Brazilian airplane manufacturer Embraer SA (ERJ) said NetJets Inc., a Berkshire Hathaway Inc. (BRK.A) (BRK.B) company, has converted purchase options for 10 Signature Series Phenom 300 into firm orders. Embraer – a global leader in manufacturing up to 130 seat airplanes – is set to exit 2014 on a positive note on this $89.55 million contract.
The order from the Berkshire Hathaway company is a part of a purchase agreement signed in Oct 2010. Per the agreement, NetJets Inc. placed 50 firm orders and 75 options for Embraer airplanes. If all the options are exercised the value of the deal will touch nearly $1 billion.
Signature Series Phenom 300, a premier light jet, is gaining worldwide popularity on the strength of the customer comfort it offers. Features like distinct temperature zones for pilots and passengers, a wardrobe and refreshment center, voice and data communications options, and an entertainment system add to this aircraft’s special appeal.
NetJet Inc. is a leader in the private jet business with 36 Signature Series Phenom 300 airplanes already in its hangar. The deliveries of the new jets will begin from Jan 2016.
Embraer exited the third quarter with an order backlog of $22.1 billion. The current order will further increase its backlog. In Nov, 2014, Embraer received a sizeable order from SkyWest, Inc. for seven E175 jets worth $301 million.
Commercial airplane demand is going to increase significantly in the next two decades, per a report from The Boeing Company (BA). While the larger and more fuel-efficient airplane demand will be primarily met by Boeing and its French peer Airbus, Bombardier and Embraer will do well in the business jet category. Bombardier forecasts delivery of 22,000 business jets, valued at nearly $617 billion, over the 2014 -2033 time frame.
Embraer SA currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Engility Holdings, Inc. (EGL), currently sporting a Zacks Rank #1( Strong Buy).
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