Embraer's Brazilian blend leads the charge for right-sized fleet sales

By Alan Peaford.

After years of Middle Eastern air transport being dominated by wide-bodied aircraft, the idea of right-sizing – putting the right aircraft on the right routes – has seen a sudden growth in demand for regional aircraft. Lining up at the front of the queue of sales people in the region has been Embraer.

The Brazilian manufacturer clearly aims to capitalise on its early successes in penetrating the Middle Eastern market with its E-Jet family of airliners, and expects to double its fleet in the region over the next five years.

Already in action with Royal Jordanian, the manufacturer was able to announce a breakthrough contract with Oman Air – the first time that Embraer has sold the aircraft in the Gulf area.

The sale of five Embraer 175 aircraft – four of which will be operated by the airline and one by the Royal Omani Police – may be modest in terms of aircraft deals but the acceptance of the type by one of the Gulf carriers has sent a clear signal. Already the other airlines are taking notice.

The order for the Omani aircraft is worth $177.5m at list price and first delivery is scheduled for the first quarter of 2011. Deliveries are expected to continue until 2013.

The Oman deal has sped up plans by the Brazilian manufacturer to select a location for a Middle East spares warehouse, aimed at enabling the manufacturer to better support its growing band of airline customers in the region. An announcement is expected during the first half of this year .

There are already four airline-controlled Embraer spares centres in the Middle East; in Cairo (EgyptAir), Amman (Royal Jordanian), and Riyadh and Jeddah (Saudi Arabian Airlines and NAS), which are supplied via Embraer’s European warehouse in Paris, France.

Setting up the Middle East facility is “something that we want to do quickly, but it’s a very complex analysis that we have to do”, said Jose Luis Molina, Embraer airline market vice-president for Europe, Africa and the Middle East.

“Initially, we have the intention to establish a partnership with a local company,” he added. “Oman is an option, as are Dubai, Abu Dhabi and Bahrain.”

Embraer’s five Middle Eastern airline customers have ordered around 55 E-Jet family aircraft to date and the manufacturer is in talks with several more prospective buyers in the region. One key target is Gulf Air, which has announced its restructuring plans to include the purchase of regional jets.

Molina is optimistic about the opportunities. “We believe that in four to five years we can double the fleet in the region,” he said. “The E-Jets offer very good economics for the airlines here. There are very good opportunities to grow in the Middle East. We are working with many airlines in the region and we are talking about five or six opportunities.”

The E-Jet business case is compelling. Presenting to a small group of journalists in Amman, Embraer senior manager marketing Byron Bohlman outlined how EgyptAir provided a “perfect example” of the E-Jets philosophy.

Before the carrier’s Express subsidiary introduced its fleet of E-170s in 2007, the Egyptian flag carrier had offered four daily flights between Sharm el Sheikh and Cairo, using a mix of Airbus A320-family aircraft, A330 wide-bodies and Boeing 737s. The route is now served 11 times daily, with nine of the flights employing the E-170.

“EgyptAir has preserved its overall capacity but has a much more market friendly schedule,” explained Bohlman. Although the extra frequencies entail higher crew costs and additional landing charges, “they would not have done this were it not feasible to do so economically”, he said. EgyptAir Express now operates 12 E-170s on 28 routes.

Royal Jordanian also opted for the Brazilian jets to operate alongside its A320 fleet and now operates five E-195s and a pair of E-175s on 47 city pairs. According to Royal Jordanian chief executive Hussein Dabbas, two more EJets could be joining the fleet soon.

“We haven’t decided yet, but two additional E-175s are on our radar screen for entry into our fleet during the next couple of years,” Dabbas said, describing the type as “economical to operate, and attractive to customers”.

Dabbas said that although the jets were not as economically attractive as the turboprop alternatives, they had a much better customer acceptance. “We introduced Bombardier Dash 8 Q400 70-seat turboprops in 2006, but customers didn’t feel comfortable flying on them,” said Dabbas. “There is nothing wrong with them – I think it’s basically just a lack of understanding and knowledge.”

At the Amman presentation, Dabbas said the airline also considered Bombardier’s CRJ regional jets, but had rejected them because they were unable to use the airbridges at Royal Jordanian’s home base of Queen Alia International airport in Amman.

“We use them on our domestic flights to Aqaba and on short haul around the Levant. We need to treat the passengers the same as if they were on an Airbus A320 in terms of comfort and access. The E-175 works well for us in that respect.”

NAS of Saudi Arabia operates its six-strong E-190/195 fleet on 25 routes and has four more aircraft on order, while Saudi Arabian Airlines operates its E-170s on 62 routes.

The new Oman Air E-Jets will also have domestic routes in their sights first. Peter Hill, Oman Air’s CEO, said: “We will deploy the aircraft on our existing and new routes. Four new regional airports are being built in Oman and the 175 is a good fit between our ATRs and 737s.

“The aircraft will also supplement our off-peak routes to Dubai and with our plans to extend local services. We will we able to fly more frequently, more effectively and more profitably.”

Oman’s aircraft will be split into a 12 business class seat /60 economy class seat configuration, both with back-seat in-flight entertainment (IFE).

“The aircraft has much longer range than people think,” Molina said. “And with the introduction of IFE to the seatback, longer routes can become attractive to both the airline and their customers.”