With high buoyancy in the aviation market, India has thrown its hat in the ring, announcing its intent to manufacture a regional transport aircraft with a seat configuration of 70-90

Recent developments in India—expanding airport infrastructure, growth of low-cost carriers, government’s proposal to start a regional airline connecting only Tier-II cities, phenomenal passenger movement among others—have enthused regional jet manufacturers. With high buoyancy in the aviation market, India also has thrown its hat in the ring; announcing its intent to manufacture a regional transport aircraft with a seat configuration of 70-90. The national committee which is looking at the feasibility design is expected to submit its report in a few weeks time.

At the global level too, there has been good news from the regional jet industry as the first Sukhoi Superjet 100 from Russia has been delivered to Armenian airline “Armavia”. Next year, if the programmes are going on as per schedule, Japan’s Mitsubishi Regional Jet and China’s ARJ 21 should roll out. Meanwhile, the two major regional jet manufacturers, Canada’s Bombardier and Brazil’s Embraer have been logging more orders, as airlines understand the market dynamics—opening new routes, fuel economics of flying the right aircraft to the right destination and the passenger potential.

Airlines in India have ordered a mix of aircraft, large and narrow-body and also regional jets to connect pan-India. Simultaneously, modernisation of airports at Mangalore, Amritsar, Bhopal, Indore, Coimbatore, Varanasi and many others, has got the aviation sector abuzz. SpiceJet has announced that it would start a regional airline soon with Hyderabad likely as its southern hub. The low-cost carrier has placed an order of 15 units of 30 Bombardier NextGen Q400 (seating capacity of 68-78) worth $400 million ( Rs. 1,800 crore) with options for 15 more.

Regional jets are seen as feeders to legacy carriers and also connecting smaller destinations to the metros. “There is huge opportunity in the Tier-II and Tier-III cities and that is where we will be looking to expand,” said Neil Mills, CEO of SpiceJet. The low-cost carriers have already networked some of the smaller cities and passengers gaining substantially on time and comfort, thus spurring both business and leisure travel.

The government proposal to waive fees for night parking in non-metros will have further economic benefits for those operating regional jets.

One of the major propositions of regional jets has been the relatively low cost of operation. It is quite obvious that on feeder routes the load factor of regional jets is higher, compared to the narrow-body aircraft. Some studies have pointed out that the load factor of a regional aircraft is 70 per cent for the 50-seat as against 57 per cent for the narrow-aisle aircraft. These factors work together to raise operating margin by 26 per cent for the 50-seat, illustrating why regional jets have become so prevalent.

However, with projections of passenger growth in emerging economies, including India, the seat configuration of regional jets is undergoing change. Larger regional jets with 100-plus seats are going to occupy the airspace at quite a pace as they are being built to be more fuel-efficient. These regional jets are competing with the narrow-body airliners of aerospace majors—Airbus and Boeing. For example, the Embraer 195 can accommodate as many as 122 passengers. While its direct competitor is the Airbus A318, it also competes to some extent against the Airbus A319 and the Boeing 737-700, thus the blurring of lines in the high-end of regional jet and the low-segment of the aerospace majors.

Embraer’s 100-seat jet is expected to offer a better customer experience and importantly economics which help the airlines. The superior economics of these new jets will enable carriers to enter traditional regional markets at lower fares, stimulating demand and supplanting the current fleet of 50-seat jets that require higher fares to operate profitably. Regional carriers survive by taking only the highest yield traffic in low-density markets.

The scenario in India is quite explanatory. The low-cost carriers are contributing to over 70 per cent of the passenger traffic. In 2009, of the 44 million passengers on domestic routes about 27 million passengers (that is over 60 per cent) were on the low- to medium-density markets. There are about 200 routes having such density potential.