MIAMI — America’s regional airlines, which are contracted by mainline airlines to provide feeder services at mainline hubs and once operated an army of 50-seat Bombardier CRJ-200s and Embraer E145s, are today faced with an acute and worsening pilot shortage. The threat of a pilot shortage was in the back of the aviation industry’s collective consciousness, even before recent events conspired to speed up the onset of the shortage.
Pilot graduation rates in the US have been dropping for some time due to ever-increasing costs, and with mandatory retirements for thousands of mainline pilots coming up shortly, the pilot shortage was almost assuredly going to hit within the next decade.
Meanwhile, a glut of pilots in the mid-90s and early-2000s allowed regional carriers to negotiate sparse deals with little guarantee of job ascension to pilots, who often earn less than minimum wage on a pro-rated basis.
Pilot Shortage Speeds Up
But in recent months, thanks to the combined effect of the FAA’s new 1500-hour rule (shrinking the pool of available pilots with enough experience to qualify under new guidelines) and its FAR Part 117 crew rest rules (enacted in response to the Colgan Air crash in 2009, the timeline for the pilot shortage has begun to move up rapidly.
Already the economics of 50-seat regional jets were dicey at best due to rising fuel and maintenance costs, and the now worsening pilot shortage only exacerbates that problem. Carriers such as Delta have already taken the proactive step of replacing routes served multiple times daily on 50-seaters with 70-seat jets operating at a lower frequency. Routes that cannot support the larger aircraft will lose service.
Small Cities Set to Lose Service
But with the ascension of pilot shortage, there is a real danger of the same process cascading upwards into the 70-seat RJ segment of the market (replacement by mainline – such as Delta’s 717s), and once again, plenty of incremental service on the margins will be lost due to the conversion process. All of these factors taken together imply that small airports and communities, places like Texarkana, Texas, Allentown, Pennsylvania, and Cheyenne, Wyoming, are set to lose a significant proportion of their traffic, and thus a key tie to an increasingly globalized business environment.
Our analysis finds that the threat of the pilot shortage, combined with the pre-existing decline in the fortunes of small air travel markets, could see between 40 and 50 US airports wiped off the commercial airline route network in the United States, and between 350 and 450 air routes from these airports and others lost over the next five to seven years. But the solution to these problems might already exist – in the form of Bombardier’s Q400 turboprop.
The Q400: Superior Economics ,Up to Certain Distance
Bombardier’s Q400 turboprop is an aircraft that seats between 70-84 passengers, depending on configuration. The Q400 has a maximum range of just under 1,000 nautical miles (1,150 statue miles) at a payload of 7,000 kg (15,400 lbs), and is capable of traveling at a speed of 360 knots (414 miles per hour). This speed, higher than the 200-250 knots that rival turboprops such as the ATR 72 typically fly at, allow the Q400 to compete effectively with regional jets up to about 400-450 nautical miles according to sources at Bombardier.
Essentially, on a 350 nm route, our analysis finds that the Q400 has about a 65-72% advantage in terms of fuel burn per seat versus the E170/CRJ-700, and a 100-110% advantage versus a 50-seat regional jet. This, along with rising RJ maintenance costs, translates into roughly a 15-17% and 48-52% advantage in terms of operating cost per seat on the route. However, increasing the distance to 450 nautical miles causes that cost advantage to evaporate, as the slower speeds (RJs are about 80 knots faster than the Q400) lead to longer flight times, which in turn lead to higher capital and labor costs.
However, until that threshold, the Q400 presents a unique opportunity to replace RJ services at a lower cost. The trip costs up to about 350 nautical miles for the Q400s and present day RJs are similar, which means that the same revenue pool (let alone a market stimulated with lower fares) would allow 50-seat RJ routes to be replaced.
Moreover, because the Q400’s fuel costs are lower, airlines could afford to pay higher pilot salaries, thereby offsetting some of the severity of the pilot shortage while preserving CASM at a reasonable rate. At present, we estimate that the Q400 would be an effective replacement aircraft of between 50-60% of the routes in questions, and help preserve service at more than 20 airports.
A Potential Q400X; RJ Speeds at Turboprop Costs
But the real opportunity on the Q400 lies in a re-engined, upgraded Q400X turboprop, which has been rumored for launch since 2011. The Q400X, whether stretched or kept at the same capacity, might operate at a speed of 420 knots or more, using a new turboprop engine from GE derived from GE’s CPX 38 helicopter engine.
If Bombardier opted for a higher speed Q400, the cost equalization point would bend outwards to around 700-750 nautical miles. While our sources at Bombardier do caution that a higher speed Q400X would require significant aerodynamic re-design, such a product would allow the Q400 to do 90% of RJ routes worldwide, most of them with superior economics than present and next-generation RJs (thanks to improvements on the CPX-38 derivative). For Bombardier, whose Q400 is already lagging severely behind rival ATR’s cheaper ATR 72, such a development could make a lot of sense. And most of the small town RJ service could be preserved.
Questions about Passenger Uptake
Of course there are several potential problems with this scenario, not the least of which being that the Q400X does not exist. Moreover, US passengers are notoriously skeptical of turboprop aircraft, which could leave airlines hesitant to invest in the product. Mike Arcamone, President of Bombardier Commercial Aircraft, says the perception is changing: “I think a lot of operators are starting to realize its quiet; the turboprop is quiet […] how smooth it is. So the fear of flying a turboprop, is reduced.
So there are a lot of markets where the Q400 could absolutely replace… at the lower end…. jets.” It would certainly benefit small cities if he’s right, where the profit contribution that they could make to airline networks with better operating economics, the Q400 and subsequent developments might prove to be an essential tool.