The case for regional jets

It’s not just about efficiency, Embraer argues that regional jets can help airlines improve customer service and increase revenue.

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By  David Ingham Published  January 9, 2003

Efficiency and customer service|~||~||~|Any traveller that has tried to take the Saudia flight from Riyadh to Dubai on a Wednesday or Thursday afternoon is familiar with the scenario — hordes of people, falling over themselves to get on a flight that is overbooked days in advance. If you’re a return traveller and you fail to reconfirm your ticket, forget it. You’re either in Riyadh for the weekend or will have to take the Abu Dhabi flight later in the day and then journey by taxi to Dubai.

The logical thing would be to increase frequencies, but sticking three hundred seater planes on short regional routes isn’t particularly cost effective unless you know you can fill them. Or, perhaps more to the point, a plane might not always be available when you need it.

One company that wants to provide a solution to the problem is Embraer, the Brazilian company famous in aviation circles for its ERJ 135, 140 and 145 models. Those products, which seat respectively 37, 44 and 50 people, have all carved out a niche for themselves in areas where aviation is often the most viable form of travel between two points in a country. Around one thousand have been sold to date, of which 620 have been delivered.

The case for regional jets, as they are called in the industry, is all about efficiency and serving the customer, as Frederico Curado, executive vice president, airline market, Embraer, explains. “The business case for smaller jets, anywhere in the world, is frequency. Instead of having one flight a day, putting in a 777, and it being packed with people, you can deploy more aircraft, more frequently throughout the day,” he says.

“It’s a concept that began in the US in the 1970s and is spreading throughout the world. The latest place to witness this kind of development is China, with more aircraft and higher frequencies,” he continues.

The concept of regional jets has proven so popular there that in December, Embraer entered an agreement with Harbin Aircraft Industry to ERJ 135/140/145 planes in the country. This is Embraer’s first industrial initiative outside Brazil. Embraer’s president and CEO, Mauricio Botelho, described the move as, “a landmark not just in the history of Embraer, but also in the history of both countries’ bilateral relations.”
||**||A new generation of regional jets|~||~||~|
Confident that the message about regional jets is getting through, a new generation of aircraft is currently under development, the Embraer 170, 175, 190 and 195. These new models, which seat 70 to 110 people, target a segment that Embraer, in Curado’s words, sees as, “wide open.”

The first model, the 70 seater Embraer 170, will enter into service sometime in 2003. The company says it already has around 100 firm orders for the new planes and around 200 options.

Curado sees the primary competitors in the 70-110 seat segment as Airbus, Boeing and Bombardier, yet he is confident the company can gain market leadership. “We see this segment as a big opportunity because there are no products available, so we have been investing heavily since 1999 in the development of the four models,” he says.

But is the message about regional jets getting through here in the Middle East? After all, most Middle Eastern airlines, with the notable exception of Emirates, have not traditionally paid too much heed to the idea of efficiency and customer satisfaction.

“I believe airlines in the Middle East will look at this very seriously,” says Curado. “When you increase frequencies, you actually increase demand because people are given a service they would not have otherwise. Typically, [regional jets] are also used by higher yield passengers.”

If you don’t believe Curado, consider this quote from Chautauqua Airlines, a small local airline based in Indianapolis. “Regional jets made sense before September 11, and we think they make even more sense afterward,” says Warren Wilkinson, marketing vice president at the airline. “They can operate the same mission with a reduced level of seats to make it economically viable.” Edmund Greenslet, publisher of The Airline Monitor, adds that, “The regional jet phenomenon… does provide real advantages on some routes.”

Of course, in the aftermath of September 11, regional jet makers suffered with the rest of the industry. However, whereas Boeing had to cut 30% of the jobs at its commercial aviation business, Bombardier had to cut 10% of its workforce (3,800 people) and Embraer released 1,800 staff, around 14% of its workforce.

Looking forward, the company is positive about its future prospects. On September 30, 2002, it reported that its overall backlog for firm orders was worth around US $9.6 billion.

Embraer estimates that 8,610 commercial regional jets (defined as planes with 30-120 seats) will be delivered worldwide between 2003 and 2022, at a market value of an estimated US $180 billion (see boxes.) The Middle East & Africa region will account for an estimated 250 of those deliveries over the twenty year period. Over the next ten years specifically, Curado says the company aims to move between 60 and 100 models just in the Middle East.

If the idea of regional jets does take off in the Middle East, Embraer will undoubtedly benefit. So too may members of the flying public, who may more easily find another flight available when the one they want to take is full.||**||

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