Embraer Seeks Regional-Jet Orders in U.S. to Maintain Backlog

Embraer SA Chief Executive Officer Frederico Curado
Embraer SA Chief Executive Officer Frederico Curado said, "Without a success in the U.S., I think it will be very challenging for us to have a 1-to-1 book-to-bill ratio.” Photographer: Jonathan Ernst/Bloomberg

Embraer SA seeks to win regional-jet orders in the U.S. this year as the Brazilian aircraft maker works to maintain a backlog at least as large as 2011’s, Chief Executive Officer Frederico Curado said.

The company is in talks with U.S. carriers such as AMR Corp.’s American Airlines and Delta Air Lines Inc. about its E175 model, and “there could be some decisions before year-end,” he said in an interview yesterday at the air show in Farnborough, U.K. Any deal would be “sizable,” Curado said, without elaborating.

Embraer is counting more on the U.S. as regional-jet demand slows, a situation Curado said is mainly the result of Europe’s economic slump and declining growth rates in some emerging markets. Some labor agreements in the U.S. also have been eased to allow more use of larger regional jets, helping spur talks with airlines there, he said.

“Without a success in the U.S., I think it will be very challenging for us to have a 1-to-1 book-to-bill ratio,” Curado said. The ratio is an indicator of demand, measuring orders received against units shipped. Embraer delivered 204 aircraft of all types in 2011 and had a firm-order backlog of 240 as of March 31, according to its website.

Embraer’s latest 20-year forecast shows North America as the largest market for regional-jet deliveries, representing 32 percent of the 6,795 aircraft the company sees handed over through 2031 in the 30-to-120-seat segment. The majority of the global deliveries will be planes with 91 to 120 seats, according to Sao Jose dos Campos, Brazil-based Embraer.

Production Outlook

Embraer last year considered boosting production of regional aircraft before holding off on concern that the market was weakening. Curado said the company now plans to keep output little changed for 2013 as well, and will conduct a reassessment toward the end of this year that may lead to a slower rate.

Brazil and China still are showing potential for growth, Curado said. Embraer said yesterday that China’s Hebei Airlines bought five more E190 jets, in a transaction valued at $226 million based on list prices. The airline now operates two E190s, Embraer said.

Embraer is continuing discussions with airlines about how to configure regional jets due to enter service about 2018 to replace current models, Curado said. The aircraft will feature new engines and probably a new wing, he said. Embraer will set the configuration by year-end and begin the program about mid-2013, Curado said.

The company is still exploring different sizes for the regional-jet aircraft family, including whether the smallest model will be larger than the current E175. The revised regional-aircraft lineup won’t include the E170.

While the E195 replacement will be larger than the current version, Curado said the seat count hasn’t been locked in.

Embraer is discussing whether one type of engine can be used for the entire aircraft family or whether two will be needed, as is now the case. Curado said he expects a decision on an engine supplier and power levels by about year-end.

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