Embraer’s Commercial Backlog Continues to Shrink
Embraer’s backlog for commercial airliners fell to its lowest level in more than five years, following a first quarter in which it delivered 21 E-Jets but sold only 12. As of March 31, its firm backlog stood at $14.7 billion, compared with $15.4 billion at the end of last year. The value of its backlog has fallen from a high of $21.6 billion in the third quarter of 2008.
Embraer’s first-quarter commercial aircraft sales totaled 10 E195s to Brazil’s Azul, one E190 to BA CityFlyer and a single E170 to JAL. By contrast, it sold 33 E-Jets in the fourth quarter and delivered 32, although the value of its backlog still fell by some $600 million. At its current rate of production of 110 airplanes a year, its backlog would now translate into less than two-and-a-half years of output. Embraer’s total unit backlog now stands at 240 airplanes.
The 100-seat E190 accounts for the largest proportion of that total, at 150 airplanes. Meanwhile, 44 E175s, 39 E195s and just seven E170s account for the remainder. Analysts blame continued weakening demand from the regional airline sector for Embraer’s steadily falling backlog, as carriers in that segment, particularly in North America, suffer through a period of soaring fuel costs and shifting emphasis by their mainline partners from airplanes in the 50- to 76-seat capacity range to narrowbody airplanes in the category of the Boeing 737 and Airbus A320.
Unfortunately for both Embraer and its Canadian rival, Bombardier, pilot-union scope clauses in the U.S. have not relaxed as quickly as they had hoped, essentially disqualifying most regional airlines from flying airplanes larger than 76 seats in capacity.
Thankfully for Embraer, demand for its E190 has remained buoyant outside the U.S., where scope clauses do not carry as much influence and low-fare airlines and even some majors have used the airplanes to pursue strategies aimed at addressing adjusting capacity to demand, developing new markets and replacing aging narrowbodies.
Company president Fred Curado, the featured speaker at Thursday’s Wings Club luncheon in New York City, told the audience that despite Embraer’s confidence that it could produce a larger narrowbody aircraft, based on preliminary design work already accomplished, the OEM decided not to launch a clean-sheet design, concentrating instead on a redesign/re-engining program.
Driven by customer feedback, according to Curado, the new aircraft will see improved fuel burn from the new engines and increased dispatch reliability. Embraer still has not determined whether the scope of the new aircraft project - expected to enter service in 2018 - will entail a wing redesign as well.
With regard to the recently signed MOU between Embraer and Boeing, Curado downplayed the possibility of any imminent joint developments between the two manufacturers, but expressed delight at the prospect of any collaboration. “We certainly have things to learn from Boeing, and it’s flattering for us that they seem to understand that they have something to learn from us,” he said.