FAA awards provisional approval for Embraer 170

 - January 31, 2007, 4:27 AM

Brazilian jet manufacturer Embraer has secured a so-called provisional certification from the FAA for the Embraer 170, allowing launch customer US Airways to begin proving runs with the airplane before it wins full FAA certification, now scheduled for next month. The announcement came just weeks after Brazil’s CTA granted similar certification for the 70-seat jet. Embraer announced in late October that the 170 would gain certification in early November, but authorities delayed the service introduction of the new class of jet for the fourth time, citing insufficient documentation for the airplane’s Honeywell fly-by-wire software.

The delays have complicated both Alitalia’s and US Airway’s plans to expand regional services and reduced Embraer’s revenue projection for 2003. The company also once again adjusted its delivery forecast downward, to a total of 102 aircraft for the year.
Although the provisional certification finally clears US Airways to begin training its crews, at press time delivery dates remained undecided, calling into question US Airways’ plans to launch operations at its new division in February. US Airways holds orders for a total of 85 Embraer 170s, with options to acquire an additional 50. Alitalia, meanwhile, must wait for full JAA approval because the European authority does not issue provisional certificates.

Notwithstanding the problems with the 170 series, Embraer last month closed its first-ever contract in Mexico–a transaction with AeroMexico subsidiary Aerolitoral for five new 50-seat ERJ-145s, with options for another 25 of the jets.

With the acquisition, Aerolitoral expects to expand its fleet by 20 percent, to a total of 30 airplanes. Meanwhile, Embraer hopes its first sale portends a move toward increased regional airline participation in Central America.

Aerolitoral ranks one of Mexico’s strongest regional airlines, operating more than 200 daily flights to 36 cities in Mexico and abroad. The company currently flies 25 airplanes, including examples of the Fairchild Metro III/23 and the Saab 340B.

Potential Complications
With the backing of AeroMexico, Aerolitoral can only hope to avoid the financing headaches so many airlines still face in this barren lending environment. Recently, just one day after Embraer CEO Mauricio Botelho said his company had secured for its customers 1.8 billion reals ($612 million) in export financing from Brazil’s BNDES development bank, the head of the financial institution, Carlos Lessa, said that the airplane manufacturer would need to “dance, dance, dance,” if it wanted 2004 financing. Lessa added that without BNDES financing, the airplane manufacturer would find itself permanently grounded.

Relations between BNDES and Embraer have grown strained since the company announced its second-quarter results. At a meeting with analysts, the aircraft manufacturer blamed delays in receiving export financing for the company’s worst quarterly showing since 1999.