Embraer skyline has serious challenges

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Introduction

May 21, 2018, © Leeham News: As Boeing and Embraer continue merger discussions for the latter’s commercial airplanes unit, the EJet skyline has some serious challenges.

The only order for the E175-E2 is a conditional sale.

Lessors account for half the orders of the E195-E2 and most of the E190-E2 deals.

More than half the orders for the E190-E1 may be canceled.

The data, from the Airfinance Journal Fleet Tracker, is as of April 15 and doesn’t include options, MOUs or LOIs. The firm order from American Airlines, for 15 E175-E1s, announced after this date, has been added by LNC.

Summary
  • Slow sales hamper the backlog.
  • The E2 hasn’t taken off as expected.
  • The E175-E1 remains the staple of the six-member family.
Discussion
EJet-E1 Backlog

Embraer had 122 firm orders for the EJet-E1 last month, according to Fleet Tracker. Fully 110 of these are for the E175-E1, including the 15 ordered by American after the data base run. There were 44 E190-E1s, including 24 from JetBlue and just eight for the E195 from two customers.

JetBlue’s order has been suspect for some time. Published reports, concurrent with JBLU deferring the order, have long suggested the airline may cancel the order. LNC’s market intelligence indicates there is little penalty attached to doing do.

It’s also been noted that the 24 orders are currently scheduled for delivery between 2020 and 2022. No other customer has deliveries scheduled beyond 2020, according to Fleet Tracker. JBLU deferred the order a couple of times.

The airline has been linked to a potential order for the Bombardier CS300, which carries more than 20 passengers more than the E190. JBLU supported Bombardier in the trade complaint filed by Boeing against BBD and the Delta Air Lines CS100 order.

The next largest order for the E190-E1 is from lessor Nordic Aviation.

The E175-E1 remains the staple of the entire EJet family. Skywest Airlines, American and Horizon Air have the most orders, with 37, 25 and 19 respectively.

EJet-E2 backlog

The backlog for the E2 is tenuous. Skywest ordered 100 E175-E2s, but this deal is conditional on changes to the US labor union Scope Clause. The airplane weighs more than the 86,000 lbs allowed in the current contracts. Embraer shifted entry-into-service from 2020 to 2021, hoping for Scope Clause relief in the 2019 and 2020 contract negotiations. However, the unions already said they don’t plan to negotiate this restriction away.

If the Skywest order is canceled, there isn’t another customer for the E175-E2 at this time. The E175-E1, which is Scope-compliant, would likely be substituted.

There are only 43 E190-E2 orders from four customers, including three lessors: AerCap (19), Aircastle (12) and China’s ICBC (10). Market intelligence indicates AerCap and Aircastle have had difficulty finding lessees for the airplanes in today’s low-fuel price environment.

The larger E195-E2, which was stretched by 12 seats in the E2 design compared with the E195-E1, is doing better, though it, too, is handicapped by low fuel prices. AerCap has 28 on order and Aircastle 13. Lessee placement remains a challenge, market intelligence indicates.

The largest customer is Brazil’s Azul, with 30.

Options, LOUs and LOIs need to be converted to firm orders to bolster the backlog and value to Boeing.

Embraer is competing against Bombardier’s CSeries in several campaigns, including most recently Ethiopian Airlines, which ruled out the Boeing 737-7 MAX and which expects to decide this year, according to a recent press report.

EMB also wants to retain JetBlue. United Airlines is reviewing the EJet-E2 and CSeries. There are other campaigns in Europe putting the two airplanes against each other.

 

One Comment on “Embraer skyline has serious challenges

  1. Embraer has been a sales champion in the past but today the situation is not favorable anymore. It is interesting to see that nobody commented that fact before. You forgot to mention the business aircraft sector and of course the Kc-390. I hope they can achieve further sales for the Super Tucano in the competition in the US. Embraer needs urgently a strong partner to overlook their aircraft programs and strongly support their sales worldwide. Boeing is the best partner they could dream of.

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