Assessing the U.S. Regional Aviation Industry’s COVID-19-impacted Present and Future

Posted by Mitsubishi Aircraft Corporation News Team on Apr 16, 2020 11:32:34 PM

You won’t be surprised to know that Mitsubishi Aircraft is closely monitoring the impacts of COVID-19 on the regional aviation sector. In this post and others to come, we intend to share what we’re seeing as part of our commitment to helping the industry understand the current and ongoing impacts of disruptions that were hard to imagine just a few months ago.

It’s self-evident that this is a remarkable event in terms of the scale and impact across commercial aviation. That said – and with the caveat that these remain the early days of a still-unfolding event – our analysis indicates that regional aviation has so far proven to be resilient relative to the overall sector, and that past disruptive events offer signs of hope and strength on the other side of a difficult period.

Examining the four major U.S. network carriers, as of April 15th mainline aircraft have exited service since January 22nd at a rate just under 50% greater than regional aircraft (35% for regional, 51% for mainline). Excepting already-planned phase-outs of aircraft, the regional rate shrinks to 30%. A recent analysis by The Air Current demonstrates this phenomenon in practice, and examines the ways in which major airlines are turning to small narrowbodies and regional aircraft to maintain network scale on domestic routes.

In Service Aircraft Graph-optimized

We do not believe that we have seen the maximum extent of COVID-related impacts on service, but this early data does hold with historic trends. In the immediate post-9/11 period we witnessed a similar trend in the relative resilience of regional versus mainline aircraft deployment, and during the “Great Recession” of 2008, regional aircraft used on domestic U.S. routes were similarly resilient.

The question that naturally follows: what are the underlying reasons why we are seeing this trend? We have a few working assumptions:

  1. Airlines are eager to preserve service to existing routes and maintain slot access at those airports. And in some cases, government aid is contingent on this preservation of service.

  2. In that context, regional aircraft offer a better seat-count match to capacity in a low-demand environment. Airlines can maintain schedules similar to those pre-disruption, but with smaller aircraft that deliver more favorable economics.

  3. Regional aircraft help airlines conserve cash reserves since they deliver lower operating costs relative to larger aircraft – they offer a lever by which costs related to fuel, maintenance, crew and fees can be constrained.

In short, regional aircraft give airlines the ability to maintain breadth of network coverage while reducing the depth of seat-mile capacity.

Some factors are difficult to assess at this point. For example, how much of airlines’ motive to preserve service is commercially driven versus done to comply with terms of government financial assistance? We intend to refine our assumptions as data emerges. But at this stage, the central forces in play regarding the novel coronavirus seem to mimic those experienced in the other recent industry shocks that we’re using as reference.

This is a rapidly evolving and still unfolding situation, with a great deal of known and potentially unknown variables in play. Regardless, what we see as certain is the vital role that regional aviation plays in the economic and social fabric of our local and global societies.

As such, expect more from us in the weeks and months ahead, including original analysis and compilations of thinking from across the industry. It’s critical for regional aviation that OEMs, airlines and other stakeholders put forward their best collective efforts in charting a course toward re-establishing the vital economic and societal resource of regional aviation.

Topics: Industry News