Read all of the latest updates from Ascend Consultancy experts who deliver powerful analysis, commentaries and projections to airlines, aircraft build and maintenance companies, financial institutions, insurers and non-banking financiers. 
Meet the Ascend Consultancy team.

The latest webinar, Regional Aircraft: Is the Market Bouncing Back? hosted by Cirium Ascend Consultancy, sheds light on key developments in the turboprop and regional jet market. Alex Vathylakis, principal valuations analyst, Arjan Meijer, president and chief executive of Embraer Commercial Aviation, and Ron Baur, president of Azzora, formed the panel, which was moderated by Delphine Wermeister-Levert, senior account manager. The panelists arrived at the following conclusions:

• In the US regional jet market, there is a noticeable shift from 50-seater aircraft to 70-seaters, but no imminent scope clause changes on the horizon that might drive this shift further towards even larger aircraft.
• MRO bottlenecks continue to pose challenges for regional turboprops as well as regional jets.
• The focus of Embraer on the E195-E2 shows the OEM’s intention to expand in the small narrowbody segment and to compete with aircraft types such as the A220-300.
• Secondary market values of turboprops are trending up, and this trend is also observed for the E190/195-E1s.

Single-aisle jets are leading the global recovery in the aviation industry post-pandemic. While regional jets and turboprops have initially experienced a faster recovery in terms of utilisation, it has significantly slowed in the past two years.

Regional turboprops

A common challenge currently faced by regional turboprops is MRO bottlenecks, resulting in a significant portion of the fleet being stored, and with only a very small number of ready-to-go aircraft available for sale or lease. In terms of flights tracked, the ATR 72-600 remains in growth mode as the only in-production regional turboprop today. Utilisation of the ATR 72-500 and Dash 8-400 has stagnated below 2019 levels, which, apart from the MRO challenges, can be attributed to part-outs and freighter/firefighter conversions respectively over the past four years.

The outlook for the turboprop fleet varies by region, with all regions except Africa witnessing a decrease in fleet size. Africa stands out as the region that has fuelled growth by acquiring used aircraft.

A notable observation is the absence of new orders for turboprops in the North American market, particularly in Canada. In the USA, passengers have long eschewed the use of turboprops in favour of regional jets, but in Canada, airlines may soon look to implement measures to address an aging turboprop fleet issue.

Shifting the focus to OEMs, ATR is still yet to benefit from its monopoly (as DHC no longer manufactures new aircraft), but they do have a stable orderbook for three to four years as they look to renew aging fleets and enter new markets.

Leasing activity in the regional turboprop market is influenced by an MRO bottleneck, resulting in a significant number of aircraft awaiting transition and placement. Concurrently, data from Cirium’s Fleets Analyzer indicates that some lessors have offloaded a considerable number of turboprops, mainly Dash 8-400 from their portfolios. Consequently, there is upward pressure on Market Lease Rates in the near future.  

Regional jets

Smaller regional jets, such as the CRJ 100/200 and E145s, have experienced a significant increase in storage of aircraft, primarily due to the departure of several US operators from these fleets. Additionally, challenges like pilot shortage and the difficulty to overhaul the engines have driven the 50-seater aircraft out of the market due to the function of aircraft age. As a result, tracked flights for these aircraft have remained 60% below the levels recorded in 2019. Consequently, many operators have shifted their focus to 70-seater medium regional jets as a more favourable alternative in the scope clause compliant market (Scope clause in the USA, negotiated by pilot unions, limits regional aircraft to a maximum of 76 passengers and introduces a cap to the number of regional jets operated on behalf of major US airlines).

The E175s have surpassed 2019 utilization levels, driven by two primary factors: increased deliveries of E175 aircraft and very low storage rates.

This positive trend is expected to continue as the US heavy aircraft market anticipates ongoing demand for new aircraft, underscored by American Airlines’ order for 90 E175s, which may even replace the earlier models of the E175. This development highlights the role of medium regional jets in addressing the gap left by the retirement of the 50-seater fleet while US Scope Clause is not expected to change any time soon.

With regards to the E2 GTF issues, storage rates are comparatively lower at 16%, in comparison to the storage rates of 22% for A220s and 36% for A320neos powered by GTF engines.

Orders indicate a potential upward trend comparable to levels seen in 2018 as demand for more efficient and larger capacity regional jets continues to shape the regional aviation market.  If “crossover” types are included, it can be seen that interest has picked up and that competition has stimulated the wider 150 seat segment.

Several factors contribute to this trend. Ron Baur notes, “The narrowbody market is sold out, and the E2 jets provide a cost-effective alternative to add frequency and open up new markets,” similar to what Scoot has accomplished. Additionally, the E2 offers a 25-30% reduction in trip costs and similar seat costs compared to smaller narrowbodies, according to Arjan Meijer.

Lease Rates

Much like most flight paths converge at a major hub, the market review naturally leads us to an analysis of Market Values and Market Lease Rate changes for regional jets over the past few years.

The fleet weighted Market Value change for the ATR 75-500 is currently about 10% lower than pre-Covid levels. In contrast, the ATR 72-600 appears to be recovering well.

However, the Dash 8-400 still has significant ground to cover, despite its very low availability. Ready-to-go aircraft in this category command a premium, but this price gap is expected to narrow in the coming months.

The values for E175s remain stable, and this type continues to enjoy a dominant position in the market. On the other hand, the CRJ-900 has seen its value still significantly below pre-Covid levels, driven by softer demand. The E190 and E195 remain slightly lower than their pre-Covid values but show a slow but steady recovery, as noted by the transaction data gathered by Cirium (increases, especially in Market Lease Rates, were announced after the webinar in our October value review).

The fleet-weighted Market Lease Rates for the ATR 72-500 have surpassed pre-Covid levels while the ATR 72-600 is showing signs of resilience, with current deals being negotiated north of the $100,000 mark – an amount not seen in the past four years in the secondary market. The Dash 8-400 reflects a similar trend with a slight lag.

In contrast, the E2 and A220 have shown Market Lease Rates improvements of around 10% compared to pre-Covid levels, indicating a positive demand for these aircraft while the new types are also naturally less volatile.

---