The lack of orders and deliveries for 50-seat regional jets during 2006 has increased the pressure on short-term residuals in this potentially vulnerable segment of the market, according to RAN’s sister publication Aircraft Value News.
Net orders in 2006 for 50 seaters numbered only five units last year. Notably the Bombardier (BBD) CRJ200 saw a reduction of 15 as existing orders were cancelled. The Embraer (ERJ) 145 fared only slightly better as 20 were registered. The majority of these were for orders from China for assembly in China.
Deliveries in 2006 paled against those made in 2005. Only four CRJ200 deliveries were made last yearcompared to 47 in 2005. Similarly, Embraer registered 12 deliveries of the ERJ145 compared to the 48 in the previous year. The de facto ending of 50-seat regional jet manufacturing has been evident for some time. There are no CRJ200s remaining to be delivered though some 53 are still on the Embraer books.
Despite strong deliveries in the past decade, residual value strength should be secure but are not owing to disposal problems at Delta (DALRQ), Northwest (NWACQ) and Independence Air which highlighted the fragility of the 50-seat market. With nearly 100 50-seat CRJ200s coming onto the market within a matter of months, values of the type experienced a significant fall. Embraer values were also expected to fall with the ExpressJet (XJT)/Continental (CAL) reduction in service. However, they recovered as ExpressJet began to use them in branded and corporate jet service.
One of the problems for values of the 50-seat regional jets is the supposed impact of fuel prices, which has renewed emphasis on turboprops. ExpressJet, however, reported that for 2006, the cost of operating its fleet of regional jets actually fell compared to 2005. The average fuel cost per available seat mile fell from 1.76 cents to 1.72 cents though load factors were up from 74.7 percent to 78 percent. The operating cost per block hour declined 2.5 percent from $1,696 to $1,652 illustrating that the hike in fuel prices failed, at least with ExpressJet, to see a rise in operating costs.
AVN suggests values of the aircraft are facing a challenge as scope clauses soften, relationships change and because of the overwhelming concentration of the type in the U.S. The concentration in the U.S. has, to date, been mitigated by the large number in service and the absence of availability. A complete analysis of 50-seat values as well as the impact of product upgrades on the ATR, are available through Aircraft Value News.