Jetrader - Winter 2014 - 49

appraisal

CRJ900

David Griffin
BK Associates
Tel: 516-365-6272
David.Griffin@BKAssociates.com

Background
Following Transport Canada and FAA
certification in 2002, the 90-seat CRJ900
entered service with Mesa Air in February
2003. The CRJ900 is a stretched derivative
of the CRJ700 with fuselage plugs, which
retains the same engines, landing gear and
wings, albeit with structural strengthening.
General Electric is the sole engine provider
with the CF34-8C5, which is advantageous
when remarketing to secondary operators.
Due to increased competition in the market,
Bombardier introduced the CRJ900 NextGen
in 2007, which incorporated improvements
developed for the CRJ1000. A 4 percent
fuel burn reduction was achieved through
a redesigned engine nozzle and more efficient operating procedures, while the use
of composites and increased maintenance
intervals led to weight savings and reduced
maintenance costs. This aircraft is available
in three variants: Standard, Long Range
(LR) and Extended Range (ER), with range
extending from 1,048 nautical miles to
1,744 nautical miles.
There are currently 359 orders for this
aircraft, of which approximately 300 have
been delivered. The majority are in operation for Delta Connection through airlines
including Endeavor Air, Expressjet and
Skywest Airlines. From a geographic point

of view, the vast majority are concentrated
in the North American market.

Current and Future Outlook
The forecast for the regional market is
stagnant. According to Boeing's Current
Market Outlook for 2014-2033, analysts
believe that the in-service fleet for regional
aircraft in 20 years will be only 1 percent
greater than 2013. To put this in perspective, the total fleet is expected to double.
Trading for this model in the secondary
market is soft. According to the August
edition of Airfax, there are currently six
available for sale; these same six planes
have been available since early 2014.
Additionally, there are 18 in storage, which
represents 8 percent of the in-service fleet;
however, this figure will drop to 6 percent if
an order for seven CRJ900LRs by Strategic
Air Finance from the stored fleet is confirmed. Based on this, BK believes that
the current market value of this aircraft
is approximately 5 percent below the base
value, dependent on year of manufacture.
The most direct competitor to the CRJ900
is the Embraer E175, and while Bombardier
has the edge on deliveries (300 versus
211), the E175 has a significant advantage
in terms of orders. While the CRJ900 has
59 more undelivered orders on its books,

the E175 has 167, or 267 if the E175-E2
is included. Short and medium term, the
NextGen version of the CRJ900 will remain
a viable alternative to the E175; however,
due to the lack of a successor to the CRJ, we
believe Embraer will dominate the 70-130
seat segment in the long term through its
E2 jets. Although smaller in size, competition does exist from turboprop aircraft. Due
to the cost of fuel, recent trends include
expanding use of large, high-speed turboprops to replace jets on short- and mediumhaul routes. Upgauging is also an issue. To
achieve lower costs per seat-mile and to
increase competition with low-cost carriers,
regional airlines are upgauging to largercapacity regional jets (RJs). Simultaneously,
we are seeing some upgauging from RJs to
smaller, single-aisle aircraft. Lufthansa's
"Wings System" recently announced that it
intends to phase out its fleet of 23 CRJ900s
in favor of the same number of A320s.
On a positive note, it is probable that
extended scope clause provisions in network
carriers' pilot contracts in North America
will continue to evolve, allowing the use
of larger-capacity regional jets such as the
CRJ900. By extension, Avolon believes that
due to the migration from 50-seat RJs to
new generation RJs the retirement age for
regional jets will rise steeply.

Bombardier CRJ 900ER Value Matrix, $US Millions
Year
Delivered

Current
Market value

Current Base
value

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2005

15.55

16.35

14.95

14.25

13.40

12.80

12.25

11.55

10.95

10.35

9.75

9.15

2006

16.65

17.50

15.90

15.05

14.20

13.50

12.90

12.15

11.45

10.85

10.25

9.65

Future Base Values - Inflated at 2.0% Per Annum

2007

17.75

18.70

16.75

15.95

15.00

14.20

13.50

12.75

12.05

11.40

10.70

10.10

2008

18.85

19.85

17.65

16.80

15.80

14.90

14.15

13.35

12.60

11.85

11.20

10.55

2009

19.95

21.00

18.55

17.60

16.60

15.65

14.80

14.00

13.10

12.40

11.70

11.00

2010

21.05

22.15

19.45

18.50

17.45

16.35

15.50

14.55

13.70

12.90

12.15

11.50

Specifications: GE CF34-8C5 Engines; MTOW 82,500 lbs.
The aircraft values stated herein are the product and the property of independent third-party sources, and ISTAT neither approves nor endorses the
information contained herein or the use thereof for any purpose whatsoever.
Jetrader * Winter 2014 49

Jetrader - Winter 2014

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