Two Words
$100 Oil
It's Re-Engineer-The-Business Time...
On An Emergency Basis
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Sector One: Small Lift Providers[/FONT]
[FONT=Tahoma, verdana, lucida]Say Good-Bye To A Lot of Regional Jets, Real Soon.
Fuel Pass-Throughs Will Pass Them Directly To The Desert[/FONT]
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JANUARY, 2008. It should be back-to-the-drawing-board time for small lift providers, what some still call "regional airlines." Maybe time for a period of sheer panic, too. The issue: 50-seat and smaller RJs are being economically marginalized by skyrocketing fuel costs. [/FONT]
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Major carriers will be looking to quickly cull out dozens of RJs in the coming months. And hundreds more in the next five years, with no replacement for this lift - or many of the markets they operate - in sight.[/FONT]
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Most SLP agreements provide for fuel costs to be a pure pass-through to the major carrier, and that means the majors are eating a lot of red ink. A lot of RJ mission applications that once provided adequate revenue generation are now net drains on major airline systems. They cannot but move quickly to restructure (read: reduce) the fleets of RJs they're leasing in.[/FONT]
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Faster Retirements Than Predicted. The Boyd Group's Global Fleet Demand Forecasts were the first to predict the decline in demand for new RJs, and also to predict that the number in operation represented a glut. That was as far back as 1999, when other
consultants were still forecasting just the opposite from the comfort of their rearview mirrors, and the warmth of being within "the consensus.".[/FONT]
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As attendees at our Annual Aviation Forecast Conference last October learned, retirements of CRJs and ERJs would result in global RJ fleets declining by over 1,200 units over the next ten years. [/FONT]
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Now, with oil hovering at $100 a barrel, that forecast has been revised. The retirement projections are for over 1,700 RJs to come out of fleets for the same ten year period, with the rate front-loaded in the 2008 - 2013 period, representing approximately 835 RJs taken out of service in the US alone. [/FONT]
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