Analysis: The RJ Glut
04-13-2005, 06:08 PM
#1
Gets Weekends Off
Thread Starter
Joined APC: Feb 2005
Position: 737 Capt
Posts: 219
Analysis: The RJ Glut
http://www.aviationplanning.com/asrc1.htm
Hot Flash - April 11, 2005
The RJ Glut.
Now, Everybody's Noticing
It's official, now that it's in the rearview mirror.
There's a big-time glut of 50-seat "regional" jets.
Even Wall Street has taken notice. A recent report by one of the most respected analysts, Robert Ashcroft of UBS, alludes to GE and other lessors and finance entities getting stuck with litters of RJ kittens.
It Ain't Braggin' If You Done It. The Boyd Group was the only consulting firm to accurately predict this situation, well before it took place, and - note this - during a time when other consultants were "predicting" the great and near endless demand for RJs. Some are still doing it.
The Boyd Group fleet forecasts first indicated an oversupply of 50-seat jets almost four years ago. We noted it here back in 2000, again right after the Comair strike, and have kept our forecast clients updated since that time. These include, by the way, manufacturers and suppliers who are directly involved in the production of 50-seaters, as well as airlines who own the things. (Unlike some other consultants, when we're hired to do forecasts, that's what we do. Results come as-is, where is. Our clients know that if they want guaranteed warm-and-fuzzies, they'd best go out and buy a puppy.)
Somebody's Fixin' To Be Out In The Cold. The game of musical RJs is just starting. Air Wis moves 60-70 of them (mostly 50-seaters) to US Airways. Then, somebody's got to be odd man out, because with all the pricing and cost challenges facing US Airways, there's not only a limit to the number of RJs US Airways can afford, but that "limit" is likely going to be a declining figure.
We could be looking at somewhere near 40 to 50 excess RJs in the not too distant future. And that assumes that US Airways remains among the living.
Used RJs? Great For Desert Shade. It gets worse. Toss in the possibility of 50 or 60 RJs getting grounded at Independence Air, and that that means swarms of these things buzzing off to the sunny climes of the Arizona desert.
Oh, and do ignore the nonsense spouted by some that there'll be a huge secondary market for 50-seat RJs. Like, where? Not the US - this is where the glut started. Not Europe - the LCC craze there has put RJ economics into the ceramic fixture. Not China - hey, folks, they're building their own RJs, and aren't likely to buy many used ones from Foreign Devils.
The Boyd Group is forecasting that between 75 and 150 CRJs and ERJs will be all dressed up with no place to go within the next three to five years. Sure, lessors can and will cut deals to make them more attractive to airlines. But that doesn't change the biggest challenge to RJ operations: high operating costs.
This is not a question of 50-seat jets disappearing. They are fine aircraft. They are necessary aircraft. They'll be part of the airline picture for the next 10 to 15 years, filling niche roles. The point here is that the number of those niches will decline, and so, too, will the total number of RJs that the market can support.
Prediction: The operating economics of E-Jets, the 70-110 seat mainline aircraft being produced by Embraer, may well accelerate the retirement of RJs. Another prediction: The E-Jet will also change the role of small jet providers (what rearview mirror worshipers still call "regional" airlines.) While there may be a culling-out of these entities, those left will evolve into operators of larger and larger aircraft, up to and possibly including what is now the sacred territory of mainline airline unions - 737s and A-320s.
RJs are fine airplanes. But if you're going to invest in one, do it with somebody else's money.
Hot Flash - April 11, 2005
The RJ Glut.
Now, Everybody's Noticing
It's official, now that it's in the rearview mirror.
There's a big-time glut of 50-seat "regional" jets.
Even Wall Street has taken notice. A recent report by one of the most respected analysts, Robert Ashcroft of UBS, alludes to GE and other lessors and finance entities getting stuck with litters of RJ kittens.
It Ain't Braggin' If You Done It. The Boyd Group was the only consulting firm to accurately predict this situation, well before it took place, and - note this - during a time when other consultants were "predicting" the great and near endless demand for RJs. Some are still doing it.
The Boyd Group fleet forecasts first indicated an oversupply of 50-seat jets almost four years ago. We noted it here back in 2000, again right after the Comair strike, and have kept our forecast clients updated since that time. These include, by the way, manufacturers and suppliers who are directly involved in the production of 50-seaters, as well as airlines who own the things. (Unlike some other consultants, when we're hired to do forecasts, that's what we do. Results come as-is, where is. Our clients know that if they want guaranteed warm-and-fuzzies, they'd best go out and buy a puppy.)
Somebody's Fixin' To Be Out In The Cold. The game of musical RJs is just starting. Air Wis moves 60-70 of them (mostly 50-seaters) to US Airways. Then, somebody's got to be odd man out, because with all the pricing and cost challenges facing US Airways, there's not only a limit to the number of RJs US Airways can afford, but that "limit" is likely going to be a declining figure.
We could be looking at somewhere near 40 to 50 excess RJs in the not too distant future. And that assumes that US Airways remains among the living.
Used RJs? Great For Desert Shade. It gets worse. Toss in the possibility of 50 or 60 RJs getting grounded at Independence Air, and that that means swarms of these things buzzing off to the sunny climes of the Arizona desert.
Oh, and do ignore the nonsense spouted by some that there'll be a huge secondary market for 50-seat RJs. Like, where? Not the US - this is where the glut started. Not Europe - the LCC craze there has put RJ economics into the ceramic fixture. Not China - hey, folks, they're building their own RJs, and aren't likely to buy many used ones from Foreign Devils.
The Boyd Group is forecasting that between 75 and 150 CRJs and ERJs will be all dressed up with no place to go within the next three to five years. Sure, lessors can and will cut deals to make them more attractive to airlines. But that doesn't change the biggest challenge to RJ operations: high operating costs.
This is not a question of 50-seat jets disappearing. They are fine aircraft. They are necessary aircraft. They'll be part of the airline picture for the next 10 to 15 years, filling niche roles. The point here is that the number of those niches will decline, and so, too, will the total number of RJs that the market can support.
Prediction: The operating economics of E-Jets, the 70-110 seat mainline aircraft being produced by Embraer, may well accelerate the retirement of RJs. Another prediction: The E-Jet will also change the role of small jet providers (what rearview mirror worshipers still call "regional" airlines.) While there may be a culling-out of these entities, those left will evolve into operators of larger and larger aircraft, up to and possibly including what is now the sacred territory of mainline airline unions - 737s and A-320s.
RJs are fine airplanes. But if you're going to invest in one, do it with somebody else's money.
