E2

“That’s a very good number, spread out across the world, from Asia, including China, to North America, Europe and elsewhere. Reception in the market has been excellent. ” Add to the mix the fact its major competitor in the regional jet space, Canada’s Bombardier, is navigating financial strife and poor sales performance and the Embraer executives have plenty to fuel their optimism.

Embraer executives make another point. Unlike the experience of some other manufacturers with new aircraft or derivatives, there have been no delays or changes to the promises being made to potential buyers of the E2 range. The program agenda and timing, as well as the performance, fuel and maintenance savings projections all remain exactly the same as when it was first launched at the Paris Airshow in 2013. And development costs, to the surprise of some analysts, are remarkably low – some A$2. 3 billion – when compared to the suggested A$4. 8 billion for Boeing’s 737 MAX and A$2. 7 billion for Airbus’s A320neo.

“Why do we have a different experience from other OEMs (original equipment manufacturers)? asks Slattery. “Because the tacit knowledge we have of delivering new aircraft programs is now very sophisticated at Embraer and I would argue that the E2 is very close in most respects to a clean sheet design. New wings, new landing gear, new empennage, new systems, new engines of course. So this is an enormous program for Embraer. This is not one wing we have stretched over three platforms, it’s actually three wings. So the concept of right-sizing that Embraer talks about, we have applied it more than any other OEM in the world to our airframes. Every airframe has a right-sized wing for its mission and operation. ” The launch of the first E2 is a significant landmark for Embraer. The original family included four variants, the E170, E175, E190 and E195. The E2 has only three variants, the E175-E2 at a list price (2016) of A$69. 5 million, the E190-E2 at A$79. 6 million and the E195-E2 at A$89. 7 million.

The first to be rolled out, the E190-E2, is a 97-seat aircraft in two-class configuration (106 in single-class) with a range of 2,800nm. First flight is scheduled for the second half of this year and entry into service in 2018.

The E195-E2 seats 120 in a two-class configuration or 132 in single-class. It will make its first flight in the second half of 2017 with EIS slated for 2019.

The E175-E2, with 80 seats in a two-class configuration and 88 in single-class has a range of 1,920nm. It will make its first flight in 2018 and enter service in 2020.

All will be fitted exclusively with Pratt & Whitney’s new geared turbofan (GTF) engine, the 175 with the PW1700G with a 142cm diameter fan and the two larger aircraft with the PW1900G, which has a larger 185cm diameter fan.

Even the fact that P&W has been having some issues with the engine doesn’t seem to be troubling Embraer. The PW1100G version has encountered problems during flight trials on Airbus’s A320neo, with flight test with the engine suspended from early May through August last year as P&W dealt with difficulties involving a seal in the area of the high-pressure compressor.

But Affonso said Embraer is “very happy” with its engine selection.

“Ours being not the first application of the engine is proving positive in the sense that as in any new development there are teething problems. But they are being solved before our flight test campaign and our entry into service”.

Amid the glitz of the E2 roll-out there was even better news for prospective operators. The largest of the family, the E195, is getting some critical design alterations to significantly improve its performance. The maximum takeoff weight is being increased by 2,000kg to 60,700kg and the wingspan increased by 1. 4m to 35. 1m, increasing the aspect ratio and giving more lift and a better lift-to-drag ratio. This will improve its range from 2,000nm to 2,450nm from normal airports and add around 250nm of range from hot and high airports.

Why extend the wing and not just add a winglet? “The aerodynamic design has evolved over time and we believe the most efficient wings are wings without the winglets,” explained chief operating officer Luis Carlos Affonso.

“If you can increase the span that is the most efficient way of having an efficient wing so that was what we did. On the 195 we felt we still could increase the span a little bit under the same philosophy of not using a winglet. For sure it introduces additional loads to the wings and of course we are still designing the aircraft, so we will go to the static tests and get detailed calculations and we will know more as we grow but we believe the impact will be minor. ” The changes are significant because the E195-E2 was originally designed to have a shorter range than the first generation E195. From a customer point of view, the new generation aircraft now has a similar range but with the benefits of improved fuel consumption and maintenance costs.

All of the Embraer executives insist the E2s are much more than re-engined aircraft. “It’s a very different aircraft from the current generation,” says Affonso. “It has new engines, completely redesigned wings, new landing gear to make room for the bigger engines, new empennages, a beautifully redesigned new interior and it is full fly-by-wire. The current generation is fly-by-wire but not full fly-by-wire. But in between we have designed the Legacy 500 (business jet) and the KC-390 (military transport) which are full fly-by-wire so with a very low risk we are able to introduce full fly-by-wire to the E2. ” The air management system and the auxiliary power unit (APU) in the E195-E2 are also being “beefed up” to make the atmosphere more comfortable for the larger number of passengers it will carry.

Commonality between the E1 and E2 series has also been a key consideration. While there are significant improvements to systems and avionics the look of the cockpit is designed to make the transformation for pilots comfortable. Indeed, pilots flying the first generation of E Jets can transition to the new aircraft after a short three-day course that doesn’t even include simulator training… and if required they will be able to fly all three variants on the same day.

“The cockpit is based on the current cockpit but has bigger displays, bigger computer memory, moving maps, synthetic vision and other capabilities the current avionics don’t support. But the symbology is the same with the same colours so pilots will feel at home,” Affonso added.

For operators, the increased efficiency, both in terms of fuel and maintenance, is impressive. Fuel burn per seat on the E175-E2 and the E190-E2 will be 16 per cent better than their predecessors and on the E195-E2, 24 per cent (because of its higher number of seats). Maintenance cost improvements per seat are 20 per cent on the E195-E2, 15 per cent on the E190-E2 and 25 per cent on the E175-E2. The main drivers of these reductions are a combination of engines, wings, more seats and full fly-by-wire.

“But the second generation E-Jet is much more than fuel cost reduction,” says Affonso. “We are improving on a cost per seat and cost per trip basis and what is really remarkable is that the E195-E2 is now at about the same level of cost per seat of a much bigger aeroplane like the A320neo. How can we do that? Because they are changing only the engine and we are investing in much more, such as the wings. So on a relative basis we have become closer to the narrowbodies because they are investing less in their new generation aeroplanes. ” One area where Embraer has been placing a lot of time, effort and money is customer and after-sale support. With the E2 series there will be hugely increased connectivity between the aircraft and Embraer specialists – whether in the air or on the ground. The aircraft will generate far more data for analysis.

New wings, new landing gear, new empennage, new systems, new engines.

“The systems have more sensors and are providing more data. We have the ability to transmit this data and interpret it for many applications. We already have prognostic analysis of data on the current series and can forecast whether something is about to fail, turning an unexpected event into a scheduled event. The logic on the E2 is the same. The difference is that we will have more systems and components providing data so we will be able to identify more line-replacable units that will be about to fail, with more opportunities to transmit that, even in flight. We are also beefing up our capability to analyse this data. ” Sales chief Slattery adds that one of Embraer’s key strategies is to spend a lot of time and money on its after sales support organisation. “We enjoy a global dispatch reliability that is over 99. 3 per cent. That doesn’t happen by accident. That happens because we are spending a lot of time on it. ” As for sales, Slattery is as bullish as any other big jet salesman. “The analogue of success for an airframe OEM is simple,” he says. “You have got to match how many aircraft you are selling with the fact that you maintain your profitability… We are a sustainably profitable organisation. We are delivering a lot of aircraft and selling a lot of aircraft. Frankly, delivering aircraft is more important than selling an aircraft because that’s when the bulk of the revenue shows up. ” And in March the Brazilian planemaker showed it is still pulling in profits despite some financial downsides. It booked a 22 per cent rise in fourth-quarter (ended December 31) net income, boosted by a more profitable sales mix and currency effects. Profit rose from a year earlier to A$151. 2 million, even though the company had to set aside money to cover potential losses from the Chapter 11 bankruptcy filing of major client Republic Airways. It is forecasting gradual sales growth this year due to solid demand for its jets and new executive aircraft, saying net revenue should rise to between A$8. 2 billion and A$8. 7 billion from A$8 billion last year despite weaker sales from its military division.

Embraer has come a long way since it launched the 50-seat ERJ 145 back in 1989, Slattery stresses. “To make the strategic shift in their product positioning from the 50-seater regional jet to a much larger aircraft was a very bold and brave move. Boldness is one of our cultural values at Embraer and that was exemplified in that move back then. What we are doing now with the E2, my sales force and the marketing team and myself, I would argue we should have a much easier job than what Embraer had back then… We have 70 customers in 50 countries and that is an enormous tailwind that Embraer enjoys today. ” Slattery says Embraer’s focus is adding new operators. “I am indifferent whether new operators join us by flying new E-Jets or aircraft they have received pre-owned from another airline or from a leasing company. I am razor-focused on adding new operators in new jurisdictions and that is a key part of our mantra now across the Embraer group. ” He has his sights set on significant sales and not only to “regional” airlines. In fact Slattery eschews the idea of categorising the new series as “regional jets”.

“I say a smaller aircraft and not a regional jet because in my opinion certainly the 190 and 195 are not regional jets. These are aircraft being operated very comfortably, complementing larger narrowbodies but operating comfortably in network carriers. ” These network carriers already include the likes of Delta in the US as well as Air France/KLM, Lufthansa, British Airways and Alitalia in Europe. But he dismisses suggestions that by moving up into the 120-130 seat zone Embraer is competing with Boeing and Airbus as well as its smaller competitors.

“It is not our strategy to compete with Boeing and Airbus,” Slattery insists. “Our strategy is to address the market that is below Boeing and Airbus and not just to address that market but to maintain a market-leading position. ” Even though the big two produce narrowbodies – such as the A319neo – with seating below that 130 level, he doesn’t believe there is direct competition.

“Our space is clearly defined from the 70-seat to 130 seats. We have an anchor and a hook in that clearly defined space. Maybe some of our other competitors, perhaps their space or niche might not be as clearly defined in the eyes of the customers. I don’t think Boeing and Airbus are considering Embraer as a threat. We’re not positioned in that way. I rarely, if ever, come across either Boeing or Airbus in a campaign. ” Slattery says that from 2004 to the end of last year, Embraer had 52 per cent of net orders in the 70-130 seat category, with principal rival Bombardier holding 23 per cent, China’s COMAC 10 per cent, Sukhoi 8 per cent and Mitsubishi 7 per cent. In terms of deliveries, Embraer had 60 per cent, Bombardier 32 per cent and only 8 per cent under the “others” category. It should be pointed out, however, that COMAC and Mitsubishi aren’t delivering any aircraft yet and Sukhoi has hardly made a dent in sales to Western operators.

Not surprisingly, Embraer also regards Asia as a prime target for its salesmen. At the recent Singapore Airshow it released its market focus for the region, saying carriers there, including China, will take delivery of 1,570 new jets in the 70 to 130-seat segment over the next 20 years (valued at US$75 billion at list prices), representing 25 per cent of the worldwide demand for the segment in the period. The global market will require 6,350 new jets in this category, worth some US$300 billion.

Embraer president Silva believes the 70 to 130-seat jet segment will play a key role in supporting the intra-regional development in Asia Pacific. “We are showing to airlines the benefit of moving from ‘red oceans’ to ‘blue oceans,’ that is, to move away from a crowded marketplace and seek out opportunities in markets that are currently underserved, or not served at all, where yields are also stronger, moving from one to two digits. ” Embraer sees untapped opportunities in Asia Pacific, where more than 250 markets, or 30 per cent of narrowbody exclusive markets are served with less than one daily frequency.

“Markets like these would be better served with 70-130 seat jets, based on the average number of passengers per departure. Also, 37 per cent of intra-regional turboprop capacity is offered on routes longer than 200 nautical miles, which are better suited to jet operations, due to their higher network productivity, better operating economics, and superior passenger appeal. Another opportunity in the region is the replacement of ageing fleets, where there are more than 250 jets in the 50 to 150-seat category with over 10 years of age, which will become targets for replacement in the near future. ” Speaking at the rollout in São José dos Campos, Silva also said he has seen no signs that the current low level of fuel price has put airlines off from ordering or considering new aircraft.

“We are in a very uncertain environment. 2016 started in a different tone (referring to economic conditions and stock market declines). Everybody is still astonished about all the issues going on. But I haven’t yet had any indication of any postponements or a desire not to buy new aircraft. Not yet. I think we are in an industry where it is necessary to have a medium to long-term view. Our cycle is very long. No airline will buy aircraft for two or three years only. The view is for 10, 15, 20 years.

“Aviation will continue to grow… There is no question that even with emerging markets growing less, aviation will still grow. When we look at China, for instance, it was growing in terms of its economy at 11 per cent but is now six per cent. However, aviation is still growing at double digits and there is huge need in China for aircraft. We may see some bumps or a soft downturn but I think the trend is upwards. ” So, with all this optimism, how does Embraer feel about Virgin Australia’s decision to reduce its Embraer fleet from 18 to 13 by withdrawing five 98-seat E190s from service and selling six E170s it has been sub-leasing to Delta? “People will always want to talk about the example where one airline is taking aircraft out of the fleet,” Slattery responds. “I can give you 20 examples where airlines are adding the same amount to their fleet. Air France/KLM, Japan Airlines and British Airways are all examples of airlines adding to their Embraer fleet last year. I never like to see aircraft exiting an operator but here’s the flip to that: those aircraft – I won’t say where they are going – but typically when we see aircraft exiting from an operator we work very hard to make sure that they are populated into a new operator for the Embraer group. ”

I don’t think Boeing and Airbus are considering Embraer as a threat. JOHN SLATTERY