Can regional jets change Australian aviation?

“When you consider fleet size per country, actually, Australia is top five worldwide for Embraer,” says Raul Villaron, head of APAC for Embraer, the world’s third largest manufacturer of commercial aircraft, and the biggest independent name in regional jets thanks to its popular E-Jet family. “It’s an important market, the Australian market, and we are very proud of what we have built there together with the airlines. Considering what’s on order, what’s coming from Alliance purchases and just natural organic growth of the market, 200 is a very conservative number for us to achieve by this decade. That’s why I think we will have more than 200 aircraft before 2030, and that will demand a lot of dedication from Embraer.”

What is a regional jet?

“Regional jet” is something of a fuzzy term, and the exact definition often depends on who you ask. Boeing has defined a regional jet as having 90 seats or fewer, while others say it is under 100 seats, and still others say under 150. For the purposes of this article, we are looking at the broader definition, meaning the Embraer E-Jet and E2, which seats up to 146 passengers, and the Airbus A220 (formerly the Bombardier C-Series), which seats up to 160 with typical two-class configurations of 120-150, both qualify – and both are poised for growth in Australia, with orders on the books from the major airlines.

“Regional jets will probably play a role for markets where you require a lower capacity than are available on the A320, 737 series,” says Stephen Forshaw, head of country at Airbus for ANZ and the Pacific. “I think coming into the next era of regional jet services, we’ll see that airlines have the opportunity to think about a longer range, and therefore a much broader set of city pairs that can be operated on what are notionally regarded as regional services.

“I’m not counting in this forecast anything where you would typically operate those services with a turboprop aircraft, like an ATR or a Dash 8. I’m really focusing very much here on the market that we see as able to be served by a jet with a smaller capacity than the 737 or A320 series – so that’s probably in the range of the A220, the Embraers, maybe the 737-7, and what would typically be regarded as your other regional jet type services.”

Regional jets in use in Australia include the Embraer E-Jet series, especially the E190, with the E190-E2 soon to enter service with WA-based Virgin Australia Regional Airlines; the Fokker 70 and 100; and the Airbus A220-300 with QantasLink. Up until this year, QantasLink used the Boeing 717-200 (formerly known as the McDonnell Douglas MD-95) for regional jet services, though the fleet has finally been phased out as more of the A220s arrive in the country.

Fly-in fly-out (FIFO) and charter operator Alliance Airlines has by far the largest number of regional jets in Australia, with 13 E190s, 24 F100s and 24 F70s in its mainline fleet at time of writing – though this does not count the 22 E190s it wet-leases to QantasLink, or the single Fokker 100 it wet-leases to Virgin Australia Regional Airlines (VARA). QantasLink, the Flying Kangaroo’s own regional arm, has four brand-new Airbus A220-300s at time of writing, with a fifth to arrive in November, while VARA is looking to ditch its remaining four Fokker 100s in favour of eight new E190-E2s – the first time a major airline will have used the E2 family in Australia.

Smaller players, meanwhile, include NT-based regional airline Airnorth, which flies three E170s and four E190s, as well as National Jet Express (NJE) – once the FIFO arm of Rex, though this is at time of writing up in the air due to the latter’s administration – which has a fleet of seven E190s mostly for FIFO operations.

“A number of our members are already operating Embraer E190s and E170s,” says Rob Walker, CEO of the Regional Aviation Association of Australia (RAAA). “Alliance Airlines has made a very large commitment to the Embraer E-Jets, and Airnorth has been also operating for quite some time. QantasLink is obviously operating the A220s. Historically, regional jets have generally been considered as 100 seats or less, but in the current climate, and with the operating requirements and conditions that we have, a lot of members have upscaled their fleets to obviously take in the larger seating capacity. So, the future is bright for continued use of regional jets, and obviously our members are seeing that they are a great product in terms of the nature of their own operations.”

How are they used?

Australia is something of a small fish in the regional jet pond: globally, by far the biggest region is North America, with OAG statistics showing 57 per cent of all regional jet frequencies in 2022, followed by Western Europe – well ahead of Australia and the rest of the Pacific.

Traditionally, in North America, regional jets like the E-Jet – as well as the older Embraer ERJ family, and the Bombardier CRJ series – are used for “commuter airlines” such as SkyWest, which mostly operates under contract with major airlines as American Eagle, Delta Connection and United Express. These commuter airlines will operate short-hop flights between major hubs and smaller airports that would not otherwise attract mainline services.

While we do see regional jet RPT services like this in Australia – QantasLink, VARA and Airnorth operate on routes such as Melbourne-Canberra and Darwin-Kununurra-Perth – a hefty chunk of the regional jet market is for FIFO services. Alliance and NJE operate under contract to fly workers to and from mining sites in remote areas. According to Robin Furber, interim chief operating officer at NJE, jets like the E190 are a good complement to turboprops such as the Dash 8 Q400 for FIFO work.

“The massive advantage the E190 gives us is the ability to go to a mine site and come back in without refuelling,” he says. “To out ports and back, it’s better than the previous aircraft operating in the area – the turboprops etc. It just gives you more fuel efficiency and a higher load. There’s a 15 per cent increase in fuel efficiency on the E190 compared to a turboprop, so it enables us to go to an out port and back again without having to do a fuel uplift, and we don’t have a restriction on payload. It has improved fuel efficiency, increased passenger uplift performance versus current regional aircraft. So, E190 on paved runways is where you see the growth across the FIFO market.”

This is not to say, however, that regional jet operators need to limit themselves to either FIFO or RPT. Nathan Miller, executive general manager of VARA says Virgin’s Fokker fleet does perform FIFO services on Tuesdays and Thursdays, but flies RPT as well outside of those days. Miller argues that newer regional jets such as the eight E190-E2s Virgin has on order are also well-placed to serve both markets.

“Some would argue that putting a brand-new aircraft into the charter market goes against the trend that’s happened for the last two decades – and it definitely does,” he says. “If you look around the WA charter market today, the average age of the Fokkers is close to 30 years of age. Even the A320s that have been used, some of them are well over 20 years old, so it’s an older aircraft market.

“What we’re doing by putting brand-new aircraft into this market is effectively going back to the future, when airlines did buy a brand-new aircraft for this market and ran them very successfully. We believe that, with the operating model that we have, that’s the future. If you look through the environmental lens, if you look through the guest lens, if you look through the reliability lens, there’s a whole bunch of factors that tell us that the WA market needs to pivot from an older, aging fleet to a younger fleet.”

Forshaw agrees, saying the line between FIFO and RPT for smaller jets like the A220 is set to become increasingly blurred. “The versatility of some of these jets gives you the opportunity to move and mingle between the two – so you might have a business case, for example, to bring an aircraft in purely for FIFO, and if I look at Virgin’s recent decision on its regional aircraft, they were very much looking for aircraft to support their FIFO operations,” he says. “I think, though, the case that I can start to see that will be attractive to airlines with an aircraft like the A220 is that it can have that ability to operate those city pairs on a FIFO basis as efficiently for the airline as needed, but it then gives the airline the versatility to use that aircraft for something else.

“For example, if you’re talking about WA or regional Queensland, where these FIFO operations are extensive, you could also operate longer sectors from Perth or Brisbane – in the case of Perth, say, to Bali or Southeast Asia, or from Brisbane into the Pacific. It gives the airline the versatility that they probably haven’t had or thought of in the past with the older generation of regional jets. To the question of ‘is it RPT or FIFO?’, I’m actually saying it’s RPT and FIFO.”

Skinnier city pairs are also a use case for regional jets: for a brief period before Rex went into administration, the airline leveraged NJE to fly a service between Adelaide and Perth with its E190 fleet – a service that, according to Furber, was already seeing some success when it was shut down. “The flights were full, having a 104-110-seat capacity,” he says. “With the Adelaide to Perth route, obviously you had Qantas, you had Virgin on the route as well, but for us, the sector, the time of our flight, et cetera, was ideal. One, it was in the afternoon, at about lunch time, where, Virgin and Qantas either flew morning or night. And obviously, with the fuel efficiency and everything else, the cost made it much more, I suppose, cost efficient, and made more sense for the Rex network. We linked up with the Rex network to make it, obviously, Rex across the network – but the E190, because we had the capacity, was a perfect fit.

“We’re not RPT, but from an RPT perspective, the customer wants cost. What’s the most efficient cost they can get? Every customer wants to get the best price possible to fly. If you have enough 737s around, you can fit Adelaide to Perth in that, which Virgin and Qantas do, and that makes it efficient – but I think with the route itself, we found the 104-110 seats we could offer were ideal for that time of day, and our aircraft were always full.”

Unlocking the regions – and beyond

One of the sadder cautionary tales in recent years has, of course, been Bonza – the airline that started with big dreams of connecting regional destinations with 737 MAX 8 aircraft, only to be brought down by several causes including trouble securing the number of planes it needed and a lack of support from its US-based financiers.

It would perhaps be a mistake, however, to assume that Bonza’s model was flawed from the start – many regional airports, such as Albury and Mildura, were eager to have its purple tails touch down on the tarmac, and Villaron suggests that the airline might have had better luck with smaller jets. “I think they would have had a much better chance to grow and to be efficient and to make money if they had the E2, for example – 100–120 seat aircraft. They could have improved a little bit on the yields, had better loads and grown their presence. For this type of operation, the E195-E2 would be perfect to address those markets.”

While older regional jets like the Fokkers and the Boeing 717s would struggle to be competitive in today’s market, with the advent of new aircraft such as the E-Jet E2 series and the Airbus A220, which have extended ranges and a comparable per-seat cost to planes like the 737 MAX 8, airlines such as QantasLink and VARA are finding that these smaller jets could be the key to opening up new regional markets.

“The regional jets have changed,” says Miller. “If you go back to the early regional jets, they were limited by range, they were limited pound for pound. They were way less efficient than their larger, narrow-body jet cousins. The new generation of regional jets, like the E2, on a trip cost basis, are extremely competitive – and even on a seat mile basis, they are getting close to, and in some cases are better for seat cost, than the narrow-body jets. It gives us the ability to look at a range of different options in terms of the markets we serve, either bolstering capacity on existing markets, or looking to new opportunities in the future.”

According to Forshaw, this ability to unlock previously underserved destinations that may not warrant more regular services with larger planes could be an asset not just to the airlines but to the cities they serve. “Broome would be a really good example,” he says. “The A220 can connect any two points in Australia, and Broome tends to be a destination where, particularly with seasonality, but also with the tourism infrastructure on the ground, supporting large tourism inflows is challenging for the destination. The ability to do that with a smaller aircraft, able to operate those city pairs, potentially opens up a lot of opportunity.

“There are regional airports around Australia that, the minute they heard Qantas were buying the A220, reached out to us and said, ‘hey, how do we get on their radar?’ And I said, ‘Well, you call Qantas’. But it’s obviously generating some excitement among some of these regional centres that they now see a potential to have a conversation with the airline operator about what they can do to support the introduction of new city pairs.”

The reach for regional jets also extends outside the Australian mainland. Already, Airnorth is operating E170s on the hop from Darwin to Dili in East Timor, with QantasLink wet-leasing Alliance E190s on the same route. QantasLink is also sending E190s to Noumea in New Caledonia starting in December, and will deploy its new A220s on Darwin to Singapore services starting next year.

Meanwhile, carriers in the wider Asia-Pacific region are embracing the latest generation of regional jets as well: Papua New Guinea’s flag carrier Air Niugini is switching its aging Fokker 70s and 100s for new A220s, while Air Vanuatu had one A220 on its order books before going into voluntary liquidation earlier this year, and Singaporean low-cost carrier Scoot has invested in E190-E2s to operate short-haul routes to Southeast Asian destinations.

According to Forshaw, the Pacific market offers a good opportunity for regional jets, as it involves longer routes with less dense demand, and requires the best ETOPS ratings and certifications due to long stretches over water. “For the A220, we’ve already modelled a huge number of the city pairs across the Pacific and worked out that the aircraft really would be very, very good for those operations,” he says. “We’ll have conversations with those airlines, recognising, of course, that most of the airlines in the Pacific operators of small fleets. I don’t think we’ll see too many orders of the scale of Qantas or Air Niugini in one hit, but certainly, some of these airlines are starting to think about even the replacement of larger propeller aircraft with jets, and the A220 becomes a really viable option for them.

“Across the Pacific, we are engaging with airlines, and this is not just in relation to campaigns. We speak to airlines all the time. We keep them abreast of what we’re doing, and they tell us what their future is beginning to look like, and we’ll have those conversations. If it gets to a point where they are interested in acquiring the aircraft, then we’ll get very specific on making an offer and looking at delivery schedules and things like that.

“One of the attributes in the Pacific is that there will often be a requirement for customer financing for the airlines, because they’re relatively small carriers and capex around fleet is going to be considerable, so there’ll be financing options around either direct acquisition or leases. So, we also work with our leasing partners on what opportunities there are to position this aircraft in markets like the Pacific. I’m really optimistic that these types of jets, and specifically for us, the A220, will play a really significant role in the Pacific in the in the next one to two decades.”

Ultimately, from the RAAA’s perspective, Walker sees plenty of positive signs for Australia’s regional aviation sector that major players like QantasLink and Virgin are willing to invest in new jets. “The A220 for QantasLink, as a replacement for the 717, is the perfect aircraft,” he adds. “I’ve had the opportunity to fly in the aircraft, as many people have, and obviously, as a product for an airline, new aircraft are a great addition to the fleet – and similarly for VARA, with the E2 and their commitment there.

“It’s 100 per cent affirmation that not only are the airlines committing to those regional routes, but they’re very happy and confident in the investments that they’re making. It’s good that airlines are stepping up and making these investments and maintaining the health and the vibrancy of regional aviation – because we all know that, with the vast distances in Australia, regional aviation, and the communities that are served and that our members serve, are vitally important to the whole Australian economy.”