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No simple solution to MRJ90’s scope clause problem

How appealing is the MRJ70 to US regional carriers or their mainline partners?

The Mitsubishi Regional Jet program got a lot of attention at this month’s Regional Airline Association convention in Cleveland. That’s not surprising given that the US market is critical to the program: MRJ flight test aircraft will be flying in the US next year and MRJ90s are slated to be delivered to US regional airline operators SkyWest Inc. and Trans States Holdings in 2017. SkyWest and Trans States hold 150 of 223 firm MRJ orders.

The scope clause issue continues to be a problem for Mitsubishi Aircraft Corp., however, and there is no easy solution. Some at RAA rather breezily suggested a simple solution: SkyWest (with 100 MRJ90s on order) and Trans States (with 50 MRJ90s on order) can convert their orders to the smaller MRJ70. Indeed, all of the aircraft SkyWest and Trans States have on order contractually can be converted to the MRJ70. But how appealing is the MRJ70 to US regional carriers or their mainline partners?

The MRJ70, with an expected maximum takeoff weight (MTOW) of 81,240 lb., would be under the 86,000 lb. scope limitation in US major airlines’ pilot labor contracts. (The MRJ90, with a MTOW of more than 87,300 lb., will not be.)  Problem solved, right? Not really.

For one, Mitsubishi is focusing its efforts now on the MRJ90, which is scheduled to achieve first flight in September or October of this year. The company then plans an aggressive flight test campaign to enable MRJ90s to be delivered to airlines in 2017. The MRJ70 is not expected to be ready for delivery until sometime in 2018, and that is if the current schedule holds (MRJ first flight was scheduled to occur by the end of the 2015 second quarter, but was recently pushed back, just the latest delay for a program that was originally supposed to achieve first flight in 2012). “So if we decided to go with the MRJ70, that would not be [delivered] in 2017, it would be 2018,” Trans States president Richard Leach said at RAA.

That would be four years later than the MRJ was scheduled to be delivered when Trans States signed up for the aircraft. Leach said 2014 “would have been the perfect time” for the MRJ to enter the US market. It is not clear whether 2018 will be as ideal.

Beyond the delivery date, seat capacity is another problematic issue for the MRJ70 in terms of appealing to US airlines. US major airlines increasingly want regional jets operated in their networks to seat 76 passengers (the scope limit on seating), but they aren’t interested in all-economy class RJs. American Airlines’ Embraer E-175s, for example, have just 44 traditional economy seats in cabins that include 12 first class seats and 20 “main cabin extra” seats.

The MRJ90, which could seat 92 passengers in an all-economy layout with 29 in. pitch seats, could comfortably accommodate the American layout. But the MRJ70, nearly 8 ft. shorter than the MRJ90, is designed for 78 passengers in an all-economy layout. Will US majors want to contract flying to a regional jet without a sizable number of first class and premium economy seats? Doubtful.

That brings us back to the scope clause issue and whether any of the major US airlines will be able to renegotiate pilot labor deals in time for MRJ90 deliveries in 2017. “The reason we haven’t seen a weight limitation [relaxation] in scope is there hasn’t been a reason to,” Leach said. “Now it’s more real. The MRJ is scheduled to come soon … so the weight item really becomes a tangible option” for airlines and pilot unions to discuss.

Leach said he doesn’t expect all of the airlines to get relief on the weight limitation by 2017, but one or two might, especially since it would also give an airline access to the E-175-E2, which is slated for delivery in 2020 and is expected to have a MTOW of well over 90,000 lb. “I would hope the next level [negotiated by US airlines] would be in the upper 90,000 lb. range or even 100,000 lb.,” Leach said. “It should be 97,000 lb. at least.”

Jonathan Ornstein, the longtime CEO of Mesa Air Group, is skeptical that scope clauses will be relaxed and is staying away from ordering RJs that don’t meet scope restrictions. In Cleveland, I asked Ornstein whether he believed it’s possible, as SkyWest and Trans States appear to be banking on, that pilot unions will allow the weight limit to rise as long as the 76-seat restriction stays in place. “I think weight is the one they’re going to hold fast to,” he responded, explaining that weight is what really keeps new regional aircraft out of the US market since the seat issue can be manipulated by adding first class and premium economy seats.

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