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Monday, May 26, 2008

Russian, Chinese Certification for ERJs, Market Analysis

On the eve of its first delivery to Grand China Express, Embraer received certification, from the Civil Aviation Administration of China (CAAC) for the operation of the ERJ 190 and 195 in mainland China. The certification followed Russian certification of the ERJ 145. The ERJ 170 and 175 will be certified, according to market needs and as new orders are received from Chinese customers.
Chinese certification occurred on May 12, just days before the May 20 delivery to Grand China. The aircraft is configured to 106 seats in a single-class layout.
“This certification is one more important step for our E-Jets in the excellent and promising Chinese aviation market,” says Mauro Kern, executive vice president, airline market. “We see China’s domestic commercial fleet as very unbalanced, because of an excessive concentration on large-capacity aircraft. We have no doubt that the ERJ 190 and the 195 will be extremely useful tools for expanding and operating more efficiently the air routes in that country.”
Grand China Express is controlled by the Hainan Airlines Group, which will be the launch customer for the ERJ 190 in China. Grand China has an additional 49 firm orders for the 190 to be delivered over the coming years.
Embrear recently said that AVIC-I Commercial Aircraft Co., Ltd. (ACAC) ARJ21 regional jet will not satisfy the demand expected from the Chinese market. Related Story Embraer estimates that the Chinese aviation market will grow around 7.5 percent per year over the next 20 years, and that it will need 730 new airplanes with 30 to 120 seats, which will represent 10 percent of the world demand in this segment. In the 91- to 120-seat range of the ERJ 190, the Chinese market will need 450 new airplanes. Airbus forecast a need for more than 2,600 new passenger jets in China between now and 2028.
ARJ 21 has largely sold in the Chinese market with 180+ on order including General Electric's Commercial Aviation Services aircraft as the first major western customer. GECAS, whose parent company supplies the CF34-10A high bypass ratio turbofan engines, signed a preliminary agreement for five. AVIC-I recently announced the delay of the planned first flight of ARJ21-700, owing to the fact suppliers were unable to provide necessary test conditions on time. Currently, the company is making efforts to ensure on schedule delivery of key systems, including advanced flight system, to meet delivery targets in 2009. The ARJ21-700 is configured to seat 78 to 90 passengers. The company indicated first flight is not scheduled for September or October.
“Grand China Express has been operating eight ERJ 145 jets, since the first delivery in September 2007, which paved the way for further cooperation between the two companies,” said Grand China Express President Yu Wenyong at the delivery. “We are very pleased to take delivery of the first ERJ 190, which will fly for the first time in the skies of mainland China. You gave life to the bird; we will make it soar in the unbounded sky.”
In October 2007, Grand China Express received the 1000th jet of the ERJ 145 family, manufactured in Harbin, China, by Harbin Embraer Aircraft Industry Co. Ltd. (HEAI), a joint venture between Embraer and AVIC II. The Chinese airline has a total of 50 firm orders for the ERJ 145 jet.
Last week also saw the debut of Commercial Aircraft Corp. of China (CACC), expected to be involved in the 90-seat ARJ21, as part of China’s effort to enter the hotly competitive larger airframe contest. CACC was launched with a $2.72 billion cash infusion, a third of which comes from the state. Its goal includes the production of a 150+-capacity aircraft. In addition to state investment, the new company includes China Aviation Industry Corporation I (AVIC I) and China Aviation Industry Corporation II (AVIC II).

ERJ 145 Certificated in Russia
Embraer received final approval from Russia’s Interstate Aviation Committee (IAC) for the 37- to 50-seat ERJ 145 regional jet family – the 37-seat ERJ 135, the 44-seat ERJ 140, and the 50-seat ERJ 145 – paving the way for operating in the Commonwealth of Independent States. The certification also ushers in new marketing opportunities for used ERJ aircraft being replaced by larger equipment in the west. CIS includes Russia, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Ukraine, and Uzbekistan.
In its most recent Market Outlook, Embraer noted strong opportunities in the Russian airline market largely to replace an aging fleet of Eastern European-built commercial aircraft which average 23 years. Slightly more than 50 percent of these models are over 20 years old and there is an urgent need to replace the smaller capacity aircraft.
Embraer forecasts a need for 510 jets, from 30 to 120 seats, over the next 20 years in the Russia/CIS. The company expects 23 percent to support air transportation growth and 77 percent to replace older aircraft. This specific jet fleet will increase by 24 percent, from 485 units in 2007 to 602 by 2027, representing an important market opportunity.
“The certification of the proven ERJ 145 family in Russia is a tremendous achievement for Embraer and a great opportunity for us to serve an important market, which needs a sizeable replacement of aircraft,” said Antonio Campello, vice president programs – airline market. “The ERJ 145 family is perfectly suited for this environment, with a tried and tested platform, unmatched economics, and more than 1,000 units flying throughout the world.”