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Embraer SA’s first new narrow-body jet is set to fly into commercial service next week to take on Bombardier Inc. But that’s just a prelude to the bigger battle emerging between heavyweights Boeing Co. and Airbus SE.
At stake: possible orders from Air France-KLM, United Continental Holdings Inc., and JetBlue Airways Corp. The sales campaigns are a key test for Embraer and Bombardier as they seek to prove the potential of a new generation of 100- to 150-seat narrow-body jets — a market sliver that Airbus and Boeing have largely abandoned for bigger, more profitable models.
The twist is that the order contests are poised to become the next battleground in a broader struggle between the aerospace duopolists. While Airbus prepares to take control of Bombardier’s C Series program, Boeing is deep into talks with Sao Jose dos Campos, Brazil-based Embraer to form a commercial-jet venture.
It remains unclear whether the market realignment and fuss over the dueling new aircraft, both powered by Pratt & Whitney engines, will stir even greater airline interest and sales. The 100-seat jetliner market “has historically been a wasteland,” said aerospace analyst Richard Aboulafia, although “Embraer has accomplished the impressive feat of cultivating it.”
From the banter traded by executives at Embraer and Bombardier, both companies are confident of success.
For the industry as a whole, Bombardier forecasts sales of about 6,800 narrow-body airliners with 100 to 150 seats over the next 20 years. Alain Bellemare, chief executive officer of the Montreal-based planemaker, can’t stop talking up what Airbus’s sales and supply-chain heft will do for the C Series and its all-new technology. The European planemaker has promised to work with suppliers to lower manufacturing costs, an area where Embraer holds the advantage.
“We have the best aircraft in the industry bar none,” Bellemare said last month. With Airbus behind the jet, interest from airlines has increased “exponentially,” he said recently.
John Slattery, the chief of Embraer’s commercial-aircraft business, declined to discuss the Boeing talks or the sales advantages that might come from jointly marketing Embraer’s regional and narrow-body jets to long-time customers of the U.S. planemaker’s 737. He instead focused on the gains in range, fuel economy and noise pollution since the upgraded E2 program was launched five years ago.
“Nose to nose, the E2 beats the C Series economically,” Slattery said in an interview. “I would be disappointed if that did not manifest into meaningful commercial orders throughout this year and coming years.”
Embraer is working to boost commercial jets sales as it navigates slowing deliveries from earlier-generation E-Jets over the next two years. Slattery is hoping for a sales bump as the first E190-E2, which seats as many as 114 travelers, enters the market with Norway’s Wideroe Airlines on April 4.
Each of the three jets has a custom-designed wing, a rarity given the engineering complexity involved. That provides a potential weight- and cost-savings advantage over the C Series, which has two models that share a wing design sized for an even bigger model still on the drawing boards.
The larger model, dubbed the CS500, will probably never materialize since it would compete directly with Airbus’s top-seller, the A320neo, Aboulafia said.
“But there’s another possibility,” he said. Airbus could expand the C Series past 150 seats, “then use a new twin-aisle family to pursue the middle market,” where Boeing is planning a new family of jets.
Bombardier plowed more than $6 billion into developing the C Series, its biggest plane, and slogged through years of production delays. The Montreal-based company agreed last year to hand control of the cash-draining program to Airbus for no cost as sales stalled amid a U.S. trade scuffle with Boeing.
Embraer’s newest aircraft were developed relatively inexpensively, and on schedule, as “refreshed” versions of an older aircraft family. That means the E2 versions of Embraer’s E190 and larger E195 can pressure the Canadian jet on price, said Bloomberg Intelligence analyst George Ferguson.
The designs and sales tactics are about to be put to the test as large U.S. and European carriers mull following the lead of an influential buyer: Delta Air Lines Inc. The Atlanta-based carrier, which owns a stake in Air France-KLM, is preparing for the first deliveries of 75 Bombardier C Series models.
United confirmed a FlightGlobal report that it’s considering jets in the E2 family along with the C Series, Airbus A319neo and Boeing 737 Max 7. The carrier has studied 100-seat aircraft in recent years, and an order would enable it to add badly needed 76-seat regional jets — a move that’s currently blocked under the terms of its pilots contract.
JetBlue recently kicked the tires on an Embraer E195-E2 and a Bombardier CS300 in separate visits to the airline’s hangar at John F. Kennedy International Airport in New York. Both planes are among options the carrier is considering as possible replacements for its fleet of 60 Embraer E190s.
Air France-KLM, Europe’s largest airline, has asked Bombardier and Embraer to submit pitches for fleet moves that also span mid-market aircraft, with Boeing and Airbus invited to participate as well, Chief Executive Officer Jean-Marc Janaillac said in an interview in Brussels.
“Embraer is still in that funny place where it offers the very best product for a highly uncertain market,” said Aboulafia. “They’ve done fantastic work in trying to stimulate the market. It might just do the trick.”
–With assistance from Michael Sasso and Benjamin Katz
©2018 Bloomberg L.P.
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