MIAMI — While much of the oxygen in the intersection of aviation and media deals with the trials, tribulations, and successes of Airbus and Boeing, a large chunk of global commercial passenger aviation is actually driven by segments that Airbus and Boeing largely don’t compete in (excepting Airbus through its stake in ATR). Ranging from 70 to 140 seats, these jet and turboprop aircraft, manufactured by companies like Bombardier, Embraer, and Sukhoi operate thousands of flights around the world every day. And while the dollar sums are not as eye-popping as those surrounding orders for Boeing and Airbus, these companies, markets, and programs are multi-billion dollar undertakings in their own right.

This swath of the market is dominated today by five aircraft families: the Bombardier Q400 and ATR 72 turboprops, the Bombardier CRJ regional jet (RJs), the Embraer E-Jets, and the Sukhoi Superjet. The Q400 and ATR have been covered ad-nauseum in this column before and accordingly, our analysis will focus on jets. 70-140 seats is of course a massive spread of capacity, and to hone it down further, the market can be further divided into three bands. The first spans aircraft seating 70-90 passengers, which encompasses the large RJs that operate for US and European regional partners for mainline carriers. The next includes aircraft seating 90 to 110 passengers, which are small mainline jets as well as trunk jets for smaller national carriers. The last includes aircraft seating 110-150 passengers, which were baseline jets for big US, European, and Chinese carriers during the current (A319/737-700 generation) but have largely been passed over in large carrier fleets for the jets one size larger (737-800 and A320) in the era of re-engined aircraft.

Over the next five years, the three jet manufacturers will turn into four, as Bombardier, Embraer, and Sukhoi are joined by the Mitsubishi Aircraft Corporation, whose Mitsubishi Regional Jet (MRJ) will be Japan’s first home-designed and produced aircraft since the money losing NAMC YS-11of the 1960s. The MRJ is aimed at the lowest segment of the regional jet market, along with Embraer’s re-engined E175-E2. In the smallest tier of mainline jets, Bombardiers smaller CSeries variant the CS100 and Embraer’s re-engined E190-E2 compete with the already-in-service Sukhoi Superjet 100-95 (SSJ 100). And in the 100-149 seat space, Bombardiers CS300 and Embraer’s E195-E2 are the competitors for this quartet of manufacturers. The analysis that follows will thoroughly assess all products between 70-150 seats for the four aforementioned original equipment manufacturers (OEMs), and will also consider tangential products such as China’s ARJ21 or the Boeing 737-7 and Airbus A319neo.

Current Market Overview

The two most important players in the regional jet and small mainline markets today are Bombardier, who invented the RJ market with its CRJ, and Embraer, who surpassed Bombardier’s larger CRJs with the more capable EJets, which also offered a superior passenger experience. These OEMs were joined in the space by Russian manufacturer Sukhoi, in 2011 with its SSJ-100, the Russian answer to Embraer’s E190.

While they have not approached Airbus A320 or Boeing 737 level sales, both Bombardier’s CRJ-700/900/1000 and Embraer’s E-Jets have sold well in their own right. Together, the large CRJs (CRJ-700/CRJ-900/CRJ-1000) have sold 809 copies with a backlog of 76 airplanes yet to be delivered. Of the variants, the CRJ-700 (350 copies) and CRJ-900 (391 copies) have far outsold the stretched CRJ-1000 (76 copies). Embraer, meanwhile has won 1,401 orders for the EJets with a backlog of 264 airplanes outstanding. Of the variants, the E175 (459 orders) and E190 (584 orders) have dominated while the E170 and stretched E195 have been more niche (192 and 165 orders respectively). The E-Jets have outsold the larger CRJ’s since they were each introduced, which is one factor that pushed Bombardier into lapping the EJets with its CSeries, a clean-sheet airplane that offers fully optimized aerodynamics and economics in the small mainline space. Embraer was forced to respond by re-engine its EJets. Still, the Brazilian OEM dominates the market today, with 61% market share and 80% of seats sold in RJ/small mainline category in North America since 2013.

The drivers of demand in this market space are variegated. Small mainline aircraft are a broad based story. These were the dominant mainline aircraft around the world as recently as 12-15 years ago (think McDonnell DC-9s / MD-80s, 737-200/300/600/700s, A318/A319s, Fokker F100s, BAe 146s, etc.). But economics and the RJs drove a bifurcation into large mainline aircraft such as the Boeing 737-800 and Airbus A320. As operations and fuel prices skyrocketed, airlines prioritized unit cost efficiency relatively more than the right-sizing for demand of smaller jets, and the 100-149 seaters fell out of vogue. The smaller 75-seat RJ were a natural outgrowth of the turboprop feeder airlines that begat 50-seat RJs that eventually became the 76-seaters. Accordingly, Airbus and Boeing have largely shifted focus away from small mainline jets. The problem is that Airbus/Boeing left a large (1500+ frame) market in their wake, and now there is still a need for the small mainline jets in many mainline networks, especially for smaller airlines with weaker home bases. The following OEMs want to capture those spoils.

SuperJet International

SukhoiThe Sukhoi Superjet was the first of these products to enter into service (EIS), launching with now-bankrupt Armavia in 2011. Right now, the SSJ comes in two variants, the SSJ 100-95 and the SSJ 100-95LR, which has roughly 700 nautical miles (nm) in excess range over the base version. Both variants seat 95-105 passengers. The SSJ is powered by the PowerJet SaM146, built by a Joint Venture between Snecma (France) and NPO Saturn (Russia), and while dispatch reliability is strong (99.9% to date), the engine’s fuel burn performance will lag behind the Pratt & Whitney Geared Turbofan (GTF) variants that will power the CSeries, EJets E2, and MRJs. PowerJet also has first right of refusal on any further developments to the SSJ like stretches or re-engines, so the prospect of adding the GTF to a re-engined SSJ is non-existent. Even with its engine disadvantage, the SSJ offers high single digit fuel burn and operating cost improvements (6-9%) versus the CRJ-1000 and the E190/E195. The SSJ also offers customer experience improvements thanks to increased cabin heights and a widened cabin that enables 5-abreast seating while maintaining the standard flexibility of regional aircraft.

Unfortunately for Sukhoi, the SSJ may be hampered by factors beyond the company’s control. Prior to Putin’s geopolitical posturing in Ukraine, the SSJ already had enough working against it. Worldwide, there is a strong negative perception surrounding Russian aerospace products. Our view is that this is misguided, because Russian aerospace’s biggest problem even historically wasn’t underlying technical quality, it was product execution that was affected by the natural weaknesses of communism in producing a motivated and productive workforce. Divorced from communism, Russian aerospace actually enjoyed a 15-20 year period (through the early 2010s) of catch up growth in terms of quality with the West. The sanctions from the United States and European Union following Putin’s Ukraine incursion may have halted this process, as Russia’s access to the global supply chain is now more limited. But the pre-existing quality improvement had already manifested itself in the SSJ.

Mexico's Interjet likes the Sukhoi Superjet well enough to have firmed up 10 options for the type.Mexican low-cost carrier (LCC) InterJet provides an instructive example. Toluca-based Interjet operates a fleet of 15 SSJs with 15 more aircraft on order. Interjet even firmed 10 options for the type in March 2015, increasing on an initial order for 20 airframes. The aircraft has been an excellent performer for the Mexican LCC, with initial dispatch reliability at 99%, and Interjet’s pilots have raved about the aircraft, calling it the “little tank.” This data point is somewhat weakened by the fact that some of the Russian carriers who were also initial operators reported having more problems with the reliability of the aircraft, even after receiving aircraft that were on specification. Part of that is certainly the learning curve, as Interjet’s SSJs were later build aircraft that incorporated lessons learned from early mistakes. But there is some likelihood that Sukhoi targeted Interjet with a disproportionate share of its support resources leading to a better experience for them than home market customers.

Despite the structural market disadvantages, Sukhoi is pursuing improvements to the SSJ, powered by a $1.8 billion capital injection from the Russian government. One key enhancement is an improved operational window, as the SSJ will soon be capable of operating into hotter (up to 50 degrees Celsius) and higher (up to 3,300 meters altitude) airports. Sukhoi will also pursue airframe improvements to reduce maximum takeoff weight (MTOW) and add winglets to boost fuel efficiency by 3-4%. A more aggressive project involves stretching the SSJ to 130-145 seats (CS300 size), which would improve the operating economics on the SSJ and make it a viable family to compete with CSeries. The stretch will, however, cause the Superjet family to brush up against fellow Russian OEM Irkut’s MS-21, another Russian aircraft with underrated technical quality.

Mitsubishi Aircraft

JAL MRJMitsubishi’s Regional Jet (MRJ) comes in two variants – MRJ 70 and MRJ 90. As their names imply, the MRJ 70 seats roughly 70 passengers, while the MRJ 90 can handle around 92. The MRJ is to date, the only clean-sheet 3rd generation regional jet developed by Japan’s Mitsubishi Aircraft Corporation. While the MRJ 90 has begun to win orders worldwide, the MRJ 70 is unlikely to ever be built, with zero orders to date. The MRJ features a 2×2 cabin, with a similar customer experience to the E-Jets. It was designed with modern aerodynamics and a modern wing with a higher aspect ratio. The trade-off is weight, as the MRJ is 4 metric tons heavier than CRJ-900. Its operational capabilities are similar to those of the E-Jets and CRJs, so its biggest improvements are efficiency. On that note, the MRJ will be powered by Pratt & Whitney PW1200G engines, the same GTFs that will also feature on the CSeries and E-Jets.

Mitsubishi’s primary challenge on the MRJ is execution, as it moves towards EIS in the second quarter of 2017 with Japanese giant All Nippon Airways (ANA). The MRJ is Japan’s first big home-built commercial aircraft since the NAMC YS-11 turboprop, which was rolled out in 1962 and saw 182 aircraft produced through 1973. The YS-11, produced as a joint venture between Mitsubishi Aircraft Corporation parent Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and Fuji Heavy Industries (the parent of car company Subaru), was a money loser, losing $600 million over its production life. But the YS-11 did ensure that Mitsubishi had some prior exposure to an aerospace program before launching the MRJ. Moreover, Japan is broadly involved in the Boeing production line, which gives it more aerospace competency than other countries building their first modern commercial aircraft (like Turkey). For example, Mitsubishi is involved with wing work on the Boeing 787, and many analysts believe that its exposure to problems with composite materials on the 787 are why it opted for an all-metal wing design for the MRJ, thought there are composites in the vertical and horizontal tail. The commercial relationship will also flow back to the MRJ, Boeing has an agreement with Mitsubishi to help with technical execution.

Despite Japan’s advantages, the MRJ is already two years late. Mitsubishi recently opened its Seattle Engineering Center with an eye towards the MRJ’s first flight in September and October of this year. Once the MRJ takes off, several Flight Test Vehicles (FTVs) will do the bulk of flight testing over following year in Moses Lake, Washington. MRJ has based flight testing in Moses Lake because they want to accelerate the process, which is easier to do in Western US airspace than in the crowded airways around Japan. We believe that the MRJ’s EIS is on track at the moment, but as always, unknowns lurk during the testing process, especially for a first time producer of aircraft


E190-E2 01Embraer is the only OEM to have an offering in all three tiers with its EJets E2, a re-engines version of the existing EJets. When Embraer decided to re-engine, they dropped the E170 and focused on E175, E190, and E195, creating an aircraft family covering 90-132 seats. The EJets will be re-engined using Pratt & Whitney PW1700G (E175-E2) and PW1900G (E190/E195-E2) GTF engines. However unlike the 737 MAX and A320neo projects, Embraer did not limit itself to swapping out engines. Relative to the first generation EJets, the EJets E2 feature a new wing, with a 17% longer span and 20% improvement in aspect ratio. The EJets E2 also have an enhanced main landing gear (MLG) and upgraded avionics, as they will be 100% Fly by Wire. Seating capacity is also expanded, as Embraer has added one row to the E175-E2 versus the E175 and three rows to the E195-E2, while leaving the E190’s seating capacity untouched.

The one conservative decision made by Embraer was to eschew increased usage of composite materials, leaving the EJets E2 as a primarily metal aircraft. Despite this show of restraint, the EJet’s E2 are far more complicated than a straightforward re-engine like that of the A320neo. The EJets E2 are currently scheduled to EIS in the first half of 2018, significantly behind the CSeries. And the EJets E2 are more complex than other re-engine programs, with less than 50% commonality with standard EJets This is challenging because Embraer’s biggest customers are airlines that want one-to-one replacements for the E-Jets already in their fleet without any disruptions or maturity challenges.

E170_002Despite this lag, Embraer is in the best position of the four OEMs, at least today, mostly based on the latent strength of the E-Jets. Due to residual demand, Embraer has already bridged the production gap till EIS of the EJets E2, as the current backlog of 264 aircraft takes EMB through May 2018. In recent months, Embraer has won lots of top up orders in US as mainline carriers replace 50-seat RJs with larger 76-seat ones. Embraer’s fundamentals haven’t yet been offset by the current macroeconomic weakness in Brazil though there are knock on effects for the entire company, especially on the defense side of the operation. And the domestic economic weakness does have the side benefit of making Embraer’s exports of aircraft more attractive due to the weakness of the Brazilian Real. And the EJets E2 are a cheap re-design, with a total cost of $1.7 billion, so it would take a much more severe macroeconomic deterioration to tangibly affect the program.


CSeriesThe CSeries is an aggressive play by Bombardier to move into the 100-149 seat space from its previous home at 50-110 seats. It comes in two variants, the CS100 and the CS300, with proposals on the table for further growth if the initial variants find success. The CS100 competes with the SSJ and E190-E2 while seating roughly 110 passengers, while the CS300 competes with the E195-E2, A319neo, and 737-7. The CSeries is a completely clean sheet design that uses Pratt & Whitney PW1500G GTF engines. The CSeries will feature the first underwing jet engines for Bombardier commercial aircraft as engines for all of its CRJs were rear-mounted. Beyond efficient engines, the CSeries features a high percentage of advanced materials in its fuselage, 70% to be exact, including 46% composites and 24% aluminum-lithium (Al-Li). Operationally, the CSeries offers enhanced air field performance, as it can operate from shorter runways and more challenging fields such as London City Airport and Toronto’s Billy Bishop Airport.

Recently, the CSeries won plaudits at the 2015 Paris Air Show with both the CS100 and CS300 on display. But it remains mired in a long-running sales drought. In fact, the CSeries has been mostly hampered by Bombardier’s weak sales knowledge base, as Bombardier didn’t know how to sell to mainline companies well because it previously focused on selling RJs to contract provider airlines, which require a completely different sales pitch. Another factor limiting the CSeries in the past has been limited financial flexibility on the company level. The financial malaise contrasts sharply with the strong technical quality of the aircraft itself.

Photo by Howard Slutsken/ AirwaysNewsFor example, after early flight testing, Bombardier recognized that the aerodynamic performance of the aircraft was stronger than projected by about 1%, and accordingly the CSeries’ Maximum Takeoff Weight (MTOW) is roughly one metric ton higher than initially thought. This increase in MTOW means that relative to the initial baseline, the CSeries overall range is improved to roughly 3,500nm for the CS300 and 3,300nm for the CS100 from 3,300 and 3,100 nm respectively, as previously advertised. Bombardier is also planning an upgrade package after EIS, mainly by adding a larger winglet initially aimed for the CS300 after the EIS aircraft are certified with the smaller CS100 optimized winglet. Bombardier had held off on winglets for initial aircraft due to technical concerns, but both variants now actually have the structural margin to fit the larger winglet.

Sadly, Bombardier’s long-run execution hasn’t matched its technical prowess, as the CSeries’ EIS advantage has slipped by nearly 2 years and the program is $2 billion over budget. Critically, the CSeries has lost its EIS advantage over the A320neo and the gap with the EJets E2 has narrowed sharply. We now project CSeries EIS at the end of the first quarter of 2016, and believe that the delays are mostly behind Bombardier. Flight testing is going well, with 98.5% reliability over the first 2,200 hours of testing (source AirInsight). The overall program has been affected by financial struggles for the parent company and the chaos surrounding management, with several major shakeups in the last 18 months for Bombardier Commercial Aerospace.

In the second part of this analysis, the author will compare the different regional aircraft in terms of performance and operational costs.