By Bjorn Fehrm
January 17, 2017, ©. Leeham Co: Union contract Scope Clauses–the provision limiting the weight, capacity or number of aircraft operated by airlines for major carriers–are unlikely to be modified any time soon, panelists at the Air Finance Journal conference in Dublin said.
The restrictive Scope Clauses are predominate in the US. These limit the ability of small airplane manufacturers to sell aircraft in the US. Most affected are Embraer, Bombardier and newcomer Mitsubishi.
Contract negotiations in December, concluded before Christmas, resulted in no changes, surprising some. This will impact planned purchases of aircraft.We sat with Bombardier’s Ross Mitchell, vice president of commercial operations, to understand why the scope clauses are so important and why they did not change.
The dominant market for regional aircraft is the US market. Regional aircraft operate on the routes that feed traffic to the mainline carriers’ network hubs.
The carriers outsource this traffic to specialized regional operators, which fly the routes with smaller regional aircraft. The mainline carriers and their pilots have special agreements in place (scope clauses) which regulate which routes and with what aircraft these routes are flown.
The purpose of the agreements for the pilots are to protect them from losing jobs when their airline outsources more routes to the (lower cost) regional operator.
On the aircraft side, there are two important limits, the maximum seat limit (76) and the Maximum Take-Off Weight (MTOW) limit (86,000lb). These set the size of aircraft which can used for these routes.
The 86,000 MTOW limit creates problems for the manufacturers of regional aircraft. New technology aircraft, equipped with new efficient high-bypass engines, turn out heavier than 86,000lb in their 76 seat variants. The manufacturers of new technology aircraft gambled on the scope clause MTOW limit being raised by the end of the decade.
Many in the market were surprised the scope clauses did not change. One who was not was Bombardier’s Mitchell.
“I have said for a long time the scope clauses will not change,” he told LNC in an interview. “To understand why, one has to understand the situation for the pilots in the mainline carriers. Scope clauses in their contracts are there to protect them from traffic being outsourced to regional operators. Traffic that they would otherwise have flown with the mainline carriers aircraft,” said Mitchell.
“US airline pilots are paid for flying time. Fly a short route with a short block time (time from closed door to when door opens again) and you earn less. Fly a longer route and you earn more. A higher MTOW aircraft can fly longer routes. It’s not in the interest of US airline pilots to increase the scope clauses MTOW limit. It would enable regional operators to take over more of the mainline carrier’s route network, flying longer routes. This is not what US mainline pilots want,” explains Mitchell.
The result is the US market will continue with an MTOW limit of 86,000lb for regional feeder aircraft. For how long, no one knows. The limit would likely stay the remainder of this decade and into the next decade.
The unchanged MTOW limit in the scope clauses favors the two aircraft types that fit under the scope clauses: Bombardier’s CRJ900 and Embraer’s E-175 E1.
It makes life difficult for new entrants like Mitsubishi Aircraft’s MRJ90. An MRJ90 certified to a scope close MTOW limit would have a short range. The smaller MRJ70 would fit the scope clauses, but would offer less space for a domestic first-class than the CRJ900 and E175.
Embraer’s new E-175 E2 exceeds the 86,000 lb scope limit. Embraer originally planned entry-into-service for this model in 2020, the last in the family that includes the E190/195 E2. The date was to give airlines time to reach new Scope agreements allowing a higher MTOW.
Embraer rescheduled the E-175 E2’s EIS to 2021 after contract talks failed. Officials plan to continue production of the A-175 E1 as long as necessary to meet the Scope limits.
Scott Hamilton contributed to this report.