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Regional Aviation News
No Immediate End In Sight For Regional Jet Boom
May 2, 2003
Analysts are challenging warnings by Wall Street that the regional jet revolution is drawing to a close, arguing that the jets introduced 11 years ago continue “previously announced intention not to remain a long-term stockholder of ExpressJet.” The regional carrier noted that “subject to market conditions, shares could be sold from time to time in the open market, through block trades, in underwritten offerings or otherwise.” Continental has a 53% to serve as offensive weapons to U.S. majors attempting to regain profitability.
Speakers at the Commercial Aviation U.S. Regional Airline Conference this week in Washington countered a report released by J.P. Morgan predicting a declining attractiveness for what it identified as high unit costs of RJs now that some of the major carriers have won wage concessions from pilots (DAILY, April 22). “The idea that the RJ boom is over is misplaced,” said Chris Seymour, senior analyst with Airclaims Ltd. “About 40% of deliveries this year are from regional jet manufacturers.” Merrill Lynch Aerospace Defense analyst Ron Epstein told attendees that investors tend to lean positively toward the RJ market, and noted the low numbers of parked RJs.
Even United’s regional partners Atlantic Coast and SkyWest aren’t at a high risk if the carrier liquidates. “I don’t think it would be harmful to the regionals other than a short disruption period,” said Bob Falkenberg of Babcock & Brown. He predicted additional RJ flying in United’s Chicago, Denver and Dulles hubs if the carrier files for Chapter 7. Most analysts at the conference agreed the major challenges regional carriers face today are lowered fixed fee for departure rates and the evaporation of ways to finance aircraft. Betsy Snyder, a director in the Corporate Ratings Group at Standard & Poor’s, said that as huge losses mount at major carriers, they’re looking to slash costs at all levels. “Contracts are not immune to reduced rates,” she said, adding that profitability could suffer from rate revisions. Regionals face a paradox in aircraft financing, analysts said, because the weak environment drives more dependence on manufacturers, who are struggling to maintain profitability. “Embraer is where it is today because it has religiously minimized its activities in financing support,” Falkenberg said. -LR
Source: Aviation Daily, May 2, 2003
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