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Embraer offers improved E-175 to win Delta order

In one of the most hotly contested regional jet orders of the year, Embraer has raised the stakes by offering an enhanced version of the 76-seat Embraer E-175, according to an equities analyst.

Cai Von Rumohr, aerospace analyst for Cowen and Co, reported the existence of the E-175 "Plus" variant after attending an Embraer investor day in Melbourne, Florida, on 2 October.

Rumohr describes the E-175 Plus as a variant that improves fuel efficiency by 5% compared to the baseline aircraft.

Delta Connection E-175 Republic Airways

 Republic Airways

Embraer was not immediately able to comment on the improved design, but the company notes that its strategy includes performance upgrades to keep the E-Jet family relevant until re-engined and possibly re-winged versions appear in 2018.

The E-175 Plus appears initially aimed at winning at least a share of Delta's requirement to buy up to 70 new 76-seaters, Rumohr says. Bombardier's 76-seat CRJ900 also is competing for the order, which will replace many of the 50-seat regional jets operated by Delta's regional partners, including Compass Airlines and Pinnacle Airlines.

Rumohr's research note to investors describes the potential Delta sale as a pivotal competition for Embraer's commercial jets division.

The Brazilian airframer's regional jet backlog is likely to dwindle to 180 aircraft as of 30 September, or 60 less than at the same time last year, Rumohr says.

Embraer needs new regional jet orders soon to meet its public sales targets, which call for selling as many aircraft as it delivers each year.

But turmoil in the US regional airline sector is making that goal difficult. Expected orders by American Airlines and its regional partners for new 76-seat jets remain in limbo during the mainline carrier's bankruptcy restructuring process. Delta is now the only US airline expected to sign an order for new regional jets this year.

Embraer is also competing for smaller orders of E-Jets outside the USA, Rumohr says. Venezuela's Conviasa may convert an option for 14 aircraft, while airlines in China, Indonesia and Africa may also place orders.

But such order prospects have not been enough to impress Wall Street analysts lately. Cowen joined JP Morgan in downgrading Embraer's stock rating from overweight to neutral.

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