ALTA: Embraer eyes Latin American prospects

Washington DC
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Embraer is bullish about the air travel market in Latin America, where an excess of narrowbodies and predictions of solid air travel growth bode well for sales of E-Jets.

"The improvement in social and economic scenarios has had a direct impact on air transportation in Latin America, with passenger demand growing consistently in recent years," says John Slattery, chief commercial officer of Embraer’s commercial aircraft division. "For the long term, we believe that Latin America continues to be one of the world leaders in air transportation growth."

Demand for air travel in Latin America, measured in revenue passenger-kilometres, climbed 9.8% during the first six months of 2013 compared with the same period last year, Slattery says.

Likewise, the number of airline passengers in Latin America increased to 88 million in the first half of the year, up 10.6% year on year, he says. In Columbia, the number of air passengers climbed 24.7% during the first half of 2013, while both Peru and Chile saw passenger numbers jump more than 15%, says Slattery.

Embraer thinks the trend will continue, estimating demand will climb 7% annually for the next 20 years. At that rate, airlines in the region will need 660 aircraft with between 61 and 120 seats by the end of the period, Slattery says.

Embraer’s current-generation E-Jets – the E-170, E-175, E-190 and E-195 – typically have between 70 and 106 seats.

Embraer had unfulfilled orders for 246 E-Jets at the end of September, but in October, JetBlue deferred an order for 24 aircraft until 2020 to 2022. Those orders will now likely be for E-Jet E2 aircraft, JetBlue has said.

At its current production rate of 90 to 95 aircraft per annum, Embraer would fulfil outstanding E-Jet orders by sometime in 2016.

The next-generation E-Jet E2 models, which will have between 80 and 118 seats and will be powered by Pratt & Whitney PW1700G and PW1900G geared-turbofan engines, are scheduled to enter service in 2018, starting with the E-190 E2, Embraer has said. It holds 150 firm orders for E-Jet E2s.

Current major Latin American E-Jet operators include Austral, Azul, Aeromexico Connect, Air Caraibes, Conviasa, Copa Airlines, Taca International Airlines, TAME and Trip, according to Flightglobal's Ascend Online database. By year-end, there will be 185 E-Jets flying in Latin America, says Slattery. Embraer has captured 72% of deliveries of aircraft in the E-Jet segment in the region, he adds.

Slattery says E-Jets can help Latin American carriers improve network efficiency, noting many carriers operate routes with narrowbodies that are too large.

He says 73% of Latin American flights on aircraft with more than 120 seats take off with fewer than 110 passengers.

"The proper use of aircraft with capacity of 70 to 120 seats allows companies to offer a larger number of flights, while maintaining good load factors," Slattery says. "As a result, airlines can achieve greater market presence and, in many cases, ensure a competitive edge over rivals."

E-Jets could profitably operate many Latin American "mid-market" routes, which Embraer defines as those having between 25 and 300 passengers travelling each way daily, says Slattery.

Currently, the majority of those routes – 65% – have connecting service only or very limited direct service, but nearly half of the region’s mid-market routes are ideally suited for aircraft the size of E-Jets, he says.