Premium #329 – The Changing Fleet Under 120 Seats

We examined fleet data from 2003 and 2016 to examine trends over the last 13 years in market share by manufacturer, fleet age, and seat counts for aircraft under 120 seats. This market, with smaller mainline aircraft and regional jets, has changed significantly over the last 13 years. The worldwide fleet (not counting Russian Yak and Tupolev aircraft for which we lack accurate age data) has grown from 2,535 aircraft in 2003 to 3,986 aircraft in 2016. The fleet grew 157% in that 13-year period, driven largely by regional jets in the US marketplace. At the same time, the participants in the regional aircraft market also changed dramatically. The following chart shows the market share of the in-service fleet in 2003. The major players in 2003 were Bombardier, Embraer, Fokker, BAe Systems, British Aircraft Corp, and Fairchild-Dornier. Only Bombardier and Embraer remain of those players today. In 2016, the fleet by manufacturer shows a very different set of players, with Embraer now in the lead, and Bombardier joined by newcomers COMAC and Sukhoi as the aging fleets of the players no longer with us continue to wane. With new and older manufacturers now in the mix, we took a look at the age distribution of the fleets. In 2003, a high percentage of the aircraft were under four years old, with the age distribution falling off in a near exponential curve, as shown below. The majority of the fleet in 2003 was less than 10 years old. Contrast that with 2016, shown below. In 2016, a large portion of the fleet was 12-17 years old, with a dramatic drop off at the 20-year point. This bodes well for the next 5-10 years for new models, as these older aircraft approach retirement age. With strong growth, plus a replacement market, the next decade could be quite promising for the aircraft OEMs. The majority of the older aircraft at that time will be the 50-seat regional jets from Embraer and Bombardier that entered service in the mid-2000s. These aircraft are sensitive to fuel prices, and a while the current low prices are keeping them active, a spike in fuel prices could accelerate retirements. British Aerospace/Avro The BAe 146/Avro RJ fleet has been declining since 2000, from 322 in service at the end of 2000 to only 179 at the end of 2016. As the fleet ages, major operators such as Swiss are replacing these aircraft with newer models like the Bombardier CSeries. The 179 remaining aircraft will need to be replaced over the next five to seven years, representing a significant opportunity for Bombardier, Embraer or Sukhoi. Fokker The Fokker active fleet also represents a strong replacement opportunity, with 250 aircraft in service at the end of 2016. Most of these aircraft will also retire and require replacement over the next five to seven years. Bombardier Fleet The Bombardier fleet was fueled by the growth of the 50 seat CRJ models early in the millennium, but growth has slowed in recent years. We expect a peak replacement market between 2023 and 2028 for many of those aircraft as they reach 20 years of age. Embraer Fleet The Embraer fleet has shown steady growth and has captured market leadership in the <120 seat segment. Early 50 seat RJ models will be approaching retirement age between 2020 to 2025. Seat Counts and Trends Average seating capacity has been increasing in recent years, as 50-seat regional jets have been replaced by 76-seat jets in the US and 90-100 seat regional jets in Europe. With the entrenched base of 50-seat jets, the growth in seating capacity has been slow, but new aircraft in the US market are typically at the 76-seat scope clause limit. The Bottom Line A lot can happen in 13 years, and the aircraft OEMs in the under 120-seat market have dramatically changed, with Embraer and Bombardier stretching their market lead as many of their competitors left the market. The upward trend in seat size, combined with new models from Bombardier, Embraer, Sukhoi and , Comac, with Mitsubishi soon to enter the market, will establish a new competitive dynamic for 2020 and beyond. The question is who will emerge as the dominant player in smaller aircraft. Don’t bet against the incumbent leaders, Embraer and Bombardier.

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