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Monday, March 29, 2004

Fleet Plans Confirm That The Future Is The Jet

If there is any doubt that the largest U.S. regional carriers see the future in regional jets, one only has to review the latest fleet report prepared by Deutsche Bank.

The eight regional carriers tracked by analyst Susan Donofrio intend to add 153 regional jets this year. The move will boost capacity by 8.3 percent over 2003. The airlines will purchase six new turboprops and retire 38 turboprops. There will be a net seat growth of 11.5 percent this year over last.

Next year, the carriers will add another 144 regional jets without adding one turboprop. The carriers are expected to retire two more turbprops.

"The growth of the [active] regional jet fleet has flattened out as storage levels have also held steady," Donofrio said. "This lack of change in aircraft levels points to new regional jet deliveries being used to replenish the fleet as older aircraft are permanently retired. [I] see this as only a temporary effect, as regional carriers begin to accept deliveries from well-stocked order books.

"Regional jets have caught on most strongly in the United States, which accounts for 58 percent of the active global fleet. Europe, with its continued preference for turboprops, is a distant second at 28 percent," she said.

Two industry analysts said Deutsche Bank's estimate for new turboprops is on the mark.

"As far as new production, I would probably say they are close," said Doug Abbey, president of AvStat. "I don't think you will see people acquire new units of turbprop capacity because there is a strong used market.

"I think there is a strong interest [in turboprops] in the lower tiers, perhaps a few of the independent carriers. I am fairly bullish on them."

Both Abbey and Karen Medweth, a senior aviation consultant with Britain's IBA Group, believe the Bombardier Q400 Dash 8 has high potential for routes flown by U.S. regional carriers. "Companies like SkyWest [SKYW] could certainly use it," Abbey said, "But I don't think they would because it would make their operations more complex."

There are a few low-cost operations using the very large turboprops, Medweth said, but "it is something that has not been succesful to date. Not many people have tried it because a number of high-profile accidents with turboprops, more so in North America than in any other place. There is a definite jet preference. Turboprops are lumped into this older technology. The Q400s are quite cutting edge, but they unfortunately have propellers on the outside that people can see," Medweth said.

Regional carriers outside of the United States operate on a different scale, she noted, with an order of 10 planes considered large. "Although the orders for turboprops will continue, you will not see them ordered in the same quanities - not in the hundreds," Medweth said.

>>Contact: Susan Donofrio, Deutsche Bank, (212) 250-7450; Doug Abbey, AvStat, (202) 338-1727; Karen Medweth, IBA Group, 44 1293 772743.<<

Turboprops Lose In Regional Fleet Expansions
Aircraft Type
2004 Estimate
2005 Estimate
American Eagle
Saab 340
-6
0
ATR42
-12
0
Embraer 145
+36
+36
Fleet Totals
293
329
Atlantic Coast
BAe Jetstream 41
-22
0
Airbus 319
+4
+16
Fleet Totals
126
142
ExpressJet
Embraer 145
+21
+21
Fleet Totals
245
266
Delta Connection
CRJ 200
0
+25
CRJ 700
+23
0
Fleet Totals
306
331
Horizon Air
Dash 8-400
+2
0
CRJ 700
0
+2
Fleet Totals
63
65
Mesa Air Group
Dash 8-200
+4
0
CRJ 200
+8
0
CRJ 700
+1
+5
CRJ 900
+15
+14
Fleet Totals
186
205
Northwest Airlink
CRJ 440
+30
+26
Fleet Totals
190
216
SkyWest
Embraer 120
-4
-2
CRJ 200
+4
0
CRJ 700
+15
+15
Fleet Totals
199
212
Source: Deutsche Bank Securities
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