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Will scope clause issue muddle Mitsubishi Regional Jet’s service entry?

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Pilot labor contracts at US major airlines currently disallow the carriers from outsourcing regional flying to an aircraft with a MTOW of more than 86,000 lb.

Two of Mitsubishi Aircraft Corp.’s most high-profile orders for the Mitsubishi Regional Jet are with US regional airline operators SkyWest Inc. and Trans States Holdings, but there is a big caveat on the 150 combined MRJs SkyWest and Trans States have on their books. Because of scope clauses currently in major US airlines’ pilot labor contracts, SkyWest and Trans States will not be able to operate the jets under a capacity purchase agreement for a US major absent a labor contract renegotiation.

Pilot labor contracts at US major airlines currently disallow the carriers from outsourcing regional flying to an aircraft with more than 76 seats or a maximum takeoff weight (MTOW) of more than 86,000 lb. The MRJ90, which is set to begin delivering to the US market in 2017, can seat up to 92 passengers and is expected to have a MTOW of more than 87,300 lb.

The seat issue is solvable: US major airlines these days generally want dual-class seating (or even tri-class counting “economy plus” seats) anyway on regional aircraft, and SkyWest and Trans States can simply configure their MRJs with 76 seats including a first-class section. But the MRJ90 is going to be at least 1,300 lb. over the weight limitation and there is nothing the regional operators can do about that, which means the race is on to see which comes first: scope clause relief at one or more of the major US airlines or MRJ90s ready to be delivered to SkyWest and Trans States.

“The weight restriction, because it is an artificial barrier, will have to be lifted,” Mitsubishi Aircraft Corp. SVP-global leasing and asset management Gergory Alberts said this week in Phoenix at the ISTAT Americas 2015 conference. He did acknowledge that “the timing is a little bit questionable” in terms of whether there will be scope clause relief by 2017, but insisted, “We’re pretty bullish that our customers in the US will prevail and by the time we deliver those aircraft, the scope clauses will be relaxed.”

I asked Alberts if there is a Plan B in case there is no scope clause change on the weight issue by 2017. “A good manufacturer always has a Plan B and a Plan C,” he said. “If there is some sort of delivery delay [to the US operators] because scope clauses aren’t a perfect fit, there are other customers [in other parts of the world] that can move up and take delivery of those aircraft.”

Along with SkyWest and Trans States, All Nippon Airways is expected to begin taking delivery of MRJ90s in 2017. Next up is Yangon-based Air Mandalay, which has just six on order and is slated to take its first delivery in 2018. Then there’s the new Eastern Air Lines, based in Miami, which has 20 on order with deliveries expected to start in 2019. The next biggest MRJ customer after SkyWest and Trans States is Japan Airlines, with 32 on order and deliveries set to commence in 2021.

“Certainly the rest of the world is not going to wait for the US scope clauses to be relaxed” to start operating MRJ90s, Alberts said.

But Mitsubishi desperately needs the US operators; right now, SkyWest (with 100 firm orders) and Trans States (with 50 firm orders) make up the vast majority of the 223 MRJs on firm order. The Japanese company also needs the US market to give the MRJ global credibility. While Eastern is a nice order to have, the startup is a small, completely unproven operation that doesn’t even plan to operate scheduled flights until next year.  

Alberts said pilot unions should understand that the MRJ90’s weight is a function of new technology that will bring increased efficiencies to regional flying and the aircraft is “not a threat to the US pilot community.”

He added, “The airlines recognize the value that this new technology will bring and it will force the scope clauses to be relaxed. I think the [weight and seat] inhibitions are short-term because [over time] there will be nothing else to fly. The 50-seaters are a thing of the past, so now you get into the larger regional jets.”

After years of turbulence, life is generally good for US mainline airlines and their flight deck crew, so it is uncertain whether either the airlines or pilot labor groups will have an incentive to reopen labor contracts over this issue. Trans States president Richard Leach said last month that “there’s at least one negotiation in progress” between a major airline and its pilots regarding the MRJ’s MTOW, but he conceded, “We don’t know if there will be [scope clause] relief” by 2017.

By the way, the Embraer E-175-E2 is expected to have a MTOW of well over 90,000 lb., so the Brazilian manufacturer is also banking on scope clause relief to be able to enter the US market with its next-generation regional jet. SkyWest and Trans States have 100 and 50 orders, respectively, for the E-175-E2. But Embraer has more time; the E-175-E2 will be the third of three E2 variants to enter service when it begins delivering to airlines in 2020. “I think there is a good chance there will scope cause relief by then,” Embraer Commercial Aviation president and CEO Paulo Cesar Silva said recently.

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