Embraer confident about jet orders from Mideast carriers in 2019, CEO says

Amid joint venture with US planemaker Boeing, Embraer Commercial "hopeful" of continuing positive relationship with China

An Embraer 190-100IGW plane (registration LV-CKZ) of Aerolineas Argentinas, on a regular flight from Buenos Aires to the Argentine city of Bahia Blanca. The planemaker's smaller jets are having a moment as airline industry faces headwinds and right-sizes, its chief executive said. ReutersShow less

Brazilian planemaker Embraer Commercial is confident it will secure commitments for its E2 jets in the Middle East this year as regional carriers cut capacity amid tough operating conditions and consider smaller aircraft.

The company is targeting existing E-jet airline customers for the replacement of those aircraft with the newer E2 model in addition to attracting new operators, John Slattery, chief executive of Embraer Commercial, told The National. 

"I’d be surprised and disappointed if we didn’t have E2 firm commitments this year," Mr Slattery said in an interview. "I do see opportunities in the Middle East and we do have campaigns there."

Embraer expects its smaller jets to be attractive options for regional operators as the aviation industry enters a down-cycle.

While demand for air travel in the Middle East and Africa is expected to triple in the next 20 years under a best-case scenario of open borders, according to the International Air Transport Association (Iata), gathering headwinds from higher oil prices, escalating trade tensions and geopolitical friction around the world are forcing carriers to cut costs.

"People want to right-size, and reduce, they're focused on efficiencies, margins and protecting the business," Mr Slattery said. "This is a moment in time when the profile of smaller jets gets higher, I'm optimistic."

Embraer received certification for its 195-E2 jet from regulators in Brazil, the US and EU and is pushing the engine performance of its jets to customers in the Middle East.

The high bypass ratio on its gear turbofan engines and "attractive" engine operating costs will work well in a region where aircraft are exposed to the harsh environment of heat and sand, he said.

"As we go into a down-cycle, airlines are focusing on ensuring they have right size equipment for the market place so the trip cost is kept as low as possible," Mr Slattery said.

Filling smaller jets at a period of slower growth means improving yield.

Asked if the E2 commitments by potential Mideast customers could coincide with the Dubai Airshow in November, Mr Slattery said those decisions are largely dictated by the airlines.

"The Middle East has been a very important market for Embraer for decades and, as we project forward, will continue to be so," Mr Slattery said.

Last month, Boeing said that after taking over Embraer's commercial jet unit, it will rename the division Boeing Brasil Commercial.

The name change comes after Boeing paid $4.2 billion (Dh15.4bn) to buy 80 per cent of Embraer’s operation making passenger jets with fewer than 150 seats. Embraer will retain a 20 per cent stake. The unit is still Embraer’s most profitable and considered a hallmark of Brazilian engineering. Mr Slattery has been appointed to lead the joint venture with Boeing.

Mr Slattery said they are starting the process of naming the aircraft.

"This process is a little bit more complicated because there is a lot of brand equity given that we have 1500 aircraft flying with 75 customers in 50 countries," he said. "I can't handicap which way it's going to go, if we're going to keep the name or change the name, I genuinely don't know."

Embraer's commercial jet unit's takeover by US top exporter Boeing comes amid an escalating trade war between Washington and Beijing. The unit counts China among its major markets, where it has 80 per cent market share in the segment of jets below 150 seats.

The unit is seeking anti-trust approval from China for the Boeing deal and waiting for its 175-E2 and 190-E2 plane models to get certified by Beijing to deliver the aircraft to Chinese airlines.

"I’m very hopeful that we will continue our excellent relationship with authorities in China and operators in China," Mr Slattery said.

"Boeing Brasil Commercial is a company incorporated in Brazil, it manufactures and exports from Brazil. The relationship between Brazil and China is very positive and I’m hopeful that trend will continue."