US-based SkyWest Airlines gave a big boost to the MRJ program when it announced an LOI for 100 MRJs at the recent Farnborough Air Show. Some characterize this order as a “blow” to Bombardier and Embraer. Such a view is, at the least, missing a key data point. Take a look at the fleet breakdown.
SkyWest is a very big airline – much bigger than most people realize. The airline has 718 aircraft that perform over 4,200 flights per day. This is not your typical regional airline.
At the recent Farnborough show we were told that the airline wanted to buy “hundreds” of MRJs. Mitsubishi demurred – it was not going to lock up so much production with one customer. The compromise was for 100. Meanwhile the airline is facing the probability that its 266 CRJ200s and 249 ERJs are going to be dated by looser scope clauses and increasingly tenuous economics. These two aircraft comprise 515 airplanes or 72% of the airline’s fleet. Its 42 E120 turboprops are also dated.
Airlines like the MRJ – its economics are expected to be more than 10% better than its current E-Jet equivalent. SkyWest ordered the MRJ90 but can switch to the MRJ70. Given the movement to larger airplanes, we don’t expect this to happen unless scope clauses aren’t sufficiently relaxed.
With these other data points to consider, it would seem that the MRJ order is not a blow to anyone. That the MRJ is an attractive airplane is not the issue – we are confident Mitsubishi offers a technically competent airplane and combines that with compelling financial support. The order from SkyWest was a major boost for Mitsubishi.
But it is still only 100 airplanes and SkyWest has to replace many more than 100 airplanes. We understand that an even larger LOI with another firm has been signed but this has not yet been made public. As big as the MRJ order is, it is part of a bigger story of SkyWest’s fleet update which is going to rival that of the network airlines it serves. SkyWest is therefore likely to do what other big airlines are doing – they will buy from more than one firm to spread their fleet risk.