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Friday, June 22, 2007

Embraer Logs More Orders, Books First Brazilian Operator of E-Jets

After announcing orders from Japan, Germany and Italy, Embraer (ERJ) logged its first Brazilan E-Jet operator in a deal worth between $730 million and $1.46 billion. Brazilian airline BRA Transportes Aereos signed a preliminary commercial agreement for 20 firm orders of the Embraer ERJ-195 jet, plus 20 options. The final contract should be completed, shortly.
Calyon Analyst Ray Niedl said the new orders illustrates the company continues to diversify its customer base and solidify its relationships with major international carriers. “We now estimate backlog to be over $16 billion, from $15 billion at the end of 1Q07, representing nearly three year's worth of aircraft orders in backlog,” he said in recommending an ADD rating and projecting a price of $57 from the current $52. “The company maintains its strong competitive positioning and is years ahead with its E-Jet product family. Bombardier (BBD) has delayed its decision on whether to launch its competing product, the CSeries jet, until next year. If it does launch the program, the CSeries is not expected until 2013 – a major advantage for ERJ.
The new BRA ERJ 195s will be configured with 118 single-class seats, with deliveries scheduled to start in the second half of 2008. BRA has also signed a leasing contract with GE Commercial Aviation Services (GECAS) to operate two other new ERJ 195s. First delivery of the leased aircraft will occur in the first half of 2008.
"BRA is proud to be the first Brazilian airline to operate Embraer's E- Jets," said Humberto Folegatti, President and CEO of BRA. "We are investing in expanding our fleet in order to meet the growing demand and, for that reason, we chose the ERJ 195 to offer our passengers the comfort, punctuality and economy they appreciate and deserve."
BRA cited the ERJ 195s ability to link more than 50 percent of the destinations in Brazil today, with nonstop flights. The 195 has a range of up to 2,200 nautical miles (4,077 kilometers) nonstop, which will allow BRA to operate the airplane on Brazil's main domestic routes, as well as reach several destinations in South America.
The decision was confirmed in December 2006, after the entrance of the company's new investor, Brazil Air Partners (BAP) Fund, consisting of Bank of America, Darby, Development Capital, Gavea Investment Fund, Goldman Sachs & Co., HBK Investment, and Millennium Americas. BRA's objective is to become a strong third-largest airline in Brazil based on its new E-Jets platform.

AeroMexico Puts ERJ 190s in Operation
In another first, Embraer ERJ 190s will fly for the first time with a Mexican company when AeroMexico puts four into operation after leasing them from GE Commercial Aviation Services (GECAS).The ERJ 190 aircraft is configured with 99 passengers in dual-class seating – 11 executive class and 88 coach. Deliveries are scheduled to begin during the second half of this year. The acquisition is part of the fleet renovation and expansion program of the Mexican consortium, which includes Aerolitoral, a subsidiary that currently operates 27 Embraer ERJ 145 jets on low-density regional, domestic and international flights out of Mexico's Monterrey International Airport. AeroMexico and Aerolitoral are part of the AeroMexico Consortium, created in January 2006. This order was already included in Embraer's backlog

LH Orders ERJ 190
In an order worth $2.76 billion, Lufthansa ordered 30 Embraer ERJ 190s with the option to take any member of the E-Jets family. Lufthansa’s order replaces the recently cancelled Swiss order for 15 ERJ 170s and 15 ERJ 190s. The first ERJ 190 delivery is scheduled for January 2009 and will be configured with 100 seats in a dual-class layout with a movable partition. The aircraft's range of 2,400 nautical miles (4,448 kilometers) enables it to fly from Berlin to any city in the European Union, as well as to several destinations in the Middle East, Northern Africa and Eastern Europe.

JAL Takes ERJ 170 for J-Air
Japan Airlines ordered 10 Embraer ERJ 170s for its regional subsidiary J-Air. The order, part of the Japanese airline's restructuring plan and rightsizing strategy, includes another five aircraft for a total order value of $435 million. The aircraft, fitted in single-class configuration, are scheduled for delivery in 2008 to service the airline’s regional network.

Alpi Eagles Confirms five ERJ 195s
Italy's Alpi Eagles, the launch customr for the high-capacity version of the ERJ 195, confirmed five options for the ERJ 195 from its original order for five firm and five options, announced in March. The value of the confirmed options is $182.5 million. Delivery of the 10 aircraft is set to begin next April. The ERJ 195 will be serving the airline's intra-European routes, configured in a single-class, 122-seat interior. On March 31, 2007, the E-Jets family order book had logged 630 firm orders and 558 options, totaling 1,188 aircraft to 32 customers in 22 countries.

Paramount Set to Take $2B in Embraer Aircraft
Paramount Airways, the first airline to use the Embraer ERJ 170/190 series in India, is set to place an order 40 more Embraer 170s over the next three years, after Managing Director M. Thiagarajan met with Brazilian President Luiz Inacio Lula da Silva, recently. The airline currently has a fleet of five Embraer jets including two ERJ 170s.
Paramount flies 1600 flights every month including transit flights amongst eight destinations in the South. Deliveries to the Chennai-based carrier, would be scheduled between 2008 and 2011 after the agreement is signed next month. The airline began operations in 2005 and plans to expand across Western India.
“We want to focus, saturate and dominate the southern region first,” Thiagrajan told local press. “Then move on for a pan-India presence by 2011.''
He also indicated the airline wants to acquire another airlines. ''We want to expand into western India later this year and if (acquisition) opportunities arise in the west, we will be more than happy to go for it.'' However, he would not comment on a GoAir proposal made to Paramount, a deal worth $150 million. Local press noted three mergers in the last three months in India including Jet Airways' acquisition of Air Sahara, a purchase of 26 percent stake in Air Deccan by Kingfisher Airlines, and amalgmation of government-owned Air India and Indian Airlines. The mergers, it said, prompted GoAir, SpiceJet, Indigo and Paramount to search for growth strategies such as merger or finding additional investment.
Paramount plans further aircraft in the next five years for a fleet of perhaps 55 to 60 aircraft and may look at developing its own maintenance capacity to replace that done now by Embraer in Portugal.
In related news, Civil Aviation Minister Praful Patel called for increased U.S. investment in Indian aviation infrastructure in a speech before the U.S.-India Business Council (USIBC) in Washington, DC. "We will have to work very actively in infrastructure," stated Minister Patel, "We need to create our own hubs [including] a cargo hub in Nagpur," to support India's booming logistics and shipping sectors.
USIBC President Ron Somers lauded Patel for his achievements in stimulating India's aviation industry and his new aspiration to develop a network of 400 modern international, domestic, and municipal airports across India by 2020.
"India's passenger and cargo airlines experienced phenomenal growth rates last year, and Minister Patel recognizes the importance of supporting these airlines by developing sufficient infrastructure," said Somers. "Equally as important, we have a true two-way street for US and Indian carriers, with Jet Airways and other Indian airlines opening international flights between our two countries."
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