China has new rules that are rigorous with respect to the development of regional airlines.  We published an analysis of these regulations later this week.

What does the actual regional jet market look like in China?  Data is not easy to find.  But here is a summary of China’s regional jet fleet as of 3Q17.

Let us focus on the newer jets, and set aside the CRJ200/700 as well as the ERJs.  A crucial point to know about is the recent Rule 30 definition in China that limits a regional jet to 100 seats. As we can see most models in service meet this requirement, except the E-195.  By bringing in this rule, China has in effect started to develop its own version of a scope clause.

China’s rules favor domestically produced aircraft. Only the meets this and has been produced too slowly to be considered much of a threat to Bombardier and Embraer.  China’s regional airline market is expected to grow rapidly as high-speed rail does not work everywhere.  Intra-regional flying is a cornerstone of the rules that drive how CAAC wants China’s regional airlines to develop.

The youngest fleet (Excluding ARJ21) is the CRJ900 fleet at .  The CRJ900 is the most popular model from that OEM in the market.  With more than 25 regional jets in service, China Express can add mainline jets per Rule 96.  It has acquired an A320 with two more on order.  The airline is successful and has filed an IPO.  This is China’s first private regional airline. Bombardier has tied itself to a strong player in China Express.  Its success with the CRJ900 will be noticed by other regionals.

Among the Embraer fleet, the E-190 is the most popular with 83 in service.  These average 6.1 years old and are mainly found at Airlines (35) and China Southern (20). These are mainline carriers and not regionals.  Another larger operator of the E-190 is Guangxi Beibu Gulf Airlines (GX) with 15. This airline is partly owned by Tianjin Airlines.  GX operates within China only.  Although it has fewer than 25 regional jets (Rule 96), it also has six A320s.

An intriguing item here is the E175, which has proven popular among the US regional airlines.  China has none in service.   Recently Embraer sent a copy (on loan from Mesa/United Express) to demonstrate it.  Embraer has hopes that will from this visit.  That is quite a marketing effort for Embraer and demonstrates the level of interest in getting the aircraft into China’s regional service.

China’s policy evolution on the regional airline market has vexed Bombardier and Embraer.  As China’s aviation market matures we have seen several Chinese airlines swallowed by the larger companies – consolidation is the way the industry works everywhere.  But the regional market has these rules that may keep it operating differently for some time yet.

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