Embraer turns sights toward better times with 70-seat 170

 - May 27, 2008, 6:01 AM

Embraer president and CEO Mauricio Botelho reflected on the events of September 11 and their subsequent effect on the world’s aerospace industry with a quote from Argentine-born Cuban revolutionary Ernesto “Che” Guevara. “We must be tough without losing tenderness,” said Botelho during a lavish dinner affair the evening before the October 29 rollout of the newly branded 70-seat Embraer 170 regional jet. Some 1,800 Embraer workers laid off after the terrorist attacks on the U.S. felt the company’s capacity for “toughness” first-hand. So has Canada’s Bombardier, which lost its stranglehold on the world’s regional jet market not long after the Brazilian jet maker became a private entity in late 1994.

“Brazilians are experts at handling crises–political, economic and financial,” said Botelho. “We were never defeated. This crisis will also pass–in a shorter time than we can imagine.” Embraer customers canceled options for some 60 airplanes as a result of the recent industry recession. Although Embraer insists all firm orders remain in effect, it acknowledged “some shifting” of delivery schedules by a number of airlines, a factor that contributed to its decision to reduce deliveries this year from 185 to 160 and lower next year’s delivery rate from 205 to 135.

Although the formal introduction of the 70-seat Embraer 170 (formerly known as the ERJ-170) comes at an admittedly difficult period, Botelho sees recent events as a potential windfall for a company able to provide alternatives to heavy, fuel-thirsty jets in the seat-class now dominated by Boeing 737s, DC-9s and Airbus A320s. The 170, the first in a new family of Embraer jets ranging from 70 to 108 seats in capacity, marks Embraer’s entry into a still somewhat ambiguous segment between the 50-seat regional jets and the lower reaches of the mainline range.

Embraer, of course, believes the drastic changes to the world’s air transport structure will serve to accelerate the development of that market segment, opening more opportunities for companies traditionally involved in building airplanes for the regional market. Although mainline union scope clauses in the U.S. still restrict the use of aircraft with more than 50 seats at most regional airlines, Botelho declared that “logic will prevail,” with respect to the unions’ hard-line stance. “Nothing can resist common sense,” said the outspoken CEO.

Stretch Variant Launched

According to Embraer, a 10-airline advisory board established to define the requirements of both regional and major carriers led to the final composition of its new family of jets, an addition to which Embraer formally launched during the rollout ceremonies called the Embraer 175. A minimal stretch version of the 170, the newly christened Embraer 175 will be 70 in. longer than its smaller sibling, allowing for another two rows of passenger seats. As a result, its basic operating weight will exceed that of the Embraer 170 by 2,206 lb, while mtow increases by 1,433 lb and zero fuel weight jumps by 5,415 lb. Of course, the extra weight will affect range and impose field performance penalties, important considerations to operators needing superior short-field and high-altitude characteristics. According to Embraer estimates, the 175 can fly as far as 1,600 nm with a full passenger load at long-range cruise speed, compared with the 170’s 2,100-nm range. Meanwhile, the larger variant’s specifications show a landing field length of 4,282 ft (at sl, ISA and “typical” landing weight) compared with the 170’s 4,101 ft.

Although Embraer has yet to land a firm order for the 175, the decision to stretch the family’s smallest iteration came at the behest of “a number” of customers from the project’s advisory board, including Embraer 170 launch customer Crossair. The Embraer 170’s primary competition in this next-generation 70-seat category, the Fairchild Dornier 728JET, will carry up to 75 passengers with a 33-in. seat pitch, an advantage that helped convince Embraer to stretch the 170, according to Embraer industrial v-p Satoshi Yakota.

Scheduled for certification in  spring 2003, the Fairchild Dornier 728JET in 1999 proved a worthy competitor in the contest for the Crossair order. Already firmly committed to providing a five-abreast cabin layout for Lufthansa, however, Fairchild lost the competition due largely to the Swiss airline’s clear preference for the Embraer’s four-abreast configuration.

Crossair’s chairman, Moritz Suter, made the trip to Brazil for the October event and told attendees that the Swiss airline may convert some of its firm orders for 30 Embraer 170s to delivery positions for 175s. However, Crossair’s first priority rests with introducing the 170, for which Embraer has guaranteed certification for the 5.5-deg approach angle into London City Airport from Geneva.

Crossair also holds a firm order for 30 Embraer 195s and options for 100 of any of the four types, although Suter said, “I don’t think we’ll take all those options, but it’s good to have that flexibility.” During a press conference before the rollout ceremony, Suter offered an optimistic forecast for “regional” airplanes in the 70- to 108-seat class.

“In this crisis in our industry, where everybody has to cut capacity and reduce frequency, the best airplane today is the one that is not too big,” he said. “The Airbus A319 is 20 tons heavier than the Embraer 195, which will carry 108 passengers–almost as many as the Airbus. With those airplanes [the Airbuses], you’re carrying around a lot of extra weight, which is wasteful and costs an enormous amount of money. I’d rather fly a small airplane with an 80-percent load factor at a reasonable ticket price than a bigger airplane with a 70-percent load factor at a bad ticket price.”

Testing Uncharted Skies

Crossair in many ways presents a perfect test case for the cost effectiveness of the new generation of 70- to 108-seat jets in both regional and major airline roles. Under plans devised in September to recast the long-time regional subsidiary of the now bankrupt Swissair as Switzerland’s new international flag carrier, Crossair over the next four months will assume responsibility for Swissair’s domestic and international operations, while it retains regional service now flown by its own Embraer ERJ-145s, Avro RJs and Saab 340s. How Crossair ultimately deploys its Embraer 170s–in either direct replacement roles of both mainline and regional airplanes, supplementary roles or some combination of the two–could further define the market for both the Embraer and Fairchild Dornier jets in Europe.   

Although many believe the September terrorist attacks and subsequent industry crash threaten to topple the clearly defined boundary between regional and major airlines in the U.S., pilot union scope clauses have until now resulted in market ambiguity for 70- to 108-seat airplanes in North America. Canada’s Bombardier has nearly cornered the market among those airlines whose scope clauses allow limited use of large regional jets with its 70- and 86-seat variants of the Canadair Regional Jet, winning orders from Horizon Air, American Eagle, Mesa Air Group and the Delta Connection subsidiaries.

The Bombardier airplanes, known as the CRJ-700 and CRJ-900, respectively, use the same cabin cross-sections as the 50-seat CRJ, a characteristic that effectively limits their use to regional operations of less than two hours in duration. Embraer and Fairchild Dornier hope to target major and national airlines with their entrants, whose non-cylindrical cabins offer considerably more headroom, shoulder space and cargo area– features critical for longer-range operations. In fact, Embraer dropped the “ERJ” designation from its 70- to 108-seat line to broaden its perceived application beyond the market limitations the term “RJ” implies.  

As the development schedule stands today, the Embraer 170 remains slated for first flight next month, certification during next year’s fourth quarter and first delivery to Crossair next December. According to Embraer’s revised plans, the 175 would reach the market in the second quarter of 2004, the 195 would enter service in the fourth quarter of 2004 and the 190 would gain its certification a year later.

Planning to use six airplanes in the 170’s flight test program, Embraer has nearly completed building the second prototype, and parts for the number 3 and 4 airplanes have already begun arriving at the company’s new 170 production facility in São José dos Campos, Brazil, from various suppliers throughout the world. Opened just two months ago with the help of some $850 million in total project investment, the new 56,000-sq-ft assembly plant will allow Embraer to build up to eight 170s per month, according to the company.

The many luminaries present in São José dos Campos for the rollout included Olaf Dlugi, CEO of long-time Bombardier customer Augsburg Airways; Jacques Bankir, managing director of the newly reconstituted Air France subsidiary Regional Compagnie Aérienne Européenne; Chautauqua Airlines CEO Bryan Bedford; and Serge Dassault, honorary chairman of Dassault Aviation. Embraer has signed an agreement with Dassault, Snecma and Thales to develop a Brazilian variant of the Mirage 2000 fighter for the Brazilian Air Force known as the Mirage 2000BR. The tender from the Brazilian government for the new fighters calls for delivery of 24 airplanes worth some $700 million.

As lead contractor for the project, Embraer would assemble the airplanes at its Gavião Peixoto Airspace Center, now under construction and slated for completion by 2005. The company recently opened the center’s 16,400-ft runway for test flying of its Legacy business jet and the ERJ-145XR, a high-performance, extended-range version of Embraer’s immensely successful 50-seat jet scheduled for first delivery to launch customer Continental Express next July.

Another contract Embraer hopes to close soon involves a deal with China for the sale of 20 ERJ-145s  to China Southern Airlines and 10 of the 50-seat regional jets to Wuhan Airlines. Two ERJ-145s in China Southern colors sat on Embraer’s ramp at São José dos Campos during the rollout ceremony, as the Brazilian manufacturer awaited expected approval from the Chinese government to proceed with deliveries.