Can lower leasing costs save the 50-seat regional jet in the U.S. market?
SkyWest expects a 20% to 30% reduction in its 50-seater regional jet fleet after its contracts to operate them for major airline partners expire, says Chip Childs, the president and COO of SkyWest subsidiary SkyWest Airlines.
The bulk of those 50-seater contracts last until 2020, however, and the carrier still thinks the purported demise of the 50-seater has been overstated. One reason it will not be as dramatic as some industry observers believe, he maintains, is that operators will be able to negotiate new lower-cost leases after the existing ones expire.
Embraer’s Gordon Preston, manager, airline market, offered the same reasoning to me after an Embraer press briefing. Refinancing at lower rates, he says, could get the cost per available seat mile to the level of a 70-seater and fill a niche. He thinks there are more than 600 markets in the U.S. where 50-seaters could remain viable.
Embraer says it believes regional carriers will continue operating about 800 50-seat regional jets in the U.S. market, which would be only about 300 less than today, and a decline to only about 900 units by 2015. I say “only” because many observers expect 50-seat usage to crater much more than that, especially over the next decade, because high fuel prices have made them uneconomical on many routes.
The SkyWest/Embraer scenario could be wishful thinking, given the impact higher fuel prices have on 50-seater economics. The number of 50-seaters in the fleet really is a consequence of scope clause restrictions that made them the highest-sized options for regional flying at the time, but scope clause restrictions began to be loosened to allow larger aircraft about a decade ago.
There are some markets where 50-seaters still with make sense, and SkyWest and Embraer at least are offering a reason for their relative confidence in the 50-seater that seems more feasible to me.
But I am still not convinced.