Berlin, a German charter and city shuttle carrier.

Alan Fraser, managing director BAE Systems Regional Aircraft, said that the "vote of confidence" underscores his view that "the Avro RJ and BAe 146 family is going to remain highly competitive for many years to come." Although these aircraft are older than the regional jets now being produced, "the best option [for regional jets] very often is to do as Lufthansa has done and recommit long term to the Avro RJ." The new generation of regional jets will offer marginal improvement, "and in some instances less capability, for a huge increase in financial risk and commitment," he said.

Fraser told Washington, D.C.-based aviation journalists last week that the goal of BAE Systems now is to reduce the number of aircraft in its asset management portfolio that are idle, maximize fleet utilization and improve the market value of the aircraft. The company has 109 BAe146/Avro RJs, of which only five are idle. Of those, two are expected to be leased in the near future. The company also has 348 Jetstream turboprops under asset management, of which 220 are in operation and 128 remain idle.

Fraser said that the Avro RJs and BAe 146s are generally holding their value, although the age and condition of the older BAe 146s makes it difficult to determine what an aircraft's value is. "It could vary by two or three million dollars," he said.

BACK Aviation reported that at least 45 BAe 146/Avro RJs were on the used market as of April, of which about 15 were from the collapse of Ansett. Despite the availability of those aircraft, the BAe 146/Avro RJ market "has considerable credibility in Europe because a seemingly spacious interior belies its regional jet capacity," according to Paul Leighton, editor of Aircraft Value News, a sister publication to C/R News. The type "is particularly evident at a number of major European airports providing both feeder and stand-alone service," he said.

The aging of the BAe 146, first introduced in the early 1980s, is making it a prime candidate for the freighter market, Fraser said. Two modification companies, Dothan, Ala.- based Pemco Aerospace (Nasdaq: PAGI) and UK-based Cranfield Aerospace, now have programs designed to turn the aircraft into a freighter.

Leighton placed the value of the BAe 146QT at between $4.2 million and $6.6 million, saying that it still has a "valuable role" to play. BAE Systems' active pursuit of the freighter market should see further conversions, he said. "The differential in value between passenger and freighter appears to be widening partly because of the lower utilization of the latter, something that may not hold true with fresh conversions." Because of the age of the 146, "the continued support [by BAE Systems] will be crucial in ensuring a long economic life," Leighton said.

Fraser noted that support has, in fact, become a major part of the BAe 146/Avro RJ program. The company will be focusing on the airline customer to make sure that aircraft dispatch reliability, direct maintenance costs and airworthiness are maintained, he said. Part of this will be through "better processes and technology," such as an IT strategy, customer account management and management information systems. It will also involve a "new style of working" with "increased focus on performance and customers and empowered people at the customer interface."

Fraser also told the journalists that BAE Systems has no plans to restart its RJX program, despite the two regional jet manufacturers receiving substantial orders. "We won't be dusting off the jigs" for the RJX, he said.

>>Contact: David Dorman, BAE Systems; tel: 44-(0)1582 488336; e-mail: ddaviddorman@aol.com<<