Embraer’s smaller current-generation E-Jets, the E170 and E175, have carved out a solid niche, particularly in the U.S. airline network, where regional jets—bolstered by the world’s largest air transport market, scope clauses and a well-developed hub-and-spoke system—have thrived for more than two decades.
As of June 30, Embraer’s 170 program had booked 724 firm orders, including 533 for the larger E175. Customers held another 189 options, all but five of them for the E175. Deliveries totaled 658, with the E175 having claimed 468 of that number, including all 47 of the smaller E-Jet models delivered through the first six months of 2017. The backlog of 66 includes one E170.
The two largest operators—U.S. regionals Republic Airways and Skywest—operate more than 40% of the in-service fleet, Aviation Week’s Commercial Fleet & MRO forecast shows. Republic operates 124 E175s and 61 E170s, while Skywest has 103 E175s in service. The U.S.-based operating fleet of E170/175s numbers about 440, or 72% of the global total.
Aviation Week’s forecast sees the combined E170/175 fleet climbing from about 690 aircraft by the end of this year to 800 by 2020, which is one year before its next-generation replacement, the E175-E2, is slated to enter service. Many new deliveries—and Embraer still has available E-Jet slots starting in 2018, when the new-generation aircraft begin production—are expected to help mainline operators upgauge their regional-jet capacity by supplanting smaller, in-service regional aircraft, notably 50-seat Embraer 145s and Bombardier CRJ-200s. Besides adding about 50% more seats—which put them at the upper range of airline scope-clause capacity limitations—the larger regional jets can be configured with two-class cabins that more closely match mainline product offerings.
The aircraft’s total MRO market is about $650 million in 2017 but is set to spike to more than $800 million next year, largely due to a rise in projected engine overhauls. Factoring out engine work—much of which is covered by power-by-the-hour agreements, though the forecast recognizes demand when overhauls are performed—the market is slated to vary from between $433 million and $510 million in each of the next three years. The total market, less engines, is projected to top $1.4 billion in 2017-19. Engine work is calculated at about $692 million, or about 33% of the MRO total.
E-Jet operators have a broad global network to leverage for support. Embraer’s service-center network includes six facilities that handle a broad range of E170/E175 services. Two of the facilities—Embraer Aircraft Maintenance Services Inc. (EAMS) in the U.S., and Portugal’s OGMA—are Embraer-owned. (The OEM has a 65% stake in OGMA, with the Portuguese government holding the rest.) Three others— Kenya Airways, LOT Aircraft Maintenance Services and TAP Brazil—are linked to E-Jet operators. The sixth, Taikoo (Shandong) Aircraft Engineering Co. Ltd. (STAECO), is a joint venture of Shandong Aviation Group Co., Hong Kong Aircraft Engineering Co. Ltd., Taikoo (Xiamen) Aircraft Engineering Co. Ltd. and Beijing Huakai Investment Co. Ltd.
The network facilities—particularly EAMS and OGMA—figure to play larger roles in supporting E-Jets as the OEM ramps up its pursuit of aftermarket revenues. Embraer late last year set up a dedicated services unit to support its three business units: commercial, business aviation and defense.
The company generates about 15% of its $6.2 billion in annual revenues from services. President and CEO Paulo Cesar de Souza e Silva says the company’s “first target” is to boost this to 25% in the next four years.
“We are targeting to look into more scope in terms of work that we can do,” Silva explains. “We believe that we can not only [grow] the client base, the services and support that we provide but also we can increase the number of parts that we touch on the aircraft and do more than what we have been doing.”
One area the company is targeting, says Silva: components. Embraer’s component offerings cover about 65% of the E-Jet fleet of 1,350 aircraft, including both E170/E175 s and E190/E195s.
The OEM is not alone in offering E-Jet component support. Spairliners in April 2013 launched its own suite of services and quickly ramped up to a fleet of more than 100 aircraft supported. Today the company—a joint venture of AFI-KLM E&M and Lufthansa Technik—supports nearly 170 E-Jets, including 11 customers under long-term agreements and three more that use its repair services.