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Boyd on RJ's - not good for Eagle.

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Boyd on RJ's - not good for Eagle.

Old 04-02-2014, 12:14 PM
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Default Boyd on RJ's - not good for Eagle.

As Michael Boyd predicted in 2003 - why regional jets are going away - and it's not good for American Eagle.

In The Lead -
What We Forecast Back Then Isn't A Forecast, Anymore.
It's Now Reality.


More than what it appears to be: ALPA pilots at American Eagle rejected a contract offer last week.

The result is that American Airlines has now decided - apparently in stone - that not only will any new Embraer E-175s now go to other contractors, but the existing 47 CRJ-700s now flown by Eagle will be moved as well.

This leaves Eagle (to be renamed "Envoy") with a declining fleet of 177 ERJs, 59 of which are near-totally uneconomic 37-seat -135s. This effectively puts Eagle into the equivalent of airline hospice. It's just a matter of time - three, maybe four years - before these machines are yanked from service, as is the inevitable economic future for 50-seat and smaller jets.

The real message here is one that Boyd Group International's airline trend and fleet forecasts outlined for our clients as far back as 2003 - there's not only an excess of small ("regional") jets, but there's increasing competition for contracts among the certificated carriers to which majors can outsource flying.

So, it's a matter of supply and demand. The market has lots of small jets, and enough companies operating them, to represent a buyer's market. The pilot professionals at American Eagle are caught in the middle. They are in a sector of the air transportation industry that's shrinking rapidly in terms of the raw number of aircraft units that can be viably supported, or wanted, at major airline systems.
The fact is that the need, and the declining revenue contribution of 50-seat jets parallels what was seen fifteen years ago with 19-seat through 50-seat turboprops. Going away. Not coming back. No one-for-one unit replacements.

Pilot Shortage Or Not. It's A Fleet Change Issue. It's not as if there was labor intransigence on the part of the Eagle pilot rank-and-file. Far from it, based on the terms that were reportedly in the proposed contract. According to the Dallas Morning News, the proposed contract was hardly gold-plated, and represented mostly the promise of continued employment with larger aircraft, and not much in the way of increased compensation, particularly after a decade of concessions. (Check Terry Maxon's blog for details.) But today, American doesn't need Eagle. They can shift this lift to other contractors.

A Major Restructuring of Fleets. The near-term future for SLPs such as Eagle (small lift providers, still mis-labeled in some circles as "regional airlines") will be in the shift to larger units of capacity - particularly the CRJ-900 and the E-170/175 categories. Fleets of 50-seaters are on a clear path to Endsville, sooner than most of the financial industry expects. This is changing the entire structure and scope of the SLP sector - big time.

This Is A Fleet Revision, Not A Long-Term Demand Trend. Of course, give it another 90 days, and the usual suspects in the consulting industry will be "predicting" this now-obvious change in the structure of the air transportation industry. "The demise of 50-seat jets has set the stage for enormous growth in demand for 70-76 seat units," will be the confident statements - particularly now that the manufacturers' order books are as obvious as measles on prom night.

But what isn't going to be noticed is that the current spike in demand for 70-76 seat aircraft is episodic, basically a need to re-fleet. It's not a long-term dynamic in fleet trends. It is to fill a market gap, and one that's shaped not entirely by market specs, but also by major airline outsourcing objectives, which in many cases result in airline brands acquiring aircraft that are sub-optimal for some of their intended applications.

This was the case with the orders for shrunk-down ERJ-135s and -140s. These were due entirely to an intent to get around labor agreements that put limits on the number of 50-seat jets certain airlines could bring into their brand systems. Great airplanes, but they sport most of the costs of a 50-seater with as much as 26% fewer seats to sell. And 50-seaters aren't great economic players anymore, either. At $.80 jet-A, maybe a go. At $3+ a gallon, a substantial percentage of these machines' revenue contribution is going directly to OPEC.

It's Just The Start. Airports and Suppliers Best Get Prepared. Stand by for news. There's a lot more fallout coming from the changes in the SLP sector. Folks in all areas of aviation planning had best understand that what's in the rearview mirror isn't anything like what air transportation will experience in the next three years.
For financial institutions, any paper on 50-seaters needs to be reviewed. Suppliers need to re-think the demands - and opportunities - that these new fleets will represent. Airports need to re-think the future, too. Regardless of the "market studies," speed-date meetings with airlines, or - the latest jive voodoo - "rebranding" that an airport may engage in, it won't change reality: the US airline industry is structurally changing. Get with it, or get left out of the global economy.
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Old 04-02-2014, 12:40 PM
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Old 04-02-2014, 04:25 PM
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And with the useless "association" that is ALPA, we are all still going to be played for fools while the reps either take union leave to drink on our dimes in DC or weasel their way into management after helping pass a criminally bad contract.
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Old 04-02-2014, 06:53 PM
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What this article fails to mention is that Eagle/Envoy could be re-fleeted whenever they need to. We have a POS concessionary contract in place, for 8yrs, signed by the bankruptcy judge. They do not need a new contract for us to finance their aircraft
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Old 04-02-2014, 07:40 PM
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Why do we have 2 threads of this now?
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Old 04-02-2014, 07:47 PM
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Because its a forum
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Old 04-02-2014, 07:58 PM
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Boyd is hilarious. 11 years later, he's waiting to be right and still not. The pilot shortage is creating a situation close to his predictions being right but not quite there. And so he wants to alter reality a little bit and make it sound like he's right. He's full of it. I don't know why he has an income.
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Old 04-02-2014, 08:15 PM
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Boyd is clueless and Eagle/Envoy isn't going anywhere.

Other regionals can't staff their current fleets let alone take additional airplanes from Eagle. Nice job turning down the TA Eagle; you guys are a very respectable and strong group!
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Old 04-02-2014, 08:36 PM
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Originally Posted by erjpilot View Post
Boyd is clueless and Eagle/Envoy isn't going anywhere.

Other regionals can't staff their current fleets let alone take additional airplanes from Eagle. Nice job turning down the TA Eagle; you guys are a very respectable and strong group!
I think the point is that there will be less frequency and bigger aircraft.
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Old 04-02-2014, 08:41 PM
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Originally Posted by mojo6911 View Post
I think the point is that there will be less frequency and bigger aircraft.
I think that is exactly the point. It will be interesting to see what happens over the next few years.

"The FAA 20-year forecast predicts the number of passengers traveling on U.S. airlines will increase by 3.5 percent from last year to 737.4 million passengers in 2011. That figure is projected to grow an average of 2.8 percent each year during the remaining forecast period to 1.3 billion by 2031."

Copied that from the FAA website. So with reduced frequency and increased capacity, will it be enough to handle the droves of people trying to fly?
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