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Few Regional Jet Lease Rentals Improve

April 12, 2021

There continues to be an assumption that due to weaker traffic then operators are flocking to lease regional jets but this far from reality.

Operators are making good use of the regional jets – where they can actually be used economically. Some operators do not have the traffic to warrant such operations or find that the economics of using smaller aircraft does not work in the Covid era. Regional aircraft are being moved between operators albeit in small numbers. An ERJ145LR has been moved to Pouya Air from Sky Mali last month; InterCarribean Airways has taken delivery of a similar aircraft also last month. However, the opposite is also evident with GECAS scrapping a 15 year Embraer 170 after it was returned by Airnorth in September 2019; another E170 has been scrapped by GECAS after it was returned by Eastern Airways in 2019. There is little indication that CRJ200s are moving between operators however in the last two years except in terms of moving in and out of storage. The E190 has been the subject of a considerable surplus in recent years but some are now moving even though a raft of examples have also gone into storage in the last few months. GOAL has received back some units from Helvetic Airways; Goshawk has received a unit back from Air Astana; Macquarie has received a unit from Azul; NAC has also received a unit from Helvetic Airways. There is therefore considerable pressure on the rentals of the regional jets making it difficult to consider increasing lease rentals by any significant amount. Indeed, there have been suggestions that the Covid Event has barely impacted the regional jet market but analysis clearly suggests otherwise.

Lease rates courtesy of The Aircraft Value Analysis Company Limited (AVAC). www.aircraftvalues.net; www.aircraftvalues.com.

 

Aircraft Age Rentals Trend Analysis
Avro RJ85 1993-1997

1997-2001

25-46

29-60

There have a considerable number of RJ85s in storage – on and off – for a decade or more such that the number now in storage is far from surprising. The last six months has seen another six being placed into storage but Conair has returned to unit to service as a firefighter. Mahan Air has introduced a Tezjet Air unit but such activity is a rare event. Lessors of the type are few and far between as the RJ85 was never considered to be an ideal target for leasing except by default. The lease rentals are therefore not moving.
Avro RJ100 1993-1997

1997-2001

25-50

30-65

There has been some movement among the RJ100 fleet with a unit going to Summit Air and Air Libya in recent months. The type is in long term storage with others being temporarily parked but more are in service than might be expected. As the type is well suited to domestic and intra-regional operations then this means that the Covid Event has had lesser effect than might be expected. Nonetheless, the type has never been viewed as the ideal leasing vehicle.
CRJ200ER 1996-1999

1999-2004

10-25

15-40

There has to be distinction between those that are “parked” and those that are in “storage”. The CRJ200ER has long been the subject of long term storage levels for a number of years. This is where aircraft are not temporarily withdrawn from service by an operator with the intent of placing the aircraft back into service when demand returns, but more reflects the retirement of an aircraft from service for onward sale or lease. Consequently, there are 150 or more CRJ200ERs in storage that are seeking to be placed with new operators while a similar number are parked awaiting to be returned to service with the same operator. The lease rentals of the CRJ200ER have been variable for many years because of the number in storage and the differing quality of equipment. Moving aircraft between jurisdictions is also not cheap.
CRJ700 2000-2010

2010-2016

35-80

70-120

There are some 20 listed as being in storage versus another 60 or so that are parked. As the majority of CRJ700s are located in the U.S. and are therefore used on domestic services, then most are in service. Indeed, Easter saw passenger numbers passing through U.S. airports as approaching pre-Covid levels. The type is therefore being well used but this does not necessary mean that load factors are high. The lease rentals therefore remain under pressure as it is all too evident that the CRJ700 does not really move between operators beyond the borders of the U.S.
CRJ900 2002-2012

2012-2021

40-95

70-135

There are a good number of CRJ900s that parked which underlines the message that the market in the U.S. has far from recovered. There are relatively few in storage and these comprise mostly Cityjet aircraft which were leased. The type is no longer being manufactured which means that Embraer now has a monopoly in this segment of the market – indeed across the entire regional jet sector. The lease rentals of the CRJ900 are not really improving to any great extent. A rise can be expected when more are extracted from the parking lot and others are shown to be moving between different lessees.
CRJ1000 2009-2015

2015-2019

70-120

95-135

The type had much to offer in terms of economics but the long thin tube effect was not to the taste of some passengers with overhead luggage space also an issue. HEH Aviation has been successful in placing aircraft but the movement of the CRJ1000 has been sporadic at best. The type is too large for the U.S. operators constricted by scope clauses. The E-Jets are doing well but it must be noted that the E190 has also not been the success that is sometimes suggested by headline delivery numbers.
ERJ135 1999-2005 15-35 The market for the ERJ135 has always been difficult. The type is best used as a commuter shuttle or in a more regulated environment which allow for higher fare prices and/or higher load factors. The aircraft is just too small for many operators. In many ways a similar capacity turboprop offers far greater efficiency over shorter sector lengths. The efficiency of the ERJ135 is more apparent where the sector length is greater than 350 nautical miles. A longer sector allows the ERJ135 to climb to an altitude that favors the jet engines. Moreover, a higher altitude also reduces the effect of weather related events. Passengers will be more cognizant of the vibration effect of turboprops on longer sectors. Rolls-Royce TotalCare can have a very marked impact on marketability such that placement with it can be that much more difficult.
ERJ145 1999-2002

2002-2006

15-30

20-40

The ERJ145 has seen some movement between operators in recent months with Residco leasing an aircraft to Ayit Aviation in December 2020. The type is similarly beleaguered by the issue of long term storage which is seeing some 250 languishing with another 100 or so being temporarily withdrawn from service. The ERJ145 is of course focused on the North American market and this makes it more difficult to see where the type can be placed. The condition of those on the open market can very considerably. There are many designations of the ERJ145 including the EP, ER, EU, LI, LR, LU, MP, RS, SA, SM, and XR. These denote differing weights and avionics. The aircraft though, are all essentially the same.
E170 2003-2009

2009-2015

40-85

65-110

Aeromexico handed a number of E170s back to lessors such as NAC and Falko in 2020 and this have yet to be moved to new operators. The market for the E170 has been difficult for perhaps a decade as operators, particularly the U.S., operators, have moved to the more scope compliant E175. There are some 25 in storage but only 15 are actually parked. The majority are therefore in service. The type still has some utility, but the operator base is below 20 which is a concern for remarketing. The lack of an E2 version underlines the issues with this type of capacity.
E175 2004-2012

2012-2021

50-115

90-145

The lease rentals for the E175 are one of the few that have improved slightly. However, it must be noted that the E175 is very U.S. centric but there are some 20 that are in storage awaiting new lessees. Lessors with surplus E175 capacity comprise Flybe Leasing, Falko, NAC and HEH. A few remain idle in the U.S. but not that many. The E175 is ideally positioned to offer low trip costs while meeting scope clause limitations. There are quite remaining on order. The disappearance of the CRJ product and the hopefully temporary stopping of the SpaceJet program has aided the E175. The E175E2 is still under development but service entry is not due quite yet.
E190 2005-2011

2011-2019

55-120

90-150

The E190 has been facing pressures for some time but some movement in the surplus fleet is now evident with the movement in the ex-Flybe fleet. Nonetheless, lessors such as CBD, NAC, Macquarie and Falko have seen aircraft being handed back which now await new lessees. There are nearly 100 E190s in storage with more parked awaiting a return to service. This surplus is a major concern still given that such regional jets are supposed to be in such demand during the Covid Event. Embraer are also now enjoying a monopoly in this segment of the market. Even the ending of production and limited supply of new E190E2s have not seen that many being reabsorbed into the fleet. The very operators that would be hoped to take additional used aircraft are the very ones seeking to replace them. The cost of engine overhauls has not proved to be that economical particularly when seeking to take advantage of the efficiency improvements. The E2 is more than just a re-engining exercise and this ensures clear water with the existing E190.
E190E2 2018-2021 145-225 The deliveries continue but there have been only six deliveries in the last year to a single operator – Helvetic – who have handed back earlier aircraft. The regional jet market is supposed to be usurping the effects of the Covid Event but the delivery rates of the E190E2 do not seem to confirm this. The lease rentals are therefore not considered to have climbed by that much. The E190E2 is more an modest upgrade and now that Embraer no longer has Boeing, there will be an incentive to ramp up the sales activity such that the E190 may be displaced.
E195 2006-2012

2012-2018

65-125

95-150

The E195, with its larger capacity, should be much more in vogue but there has been little movement among the fleet in the last year. However, the number in storage is limited as are those having been parked. The lease rentals have yet to an improvement but this may change in the coming months. A number are leased which shows that the leasing community sees the type as having some attraction. The type has been replaced by the larger E2 version and the Covid Event has complicated any remarketing efforts.
E195E2 2018-2021 160-250 Rates for the stretched E195E2 have increased slightly. There have just over ten deliveries in the last twelve months which is better than for the E190E2. With no real competition except perhaps from the A220-100 then the market for the E195E2 should be improving. Yet, the market for the type is very fragile and there may now be a temptation for Embraer to seek to discount aircraft to maintain production that must otherwise be reduced.
328JET 1999-2002 10-30 There can be no escaping the issues affecting the 328Jet but there are many used in a non commercial role so storage is not so obvious.
Fokker 70 1994-1997 20-50 While there a number in storage there are also a greater number in service. Where domestic travel is still possible then the type has utility but for the short term rentals are impacted.
Fokker 100 1987-1996 20-50 Nearly a 100 seem to be in storage not all of them due to the Covid event.

 

 

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