Embraer Gains Altitude on Strong 2017 Outlook

Embraer’s Slattery Sees Potential In Middle East

Embraer Commercial Aviation CEO John Slattery. Commercial Aviation CEO John Slattery sees great potential in the Middle East for regional jets, particularly the E2-family of aircraft Embraer currently is developing. “I want to get some E2s flying into the region as quickly as possible,”

Slattery tells ShowNews in an interview. “We need to deliver the E2 on time.” Slattery believes Embraer’s aircraft are perfectly suited to the Middle Eastern aviation market. Airlines in the region underutilize larger-gauge aircraft, sacrificing load factors and, ultimately, yields. In the Middle East, almost 80% of regional flights depart with fewer than 150 passengers, and only 21% have more than 150 passengers, Slattery says. “Forty-two percent of intra-regional flights depart with load factors below 70%,” he says. “They are flying aircraft that are more expensive on a trip basis, and they’re leaving 30% of the aircraft empty.”

The problem in the region is that operators are using aircraft that are too large for the missions they need to serve. “As airlines continue to add larger-gauge equipment with higher trip costs, they’re all under pressure to not increase frequency,” Slattery says. Most markets in the Middle East would be better served with smaller aircraft and greater frequency, he says. “If you reverse engineer [average passenger traffic] onto an Embraer 190 or 195, you’d be flying with over 90% load factor,” Slattery says. “With that, trip costs would be 20% lower.” Slattery admits that this phenomenon—overcapacity—is not limited to the Middle East, but it is particularly prevalent here. “It certainly seems to be a philosophy that has been adopted there now,” he says. In addition, because load factors and yields are low, airlines are ignoring potentially lucrative markets.

Without going into specifics, Slattery notes that 40 markets in the Middle East do not have direct air service, and several markets served by airlines have less-than-daily operations. By rightsizing and matching demand to capacity, airlines can unlock the potential of these markets, he says. Embraer predicts the market for 100-150-seat aircraft in the Middle East could be as many as 350 aircraft over the next 20 years. Of that, he thinks Embraer could deliver between 70-150 aircraft. “Sixty percent of the markets that are served are served with less-than-daily service, Slattery says. “When you’re flying with a low load factor, you may be flying with lower yields from the lower load factor and…by definition flying massively higher trip costs,” he adds. “It is likely that you are limiting…frequency.” In time, Middle East operators will focus on lower trip costs, and higher yields, he predicts. “That’s what they’ll embrace more directly in the coming years and decades. The true concept of regional productivity and regional aviation.” This evolution will allow Middle East carriers to “develop existing mature markets that are just simply not big enough on the passenger trip-per-day,” Slattery says. Now, “airlines are eating a lot of dollars in the air by flying aircraft that are too big and too heavy.” The E2 family is well suited […]

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