Lessors see significant potential for Embraer E2 in the Middle East

The Gulf region is underserved by regional aircraft of up to 150 seats. So there should be huge potential for Embraer to capture market share in the coming years with its E2-family. That’s the view some lessors shared on Sunday in Dubai during the Embraer Symposium. The Brazilian OEM held the event one day before the Dubai Airshow kicks off. “There is huge relevance here and perhaps there is underrealized potential. Other regions in the world have a 60/65 percent to 40/35 percent split between widebodies and narrowbodies. Here in the Gulf region, it is 90/10 percent. So there clearly is untapped capacity in this part of the world. Regions are domestically and internationally that are underserved,” said Tom Gathercole of Aircastle. The lessor has a portfolio of 19 Embraer E195-E1s and E195-E2s. He added: “I think aircraft like the Embraer E2 can play a huge part in the growth of this region. Aviation is clearly at the epicenter of a lot of strategic growth strategies that we are seeing for 2030. Connectivity is key to facilitating those kinds of strategic missions. So these aircraft absolutely have a place in this part of the world.” Currently, SalamAir in Oman and Royal Jordanian are the only Middle East airlines to have ordered E2s, while in Africa, Nigeria’s Air Peace is already operating E195-E2s. Madagascar Airlines has three E190-E2s on order from lessor Azorra. Without identifying potential operators, Gathercole sees many more airlines ordering the type. The first generation of Embraer E1s is in service with a number of Middle East carriers like Royal Jordanian, Saudia, M1 Travel in Lebanon, CIAF in Egypt, and Petro Air in Libya. However, the General Electric CF34s have struggled to meet the performance requirements in the hot and sandy environments in the region. Gathercole said this is less of an issue with the Pratt & Whitney Geared Turbofans, although the engine has a hard time in Abu Dhabi on A321neo fleet of Wizz Air Abu Dhabi. Regional jets product offering Niall Haydon of Perseus Aviation, which was formed this year by entities related to Apollo Global Management, added that the so-called cross-over jets offer passengers a better product. “Some of these routes were previously served by turboprops. That’s an offering that wouldn’t be necessarily acceptable to customers in the Middle East, where airlines have a certain standard of product offering and people tend to travel with a lot more luggage. In terms of not just meeting the right seat costs but also the right product as well as developing some of these routes, regional jets are quite an interesting opportunity.” CEO Ted O’Byrne of Saudi lessor AviLease subscribes to this view. The company has just grown its aircraft portfolio to 167 aircraft after completing the acquisition of Standard Charters, but this doesn’t include any Embraer E2s. Although the E2 hasn’t been purchased by any Saudi airline, a regional jet could play a welcoming role in Saudi Arabia’s Vision 2030. This policy sees the number of passengers carried by Saudian airlines grow to 300 million in a decade’s time. “Very clearly, the impact of having smaller gauge aircraft that serve domestic markets is really important. The goal of the Saudi Arabian authorities is really to bring the right gauge aircraft to serve the larger hubs, so we can triple the number of passengers by the end of the decade,” said O’Byrne. He didn’t say if AviLease is planning to add E2 to its portfolio. Tom Gathercole said that airlines in the Middle East operate some 1.500 aircraft right now and have another 1.200 on order. “You can from that statistic that there is a huge scope for growth here. That’s only on direct orders by airlines. There is obviously a huge opportunity for lessor placements as well. This is a region where the cost of funds is particularly important. That’s mainly the lessor game to get costs as low as you can and diversify your sources of funding.” Market potential Embraer’s Head of Product Marketing, Vagner Ricardo, focused on the potential of the Middle East market. Of the 11.000 aircraft in Embraer’s 2023-2042 market outlook (8.790 regional jets and 2.210 turboprops), eight percent or 920 aircraft are guided for the Middle East and Africa. In the Middle East, 50 percent of the fleet is narrowbodies, 38 percent is widebodies, and six percent is small narrowbodies. Only three percent are regional jets in the 50 to 150 seat category, one percent RJ’s below 50 seats, and two percent are turboprops. According to Ricardo, there is huge potential for regional jets, as 61 percent of all regional routes are served only once a day, while 25 percent of the market has load factors below 70 percent and are loss-making. Another number: 55 percent of the flights have an average gauge of 187 seats that can be served best by a cross-over aircraft like the Embraer E2. The airframer claims the E2 has lower operating costs than the rivalling Airbus A220 family. “There is a clear capacity gap between current and future fleets, there is a clear requirement for an aircraft size that fits better in the Middle Eastern market. Over 1.000 interregional routes can be better served in terms of frequencies if the right aircraft is introduced. And there is a strong potential to develop these thin routes,” concluded Vagner Ricardo.

No results