Fleet renewals fatten OEMs’ backlogs

 - July 25, 2007, 9:29 AM

An extended period of order taking for the world’s makers of regional airliners showed little sign of relenting last month, as Canada’s Bombardier grabbed at least two more major orders for CRJ regional jets while Brazil’s Embraer and the Franco-Italian ATR partnership counted the proceeds from a busy Paris Air Show.

An order for seven CRJ900s last month from Uruguay’s Pluna Airlines raised Bombardier’s CRJ order count for the year to 111. Also holding orders for 52 Q400s, five Q300s and four Q200s, Bombardier saw its turboprop sales performance in the first half eclipsed only by that of ATR, itself in the midst of the best three-year period in its history. This year’s first half yielded ATR firm orders for 63 airplanes, already more than it sold all of last year and a mark surpassed only by a record total of 90 in 2005.

A comparatively slow start this year by Embraer’s sales team limited the increase in the order backlog for E-series jets to 36 airplanes, including a firm order for five E175s Republic Airways converted from an option during the second quarter. The deal came to light last month when Embraer identified Republic as the customer for a separate order for eight E175s booked in the first quarter and listed as “unidentified.”

The Brazilian manufacturer could use the breather after kinks in its supply chain forced the company into a fairly aggressive production ramp-up. At Paris, however, the sales team seemed to find its stride again, collecting new firm orders for 20 airplanes from four customers, not counting a 30-airplane deal from Lufthansa that took the place of a canceled contract for the same number of airplanes from Swiss International Airlines. Embraer followed its Paris showing with a preliminary deal last month from Brazil’s BRA Air Transport that calls for an imminent firm order for 20 E195s.

While the relatively modest orders helped regain some of the sales momentum Embraer’s E-Jet line had built over the past few years, one might argue that the more significant achievement for the Brazilian company lay with the identity of one customer in particular–Japan Air Lines. The deal, a firm order for ten 78-seat Embraer E170s to fly for JAL’s J-Air regional subsidiary, marked Embraer’s entrée into the Japanese market and signaled Bombardier’s failure to retain JAL as a CRJ customer. J-Air’s fleet now consists of nine CRJ200s.

For its part, Bombardier exacted at least a modicum of revenge with the order for seven CRJ900s from Pluna, only the second South American airline to order new CRJs and the first to do so in more than a decade. (Argentina’s Southern Winds ordered two 50-seat CRJ200s in the mid-1990s.) The Pluna deal, along with last month’s firm order from Mesa Air Group for another 10 CRJ700s, capped Bombardier’s most prolific sales semester for CRJs since the first half of 2001. In fact, Bombardier collected more firm orders for regional jets during the first half of this year than it did in the previous two-and-a-half years.

One of the more intriguing recent deals–a firm order for three CRJ900s from Libyan Airways–cemented Bombardier’s presence in a market that until last year didn’t exist for Western aerospace companies. Airbus broke ground in Libya during last year’s Farnborough Air Show, when, just a week after the U.S. lifted economic sanctions against the country, it signed an MoU to fill the first significant civil aircraft order from a Libyan airline in 30 years. That contract, with Tripoli’s Afriqiyah Airways, calls for delivery of six A320s, three A319s and three A330-200s.

The CRJ’s growing influence in such virgin territory as Libya and, earlier this year, Russia, hearkens back to headier times when the 50-seat CRJ100 and 200 helped reshape the North American regional airline business. Since the effective collapse of the 50-seat jet market, Bombardier has had to “realign” production rates on several occasions. This year the company cut combined CRJ700 and CRJ900 production from 65 to 50 units, but now with the apparent resurgence in demand for its bigger RJs, the CRJ backlog by the middle of last month exceeded 140, a number that accounts for nearly three full years of output at the current rate.

At the same time Bombardier reduced CRJ rates, it increased Q Series turboprop production from 50 a year to 65. Six months later the move had proved prescient, as the company’s sale of 61 turboprops during the first half already beats last year’s total and ties the mark it set in 2005–previously the company’s best showing of the decade.

Meanwhile, the only Western competition left in the regional turboprop-building business finds itself contemplating raising rates yet again. From 24 airplanes last year, ATR expects to increase this year’s output to 44, and then to 64 next year. By the end of June ATR’s order backlog stood at 170 airplanes, nearly double December 2005’s tally of 89.

ATR has made a tradition of piling up orders during airshows, most recently leaving Paris with firm orders for 22 airplanes from four customers. It saved one of its biggest for Rome, however, where on June 25 Malaysia Airlines signed for 10 ATR 72-500s in the presence of the Italian and French prime ministers. Only five days earlier ATR’s Paris highlight came in the form of a Jet Airways order for 13 ATR 72-500s, six of which the Indian airline will lease from Ireland’s Aircraft International Renting. Now flying eight ATR 72-500s, Jet Airways expects to take the first of the new batch this year and the last in 2010.