It is well known that list prices for commercial aircraft are no guide to market pricing. The list numbers are nowhere close to reality.
However, list prices do provide a useful guide to OEM market posture. List prices send signals to competitors even if competitors know that, ultimately, the customer will grind vendors down to the bone. Let’s take a look at the commercial aircraft business and compare list pricing and seat capacity.
ATR has a highly compelling offering. Its competitor, the Q400, appears priced out of line. This likely means that when competing for an order, Bombardier has to be far more aggressive discounting than ATR. Which is difficult and likely why ATR is outselling Bombardier. While Bombardier argues that their product is vastly more capable and is a better alternative to a small regional jet for <500 miles – the market doesn’t necessarily value this capability the same way. Few turboprop operators need the Q400s’ speed and power. The majority of turboprops users get what they need from the ATR, which is adequate performance and great economics for <500 mile trips.
However, another view could be that speed and power are factors in the equation, and that the reason the ATR is priced so much lower is that it takes two of them to accomplish the same work as a single jet could in two hours, given the speed differential. The Q400 is, as one would expect, in between the ATR and a regional jet in performance terms. One might therefore argue that the Q400 is priced in line with its capabilities.
Bombardier’s CRJ700 looks lonely, with no competitive equivalent. It appears that seat segment is better for turboprops which can do the job at much lower cost, even with range limits. Orders in the 51-75 seat regional jet market have dropped precipitously.In the 76 seat segment, we see the E-175 and CRJ900 virtually at a tie. But the E-175 outsells the CRJ900. It has a bigger cabin and, on a small aircraft, where a sense of space is crucial, the E-175 cabin wins. Bombardier announced a CRJ cabin refresh at RAA yesterday, which serves to highlight this issue. The CRJ900 is at a size where a stretch starts to provide a sub optimal passenger cabin experience, while economics and low weight are great for the operator.
The forthcoming E-175E2 will do well in the United States once the scope clause issue is resolved, or mainline airlines decide to buy this aircraft for trunk services and overcome scope limits.
The next aircraft on the chart, the MRJ90 is equally outside the scope clause and also faces challenges in the US. But we hear good things about program acceleration to the flight test regime. The SSJ is a promising aircraft. It was priced well to start with, and with the dollar cost much lower now, should be even more attractive. But Russian aircraft are not easy to sell outside the CIS in the current environment. Superjet recently lost a sale in Europe because the company cannot afford to deliver the performance the customer needed.
The largest members of this market are the CRJ1000 and E-190. What we said of the CRJ900 applies also to the CRJ1000 – operators like the 5.5% lower costs but passengers face a long narrow tube with a sense of space limits. The E-190 cabin is considerably larger and the E-190 outsells the CRJ1000. Embraer has kept the dimensions of the E-190E2 exactly the same as the E-190 because that is what customers asked for.
While Embraer’s products have been well accepted, a re-engining program announced only seven years after EIS is interesting. While they got the cabin part of the equation right, they were too early for new technology engines, and needed to reload against competition from MRJ and CSeries. The E2 accomplishes that.
Although Bombardier has four products in this chart, they all face market challenges. This is partly because the company has been so focused on the CSeries that limited resources curbed other programs. We understand there is a paper CRJ replacement under development, but absent capital, it could remain a paper exercise for some time. Embraer has a strong base with the first generation E-Jets upon which to build with the E2. Keeping the E-190E2 at the same physical dimensions as the E-190 should prove to be the right choice.
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.