What operating economics does the M100 need to deliver?

Mitsubishi is pressing hard to get the US regional airlines to consider its revised M100 as an alternative to the Embraer E-175 and as an option to replace Bombardier CRJ series aircraft. The US regional airlines operate in a very tight margin environment. The most recent trend is that the major carriers whom the regionals fly for will place their equipment orders and enter into operating contracts with regional carriers. As always in fleet planning situations, the driving factors are suitability to the mission and market and economics, both capital costs and operating economics. The aircraft manufacturers know their markets well, know their competitors’ costs, and can price to the point of economic indifference. How will Mitsubishi need to price its new airliner to gain sales in the competitive marketplace? AirInsight’s interactive modeling technology could be helpful in this regard and reveal the answer. Our model utilizes the Department of Transportation Data and Form 41 cost data to provide comparative analyses. The first part of our model is an examination of suitability for a mission or market. Utilizing today’s routes as a baseline, we compare the distance between airports and the number of flights conducted by today’s regional jet fleets. The model is interactive and can show how data have changed from 2010 through 2018 by clicking on the circle. There are two interesting trends – the CRJ’s typical range has been shrinking to shorter-haul routes while the E-175 has been moving towards longer stage-lengths. This is logical given the difference in passenger comfort between the aircraft. The second part (look at the bottom of the model for the next two pages) of our model contains two-quadrant charts. The two charts are activated by selecting a year from the list. These charts show how the incumbent aircraft compare in operating terms. A table also lists the average seating for these models over the period. The third page is another interactive model comparing stage length with operating costs per seat hour. The data and models provide the reader with a good perspective of what Mitsubishi is up against. You can download the most recent Mitsubishi brochure here. Over the period (2010 through 2018) the incumbent aircraft averaged 696.5 gallons of fuel per flight hour. The M100's GTF engine should be at least 15% better at 592 gallons/hour. Indeed, we would not be surprised to see the number closer to 550 gallons/hour. Mitsubishi's brochure (p.18) only speaks of "double-digit" fuel reduction. In their 2013 brochure (ENS-006_Nakamura) (p 16 & 17) there is an allusion to a fuel burn saving of ~12% for the MRJ70. Given that the M100 should be an improvement on that with its weight loss program, over 15% is doable. The typical stage length for these aircraft is about 580 miles. Mitsubishi's decision to take out weight and tweak the wing fits the mission requirements. The M100 does not need a 1,000-mile range but will have a 1,910NM range. Mitsubishi claims (p.21) this allows for 99.5% of all routes at full payload. There is some vagueness about the range though. As we have seen with Delta using the A220-100 to create new routes, the ability to serve long thin routes is attractive. Making extra that range useful, but not critical. In terms of operating costs per seat hour, the incumbents average $13.26. Fuel costs are typically covered by the major airline the regional is flies for. Regional jet operations are intense in that these aircraft perform many more cycles than mainline aircraft. The DoT data reports the 2018 fleet had a maintenance burden of approximately $495 per flight hour. Here is where Mitsubishi really can earn big credits. As a new design with lighter materials, the M100 should be considerably cheaper to maintain. Mitsubishi alludes (current brochure p. 18 "Operating cost per trip") the M100 should offer "double-digit" maintenance cost reduction. Taking them at their word, this would mean at least 10% or ~$50 per flight hour. Also not an exciting number. In summary for the M100 to really draw airline interest, it has to deliver significant savings compared to the industry average of $963 flight operations costs per flight hour. While the M100's better fuel burn should be the best in class, that may not be enough because while fuel costs are up they are still rather low and covered by the majors. But about half the cost per flight hour is in maintenance. The M100 needs to offer ~20% (~$193) in overall savings per flight hour to drive market attention. This means Mitsubishi needs to deliver an operating cost of ~$770 per flight hour. Can they get there? It won't be easy.

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