Embraer announced yesterday, as expected, that it will re-engine the relatively young (7 year old) E-Series of jets with new technology engines to make them more competitive with the similarly sized Mitsubishi Regional Jet and Sukhoi Superjet, and the larger Bombardier CSeries, A319neo and 737-7Max, all of which feature new technology engines.
Embraer had been considering developing a new aircraft in the 120-140 seat range to compete directly with the Bombardier CSeries, but concluded that they did not want to compete head to head against Boeing and Airbus in addition to Bombardier.
An engine announcement has not been made, but the two obvious candidates are the GE Passport (formerly TechX) that will power the Bombardier Global Express 7000-8000, and the PW1000G Geared Turbofan from Pratt & Whitney that powers the Mitsubishi Regional Jet, CSeries, Irkut MS-21 and A320neo. With the current ESeries powered by the GE CF34-10, we believe the incumbent manufacturer should have a leg up in the competition, but the lack of a decision upon announcement is surprising. After all, the fundamental element in a re-engining program is the engine itself. Perhaps Embraer feels competitive pressure with its existing and potential customers.
The ESeries has proven to be a best seller for Embraer, with more than 1,000 orders in a relatively short period of time. While it is quite early in the life of a program for a change in engines, the ESeries was introduced just before the next generation of engines was ready for introduction, and thus is the newest design with old technology engines. Bombardier had considered a competitive offering at that time, but deferred its CSeries in favor of new technology engines, enabling Embraer to secure a significant customer base in the interim.
The Mitsubishi Regional Jet, with new technology PW1000G engines in a similar sized aircraft, offers better economics for regional carriers and appears to be slowly building momentum as the conservative Japanese have begun a more aggressive marketing campaign. Faced with unfavorable economic comparisons, Embraer determined that it must re-engine its product to remain competitive.
We view this as a positive development for Embraer, which can now better compete with the new technology MRJ and CSeries aircraft, significantly narrowing the economic disadvantage between the aircraft.
The decision not to compete with the CSeries is also a positive for Bombardier, although Embraer’s unwillingness to compete head to head with Boeing and Airbus indicates the difficulties of competition with the large incumbents in the marketplace.