Brazilian commercial aircraft manufacturer Embraer S.A. ERJ has delivered the first consignment of two E195 jets to China’s Tianjin Airlines as part of a sales agreement signed in 2014.
The agreement involved supplying 20 E195 and 20 E190-E2 jets. At present, Tianjin Airlines is the largest operator of the Embraer E190 fleet in China with 45 aircraft. It intends to expand its fleet of E-jets encouraged by the latter’s superior operational economics.
Embraer continues to witness strong demand for its E-jets, booking several orders in the third quarter. Year to date, the company has booked a total of 146 firm orders, which include 20 new orders placed in the third quarter. This comprises an order of 18 E175s from SkyWest to be flown by United Airlines and 2 undisclosed orders for E190s. Currently, E-Jets are flying with 70 airlines from 50 countries, holding a 60% market share, based on deliveries, in the segment of jets with a capacity of up to 130 seats.
Embraer Commercial Aviation holds an 80% share in the Chinese regional aviation market. Year to date, Embraer has 224 firm orders in China and believes robust growth in the regional Chinese aviation industry will further boost demand. In its current 20-year market outlook, it projects deliveries of jets in the 70–130 seat category to be 1,020 between 2015–2034 in China and worldwide deliveries in the same category touching 6,350 jets.
However, Embraer operates in a highly competitive commercial aircraft manufacturing industry dominated by two companies – The Boeing Company BA and Airbus Group SE EADSF – with a long operating history as well as an established reputation. This requires Embraer to invest steadily in technology and performance enhancement to meet the growing demand. Measures to retain market share while remaining competitive involve substantial recurring costs for the company.
Zacks Rank
Embraer carries a Zacks Rank #3 (Hold). A better-ranked peer stock worth considering in the aerospace and defense industry is Leidos Holdings, Inc. LDOS, sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment