Brazil’s Embraer has signed an order with United Airlines for 30 E-175 and options for an additional 40 jets, worth USD$2.9 billion at list prices.
The order, which will include the 76-seat regional jets for its United Express fleet, reinforces hopes that this year’s lower E-Jet output was just a cyclical ebb for Embraer.
“Without a doubt, this order makes it more likely we’ll increase the pace of production next year,” said Paulo Cesar de Souza e Silva, the head of Embraer’s commercial aviation unit.
“We’re doing really well this year.”
The plane maker is trimming output of its regional E-Jets by 15 percent in 2013 after years of lower demand. But fresh demand has been unleashed after major US airlines last year renegotiated labour contracts that had limited their regional fleets to jets with 50 or fewer seats.
Hurt by rising labour costs and a drop in commercial aircraft production, Embraer posted a 67 percent drop in first-quarter net income to USD$30 million.
United said it expects its new E-175s to achieve fuel savings of 10 percent compared to the 50-seater regional jets they will replace in 2013 and 2014.
Silva said he continues to expect 200 to 400 new orders for regional jets from major US carriers between this year and the middle of 2014.
Canadian rival Bombardier won an order from Delta Air Lines in December, but Embraer responded a month later with an order for American Airlines’ regional network.
“American and US Airways still need to renew their fleets. They’ve done that partly with the order in January,” Silva told Reuters. “I see good chances for us to close more deals ahead.”
Waning production of Embraer’s regional jets seating less than 120 passengers, its biggest source of revenue, was offset in the first quarter by rising revenue from its defence and executive jet divisions.
But the less profitable product mix and rising labour costs weighed on operating profit. Earnings before interest, taxes, depreciation and amortisation,, fell by nearly a third to USD$100 million.
The retroactive cost of a recent wage increase and a USD$9 million provision for an outstanding labour lawsuit also hurt EBITDA.
(Reuters)