United Partner SkyWest to Buy $4 Billion of Embraer Jets
United (UAL) Airlines partner SkyWest Inc. (SKYW) agreed to buy more than $4 billion of Embraer (EMBR3) SA jets as new pilot contracts at the largest carriers allow commuter operators to fly bigger planes.
The accord comprises 40 firm orders for 76-seat E175 jets with two-class cabins that will be flown for United for 12 years, St. George, Utah-based SkyWest said today in a statement.
The aircraft will be the first 76-seat regional jets in United Express’s fleet after parent company United Continental Holdings Inc. joined AMR Corp. (AAMRQ)’s American Airlines and Delta Air Lines Inc. in crafting labor agreements allowing the larger jets to be used that way. Regional airlines pay less, which reduces costs for the carriers.
“In this very competitive business of operating regional jet aircraft, we are appreciative to have been given the opportunity and we are committed to providing an outstanding level of service to United,” SkyWest President Bradford Rich said in the statement.
The order also marks another win for Sao Jose dos Campos, Brazil-based Embraer after United agreed to buy 30 of the E175s in April and American and its regional partner Republic Airways Holdings Inc. (RJET) agreed on an order of 47 Embraer E175 jets earlier this year.
Big airlines are seeking 76-seat jets as they retire aging single-class 50-seaters that guzzle fuel. The larger aircraft let them lower operating expenses and charge higher fares for business class tickets.
SkyWest also has a conditional purchase agreement for 60 more of the E175 jets pending operating agreements with other airlines, plus options for 100 more, Embraer said in a separate statement. That gives the whole order a value of $8.3 billion at list prices, though airlines typically get a discount.
The firm deliveries for United Express will begin in next year’s second quarter and run through mid-2015, SkyWest said.
In December, Delta agreed to buy as many as 70 Bombardier Inc. (BBD/B) CRJ-900 jets with 76 seats, rebuffing Embraer. Montreal-based Bombardier is helping Delta get rid of five dozen 50-seat CRJ200 planes as part of that accord.
SkyWest climbed 0.6 percent to $14.26 at the close of trading in New York. Chicago-based United dropped 2.7 percent to $33.35.
United previously rose 47 percent this year, outpacing a 43 percent increase by the Bloomberg U.S. Airlines Index, while SkyWest added 14 percent. Embraer jumped 31 percent, outpacing Bombardier’s 25 percent advance in Toronto.
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