Paris Air Show
Aerospace |
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American
Eagle $1.4 Billion Order Split Two Ways EMBRAER
During the conference, a beaming Mauricio Botelho, president and CEO of Embraer, emphasized the importance of the contract for the future of his company and the EMB 145, stating, "The [EMB 145] project did survive, was certified, did deliver according to expectations, and will be present in the future. This order reaffirms our product's strong position in the market."
In response to questions as to why Embraer had been selected over Bombardier to supply the 50-seaters, American Eagle's Vice President of Planning Peter Pappas said, "We conducted an analysis that included everyone from pilots to passengers. We left no overhead bin unopened and no landing gear tire unkicked. At the end of it all, Embraer emerged as our choice." Pappas downplayed the issue of cost per plane, but did admit, "Price is always a factor." Deliveries of the aircraft begin in February of 1998 and could be in service as early as May of the same year. Pappas noted that the 42 firm orders were for growth purposes but there was potential for the optional planes to be used as replacements for American Eagle's aging fleet of Shorts 360s. The aircraft will be used initially to serve the airline's most competitive routes in Chicago and Dallas/Fort Worth. A minor note of the press conference -- Embraer posted a loss for the first quarter of this year, a situation Botelho blamed on a delay in certification resulting in three planes left undelivered. The Embraer CEO did say the company will recover losses this quarter, and the American Eagle order "assures a long term production schedule and security for the company." American Eagle seemed equally pleased with the Rolls Royce Allison engines which will power the EMB 145s. While the order was a package deal that included Rolls Royce, Pappas voiced strong support for both the AE3007A and AE3007A1 engine models. The latter version will be used in the EMB-145LR, an engine Embraer says will "improve climb and hot weather performance" on the long range jet still in the development stage.
BOMBARDIER
Deliveries of the aircraft are scheduled to commence in early 2001, with 17 of the planes slated to be delivered in the first year. The remaining 8 aircraft are planned to arrive in 2003.
The CRJ 700 is Bombardier's first 70-seat aircraft. The new plane has already gathered 117 combined orders, options and MoUs with certification still nearly 4 years away. The CRJ 700 had little competition for the order, American Eagle acknowledged, although Embraer has plans to develop its own 70-seater. American Eagle didn't seriously consider the Embraer model, Pappas noted, because, "the airline can't be assured the plane will ever materialize." Aero International Regional also markets a 70-seater, which AMR Eagle representative said was merely "evaluated," but was never in the running for the contract.
Pappas did not refute Bombardier's claims that pricing was the key issue in giving the contract to Embraer, but focused rather on disputes his company had with Bombardier over the degree of commonality between the 50 and 70-seaters. GE and Rolls Royce split business as well on the two American Eagle orders, as GE Engines will power the CRJ 700. After being forced to streamline their operations a few years back, American Eagle claims they have emerged as a "leaner, more competitive, more viable airline system." Progressing through what the company deems the "Renaissance of American Eagle," representatives cite both the Embraer and Bombardier orders as signs of the airline's dedication to expanded its facilities and services. The company has also allocated $12 million to expand the Chicago concourse with plans to add 17 jet bridges. American Eagle was founded in 1984 as American Airlines' regional affiliate.
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Embraer was the
first to announce its American Eagle deal worth approximately $700 million
in definite sales and close to $1 billion total, including options. The
order confirms early speculation that Embraer would indeed receive the contract,
although previous reports suggested the company would get the entire 67
plane order. Instead, American Eagle negotiated a deal for 42 firm orders
for the EMB 145 with options for 25 additional aircraft.
Immediately following
Embraer's American Eagle contract announcement, Bombardier held a press
conference to announce its own deal with the airline. While American Eagle
chose Embraer for its 50-seaters, Bombardier captured an order for 25 of
its 70-seat Canadair Regional Jet Series 700s with an option for 25 more.
Coincidently, the deal is worth an estimated $700 million for scheduled
deliveries - same approximate figure given by Embraer for it's American
Eagle contract - but $1.4 billion total if options are exercized. The contract
for the CRJ 700 is Bombardier's first in North America for the new 70-seat
regional jet.
Bombardier officials also fielded questions concerning Embraer's victory
in the battle for the AMR Eagle 50-seater contract. In stark contrast to
previous statements by American Eagle representatives, Bombardier cited
price as the major contributing factor in the airline's decision to go with
Embraer. Robert Brown, president of Bombardier, stated, "The commercial
terms [for supplying the 50-seater] were not acceptable to us, primarily
because of pricing." Brown also implied Embraer had slashed its prices
dramatically to get the contract, adding "We don't believe that our
competition can continue to operate in the same fashion and still remain
competitive."