Brazilian aircraft manufacturer Embraer is bullish about the prospect for its flagship commercial aircraft, the E-Jet-E2. It delivered seven of the planes in the second quarter and, with new orders coming in from around the world production levels could hit 100 planes annually by the middle of the decade.
So why, then, does Embraer CEO Francisco Gomes Neto see an opportunity to keep selling E-Jet-E1s, the older generation of E-Jets, for another decade? The peculiarities of U.S. pilot contracts.
Pilot contracts at Alaska Airlines, American Airlines, Delta Air Lines, and United Airlines are all barred from contracting regional partners to fly any plane with more than 76 seats — and even the number of those is capped — or with a maximum takeoff weight, or MTOW, greater than 86,000lbs. Embraer’s smallest E2, the E175-E2, can be configured with just 76 seats but it weighs in with a MTOW of nearly 99,000lbs. And new pilot contracts at American, Delta, and United — only Delta’s is ratified to date — make no change to these regional jet limits. This is why not a single U.S. regional airline has firmed an order for E2s to date despite the ubiquitous popularity of older E1s.
In fact, the E175-E1 is so popular that American just ordered seven more for its Envoy subsidiary with deliveries beginning in the fourth quarter.
“We believe the E1 still has an important market, especially in the U.S.,” Neto said during the airframer’s second-quarter earnings call Monday. “We will have more and more opportunities for E1s in the next 10 years at least.”
He did not elaborate on how the E1 will remain a competitive option for regional airlines over the next decade. The plane was first introduced with Air Canada in 2005, and updated with more fuel-efficient wingtips — not to be confused with winglets — in 2014. However, history shows us that manufacturers can make efficiency improvements on existing models without completely updating the aircraft; for example the improvements Airbus made to the A320 after it first flew in 1987 until it was replaced by the re-engined A320neo in 2016.
It also does not hurt that Embraer faces no real competition in the 76-seat regional jet space. The Bombardier CRJ900, which Mitsubishi bought in 2020, ended production in 2021.
Outside the U.S., Embraer sees increasing interest in the E2. During the second quarter, it signed Royal Jordanian, Scoot, and SKS Airways as new customers with deals for 27 E190- and E195-E2s through leasing partner Azorra. European carrier Binter also ordered six more E195-E2s. Embraer’s backlog for aircraft was worth $17.3 billion at the end of June.
“We are working many different campaigns in different regions — especially for the E2s — so we expect to make some announcements in this second half of the year,” Neto said when asked about additional new orders.
China is one market where Embraer is hoping to land a deal. Neto said talks between Brazilian president Luiz Inácio Lula da Silva and Chinese president Xi Jinping on a bilateral trade deal could include the sale of E2s to Chinese airlines.
Asked about the quality issues affecting Pratt & Whitney geared turbofan engine, Neto said that they face some challenges but “don’t see [any] big issues.” P&W is the sole engine supplier for the E2 but with a different variant of the geared turbofan engine than the one recently recalled that is on the Airbus A320neo family.
Neither Neto nor other Embraer executives made mention Monday of the status of a potential new 50-seat turboprop aircraft targeted for the U.S. regional market.
Embraer posted a nearly $100 million adjusted operating profit on revenues of $1.3 billion in the second quarter. It delivered 47 aircraft, of which 17 were commercial E-Jets.