Embraer Gets $677 Million JAL Order in Split With Mitsubishi

Embraer SA (ERJ), the world’s biggest regional-jet maker, got an order for 15 E-Jets valued at $677 million for Japan Airlines Co. (9201), which also agreed to buy 32 planes from Mitsubishi Aircraft Corp.

The first deliveries of E170 and E190 planes are expected next year, Embraer (EMBR3) said in a statement today. JAL has an option to buy 12 more of the regional jets, which would increase the value to more than $1 billion based on list prices.

The sale will help shore up Embraer’s production of its current E-Jets as the Sao Jose dos Campos, Brazil-based company prepares to build its next-generation planes starting in 2018. Embraer is betting on a refreshed version of its 15-year-old regional-jet family as the Mitsubishi Heavy Industries Ltd. (7011) unit joins the competition with Japan’s first passenger jet.

“This repeat order by Japan Airlines is an affirmation of the added value that E-Jets have brought to its operations over the years,” Paulo Cesar Silva, chief executive officer of Embraer’s commercial aviation unit, said in the statement. “It has enabled the airline to grow its domestic network in a sustainable way.”

The 15-plane firm order will double the number of Embraer planes in JAL’s fleet. The Tokyo-based carrier added the company’s aircraft to its fleet in 2007.

Embraer rose 0.5 percent to 21.89 reais at 11:13 a.m. in Sao Paulo.

Challenging Embraer

The JAL agreement with Mitsubishi Aircraft is the unit’s third this year for planes the manufacturer expects to start delivering in 2017 after test flights next year. Mitsubishi Aircraft, which has delayed air trials for its jet three times, is challenging Embraer and has set a goal of winning half the global regional-aircraft market during the next 20 years.

The JAL order brings Mitsubishi Aircraft’s total to 400, Hideo Egawa, the planemaker’s chief executive officer, told reporters in Tokyo.

“Our sales force is very active in Europe, Southeast Asia and North America,” Egawa said. “We expect more orders as well from Latin America and Africa.”

The list price for the Mitsubishi planes is 4.7 billion yen ($45 million) each, bringing the agreed order’s value to about 150 billion yen, Japan Airlines President Yoshiharu Ueki told reporters in Tokyo.

To contact the reporters on this story: Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net John Lear, James Callan

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