Sept. 9, 2015, © Leeham Co.: The chief executive officer of Embraer’s commercial aircraft unit believes a trend might be emerging for US major airlines to directly operate 100- and plus-100 seat aircraft (and below the 125-seat sector), opening new opportunities currently precluding the largest E-Jets, and by implication, competing jets.
US major airlines have generally migrated away from the 100-125 seat aircraft, up-gauging to the 150-162 seat Airbus A320s and Boeing 737-800s and their re-engined successor. The “baby” Airbus and Boeing aircraft, the A319ceo/neo and 737-700/7, haven’t sold well in recent years.
But the Embraer E-195 E2, at 122 seats in a comfortable single-class configuration and somewhat smaller in two class, hasn’t yet penetrated the US market. Neither has the Bombardier CS100, a 100-110 seat aircraft in two- or single-class configuration.
Delta Air Lines is bucking history with acquisition of 88 inexpensive Boeing 717s from the used airplane market. Southwest Airlines and United Airlines are acquiring used 737-700s and United agreed to lease in 25 used A319s.
Cheap fuel and cheap capital costs help these decisions. But Paulo Cesar, president and CEO of Embraer’s commercial unit, sees an opportunity for his airplane.
“Generally speaking there are good opportunities in the US market for 76-seaters and for the 100 seats for the major airlines,” he said. “There might be a trend going forward for major airlines to add 100 seats, 100-plus seats in the major airlines.
“We believe the 195 E2 will be a very attractive aircraft with its unit cost with the additional three rows and a new wing and a new engine. The unit costs will be very competitive and the trip costs much lower than the narrow bodies.”
Cesar believes these attributes will also prove attractive in Asia. But he cautions that “there are many threats in the market drivers which may impact our ability to sell aircraft, especially in Asia, which could be a driver for other economies.
“We believe there are certain airlines in Asia that have over-ordered. There is one more element to this picture, and that’s the softness of the economies in the region that may accelerate…the doubts about how these airlines go forward and their ability to take delivery of these aircraft.”
The E-195 E2 is scheduled to go into service in 2019.
In an interview with Leeham News and Comment last week in Seattle, Cesar sees E-Jet production rates climbing from the current 8/mo to nine or 10/mo after introduction of the E2 in 2018.
“We are seeing very good sales in the last two years. There is a lot of interest on the E2. The E2 has not flown yet, and we already have 600 orders and commitments,” he said. “The first flight of the E2 is next year. I believe that as we fly the E2, more interest in the aircraft will come. Going forward with production, I believe we can be a little bit above [the current rate of 8/mo] in the last two years. We are higher this year than we were last year. The trend is positive, so we can go bigger.
“We could go to 9 or 10/mo,” but Cesar didn’t want to specify a time line because of the pending transition from the E1 to the E2. “As we fly the E2 next year, as we deliver the first E2 in 2018, the trend is higher.”
Cesar said there is no production gap in 2016 or 2017, but called 2018 “a little bit of a challenge.”