Wednesday, December 4, 2019

Digging Deeper into the CRJ-550

Typically, when I start analyzing a project, I try to dig as deep as possible into the city, route, program, or airline as possible. I try to be as factual as possible in my analysis to provide you all the best possible articles possible. So when I mess up or get something wrong, I think it is incredibly important to correct the record. This is why I wanted to address the CRJ-550 again.

Before I begin, I reached out repeatedly to United for comment and they have yet to return my emails. I did reach out to Bombardier and they confirmed they have not sold a new CRJ-550 nor do they have orders for the aircraft. Rather, United purchased the aircraft certificate from Bombardier. Also, I have reached out to Mesa regarding their announcement yesterday regarding more E-175s and the transfer of CRJ-700s to "another United express carrier". As of this writing, I have not received a comment from Mesa either.

So where did I fail on the CRJ-550 analysis? As many of the news agencies across the country reported, I assumed the CRJ-550 was actually a brand new plane, not just a retrofit on a new certificate. As many of you correctly pointed out to me online, these "new" CRJ-550s were actually used CRJ-700 placed on a new certificate with lower weights and configuration. I clearly did not understand the full context of the CRJ-550 program and I'll own it.

So how old are United's CRJ-550s? Well, the youngest current operating CRJ-550 is 10 years old according to the FAA's registration database. If this old of an aircraft caught you by surprise, don't worry, it caught me as well.

During my research for the piece, I did pull United's SEC file and paused when the regional fleet orders only discussed the E170/E175. Heck, I even pulled Flight Radar live flights to get an idea of how many CRJ-550s were operating. All of these should have been red flags, but I missed them. I should have gone a step further and pulled the individual tailnumbers similar to what I did above.

Well, that's exactly why we are digging deeper into the CRJ-550 program. Even since my last post, United still appears to be making moves within the CRJ-550 program. Further, during the last week, my data provider,, opened a new module with DOT on-time performance data. Typically, I do not use on-time delivery information for analyzing commercial decisions as it often does not make a material difference in an airline's commercial decisions. More often, OTP might make an impact on how a route or schedule is designed, such as how an aircraft is turned or blocked, but not often is a decision made how rather a route will be flown or not. However, if you are looking to see understand the customer experience, OTP would be the number one driver for customer satisfaction.

However, the DOT's on-time delivery data does unlock a host of schedule design metrics that directly impacts how much flying an airline might accomplish during the day. The data is extremely detailed down to the tail number of an aircraft and the routing that it took on an individual day.

Let's take United for an example. Since we have both aircraft counts and block hours, we can see United's network monthly average utilization in 2018 and 2019. Overall, United utilization is up year-over-year across all bases. This could be due to pushing harder on the schedule, longer block times, decreased spares, or a whole host of other issues. It's really not the point of this week's post, but it shows the power of other data sources that are often left unused when analyzing an airline on the network level.

So, if we are writing about the CRJ-550, why do I have DOT on-time performance data? Well, this allows us to understand the history of the CRJ-550 aircraft. The next part is a little confusing but bear with me.

My original hypothesis, as I believe many industry observers also believed, United was swapping CRJ-700s to CRJ-550s at an equal rate of E175 deliveries. This hypothesis was evidenced yesterday when Mesa announced they were adding 20 E175s to their fleet and offloading 20 CRJ-700s to "another United express carrier". These 20 aircraft would result in Mesa completely exiting all CRJ-700 operations. Which carrier might receive the aircraft? I think it is safe to assume GoJet, but I would not count Skywest out of the picture either. Who gets the aircraft will be a function on how United wants to deploy the fleet. More on that later.

When researching the history of the original GoJet eleven CRJ-550 aircraft, I tried to use the DOT on-time performance data to see which routes the aircraft were operating. I was surprised to find that each of the N-numbers of the aircraft was changed, even though most of them were operated by GoJet. This might be due to the new aircraft certificate, but this would be a question for United.

I was equally surprised to find three of the CRJ-550 aircraft were old CRJ-700s operated by ExpressJet for American Airlines. These three aircraft were grounded and placed into storage in December 2018 or January 2019 timeframe as the ExpressJet CRJ700 aircraft were grounded. I originally thought all CRJ-550 aircraft were 1:1 capacity downgrades for the E-170/175s for United. This does not appear to be the case.

Using the old GoJet tail numbers, I was able to find that GoJet had completely retracted all of these aircraft from their operation by mid-August. This makes me wonder how long the actual conversion process takes for these aircraft. United might have been conservative to make sure they had all FAA checks in place or wanting to make sure they had a critical mass of aircraft. It could also point to the aircraft being converted as part of a regularly scheduled heavy maintenance check, but honestly I would just be speculating. If you know the details of the conversion process, I’d like to hear from you.

In United's last earnings call, they stated they expected to have 54 CRJ-550 aircraft operational by the fall of 2020. So far, we have found 31 of the 54 aircraft (Mesa 20 + 11 original). So where else might the aircraft come from? Again, we turn back to the on-time performance data to give us guidance.

If we assume United's guidance of 54 CRJ-550 aircraft is rock solid, United will need to rob an entire fleet from Skywest or the remaining CRJ-700 aircraft from GoJet. I suspect the easiest decision will be to convert the remaining GoJet aircraft since they appear to be the main operator of the aircraft. However, even so, we would be six aircraft short.

For those expecting a simple move from Skywest to GoJet, I highly doubt the transaction would be that simple. When examining the ownership records of these 23 aircraft, Skywest owns 22 of the 23 aircraft. I doubt Skywest would willingly shift the ownership of any of these aircraft to another regional operator which they do not own. So, I would not rule out the possibility of the CRJ-550 flying under the Skywest flag.

If Skywest's entire fleet was converted to the CRJ-550 and no other GoJet were converted, we would have our 54 guided CRJ-550 by the fall of 2020. It would bring into question what United would expect to do with the final 17 GoJet CRJ-700s. I’d suspect they would be converted in time as well.

If you stuck with me this far, I assume you are wondering why any of this matters. Well, crews have to be based somewhere. If GoJet were to take the entire fleet without expanding its crew bases, the aircraft would likely be limited to Chicago, New York, and Dulles with limited options within the remaining hubs. Expanding the fleet to Skywest may allow the fleet to expand westward into Houston and Denver and I could easily be talked into SFO. I personally think the CRJ-550 would be a great California aircraft.

Finally, I want to touch on the 4 million pound gorilla in the room: why the CRJ-550 is such a hot button issue with the United pilot union. In 2018, ALPA started to produce videos regarding scope and the E175. In these videos, ALPA makes it clear, they want the E175 to operate as mainline or a United to purchase a new narrowbody fleet.

In 2018, I suspect the pilots assumed they had the company in a jam to push one of these proposals through. United had just purchased 20 new E175s and while they were nearly capped out on their 70 seat flying. Again, I suspect the pilot union suspected they could just wait the company out. With no solution, the company would have to remove 70 seat aircraft from the fleet to add the new E175s. I doubt they expected, as many of us did not suspect, Bombardier would come up with a scope compliant aircraft certificate for what appears only to be United.

This converting CRJ-700 aircraft to the CRJ-550 certificate effectively removed the log jam to bring more E175 aircraft into the fleet without having to negotiate for scope relief from their pilots. This is why you will see pilots talking about United skirting the scope clause.

While the CRJ-550 may have provided temporary relief to the company, by the fall of 2020, there will only be around 20 CRJ-700 aircraft that can be converted for scope compliance. The CRJ-550 is not a permanent solution rather a stay of execution. By early 2021, without an agreement with their pilots, United will likely find itself back in the same position it was in 2018. Needing to expand the 70 seat fleet without having the ability to do it.

I assume we will continue to see the CRJ-550/700 discussion continuing for some time. There will continue to be fleet movement until the fleet discussion is settled, maybe when the latest pilot contract is completed.

1 comment:

  1. You could have saved lots of time researching by looking at airline forums such as airline pilot central. This is united management telling pilots they will work around their scope clause while they are negotiating their new contract. Eventually the pilots will cave since the majority of pilots will retire in next decade and they are nice and safe and want some extra money for retirement.