As the start of the Paris air show on Jun 15 approaches, the order book for Embraer (NYSE:ERJ), is filling up with a new US$1.92 billion order for its E-jet series airliner.
On May 21, Brazil’s aerospace giant announced that it had completed a contract with Azul Linhas Aereas Brasileiras for 30 regional E195-E2 jets, with options for 20 other, following a letter of intent (LoI), signed in Farnborough in July 2014.
Paulo Cesar Silva, CEO of Embraer Commercial Aviation, thanked Azul which was "born and raised in the Brazilian market with the E-Jets". Azul already operates 82 E-Jets and has 6 more on order, will receive the new aircraft in the second quarter 2020.
Should Azul exercise all options are exercised, the current order could reach a value of US$ 3.2 billion.
So far, Embraer has received 242 firm orders for E-Jets and enjoys options and purchase rights for 348 additional units.
The E195-E2 is scheduled to enter service in 2019 after the E190-E2, expected in the first half of 2018. The E175-E2 will follow both in 2020.
Shares of Embraer were trading about 2 percent higher this morning in New York in the wake of what has been a profitable period for the Brazilian aerospace company and major Bombardier (TSE:BBD.B) competitor.
Last week, Embraer announced an over US$2 billion contract to sell its E-series jets to China’s Tianjin Airlines.
Yet, the manufacturer expects much higher orders in North America, where it plans to sell up to 2,060 units of E-series airliners to fill the 70 to 130 seats market, representing a staggering 35% of total world demand for aircraft of this particular segment, valued at US$96 billion.
About 47% of new deliveries from the region will actual growing demand, while the remaining 53% will replace older planes that heading for retirement in 2034.
The restructuring of traffic operations at major airports acting as hubs has shifted more capacity on regional jets offering more premium seating options instead of the typical 50-seater that used to dominate this market.
Growing demand for this type of aircraft – where Bombardier offers its CRJ series and C-series 100 at the higher end – explains the interest in the E175 from 70 to 78 seats, which has become a best-seller in its category, with 80% of orders in North America since 2013, says Embraer.
Larger capacity aircraft offer airlines more growth opportunities in regional or domestic routes as well as the ability to lower density but longer distance routes currently served by larger narrow-body aircraft such as the Boring 737 or Airbus A320.
The family of E-Jets had logged more than 1,560 orders and more than 1,100 deliveries to date.
Since entering service in 2004, the E-Jets have accounted for approximately 50% of orders and 60% of global market deliveries of 70 to 130 seats aircraft. In North America, Embraer has a 50% market share in this segment, having delivered more than 400 E-Jets.