Embraer’s Aircraft Are Perfect For Airlines Right Now

Could Embraer aircraft be the solution for airlines looking to break back into the recovering market? The smaller…

Embraer’s Aircraft Are Perfect For Airlines Right Now

Could Embraer aircraft be the solution for airlines looking to break back into the recovering market? The smaller fuel-efficient aircraft are cheaper to operate than bigger Boeing and Airbus planes, easier to fill with passengers, and more readily available.

Embraer could be the solution for the aviation market to recover. Photo: Embraer

Why would smaller aircraft be better?

As the aviation industry starts to make plans to resume services across the world, airlines are collectively reexamining their fleet operations. Embraer has stepped in to showcase its product offering, suggesting that its smaller aircraft would be cheaper to operate and suit the recovering market better.

With less demand for air travel, airlines are finding that they have way too much fleet capacity on their hands. They have aircraft that can regularly fly up to 200 passengers (variants such as the Airbus A320 and Boeing 737), yet are struggling to get over 100 passengers onboard.

According to new data published by Crirum, 45% of the aircraft trips in the world are being performed by jet aircraft that seat 70-150 passengers, while only 34% of other flights are performed by bigger narrowbody aircraft. Widebodies achieve the remaining 21%.

Many of these trips are within the range of smaller aircraft (such as European regional flights) and don’t require the range offered by bigger narrowbody, or let alone widebody, aircraft.

Thus the solution might be to acquire some smaller aircraft that are better suited for these lighter operations until demand returns. Aircraft that Embraer has in abundance.

Embraer jet
Embraer aircraft are suited for the smaller 70-150 seater market. Photo: Embraer

What is the argument for Embraer?

Embraer is one of the world’s leading companies producing aircraft in the 70-150 passenger category, and they are well set up to offer aircraft to airlines until the industry recovers.

“The term “right-sized” has never been more appropriate. There is still a long way to go before we can claim victory over the crises, but, as the headwinds ease, airlines with right-sized aircraft will recover faster and stronger.” – Embraer in a press release

Besides, Embraer aircraft are cheaper to buy and rent, coming in on average 50% less expensive than an A320 or Boeing 737 at list prices.

  • Embraer Ejet 190 – $50.6 million (new)
  • Boeing 737-800 – $106.1 million (new)
  • Airbus A320 – $101 million (new)

Lastly, there is also a substantial second-hand market of Embraer aircraft, with over 1,500 of the type built.

It seems that airlines like Austria Airlines has taken Embraers suggestion, and is relaunching services using Embraer aircraft (as well as Dash 8s).

What about other aircraft?

The only other aircraft that would come close to the specifications listed above would be the Airbus A220. The only issue is that they are far more expensive ($81.3 million at list prices brand new), and there isn’t much, if any, of a second-hand market.

airBaltic will recover fast with its fleet of Airbus A220s. Photo: airBaltic

Airlines like airBaltic, who only operate the Airbus A220, are well set to take advantage of this lull in the market. If other airlines want to follow in its footsteps, then they will need to turn to Embraer to lead the way.

What do you think of this news? Let us know in the comments.

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This Virgin Australia Bidder Wants To Slash The Airline’s Fleet

A firm local favorite in the Virgin Australia bidding process is BGH Capital. The Melbourne-based private equity group…

This Virgin Australia Bidder Wants To Slash The Airline’s Fleet

A firm local favorite in the Virgin Australia bidding process is BGH Capital. The Melbourne-based private equity group has been the last of the currently shortlisted bidders to have their plans for Virgin Australia made public. But overnight their plans leaked out, and it looks like BGH wants to run a very slimmed down airline.

BGH Capital proposes relaunching Virgin Australia with as few as 15 aircraft. Photo: Getty Images

A report in Friday’s Australian Financial Review says should the BGH bid ultimately succeed, they’d initially re-boot the airline with a few as 15 Boeing 737s.

When Virgin Australia collapsed in April, it had a mixed fleet of about 130 aircraft, including 79 Boeing 737-800s. Around 30 of the 737s are leased.

Administrator keen to maintain the status quo

The airline’s administrator, Deloitte, and Virgin Australia’s management have been keen for the new owners to maintain much of the pre-existing capacity. The other three bidders, Bain Capital, Cyrus Capital, and Indigo Partners, have mostly gone along with this, although no-one expects Virgin Australia’s current disparate fleet to remain as is.

But BGH Capital is the only bidder proposing downsizing the airline to such an extent. According to the Financial Review, the other three bidders are talking about resuming services with around 40 aircraft. BGH outlaid their plans to the Australian Council of Trade Unions (ACTU) earlier this week. A much smaller airline means a lot of job losses, and the trade unions are in the business of boosting jobs, so BGH’s proposal went down like a brick in Sydney Harbor.

BGH Capital would ultimately like to see up to 80 aircraft in the air. Photo: Bidgee via Wikimedia Commons.

The private equity group argues it is unreasonable to expect a re-booted Virgin Australia to resume services with a capacity similar to what was offered; COVID-19 and the collapse in demand have put paid to that. Ultimately, they’d like to have up to 80 Boeing 737’s flying, but that’s still a significant drop on the current (grounded) fleet size.

Bidders made pitches to trade union council earlier in the week

All the bidders made their pitches to the ACTU on Monday. Brookfield Asset Management, who walked away from the bidding process just before the last deadline for submissions, also gave a presentation. According to the Financial Review, the ACTU was underwhelmed by what the bidders had to say, but particularly so by BGH Capital’s plans.

The ACTU says some 16,000 people rely on Virgin Australia for work. In a statement seen by Simple Flying, the ACTU says it’s interests are to;

“… maximize the number of full time and permanent jobs across all aspects of existing Virgin Australia operations, inclusive of both current Virgin Australia employees and those employed by direct contractors.”

The Council also wants to see all employee entitlements protected and fully paid out. They’d like employees taken on by the new owners to have 100% of their accrued leaves and benefits carried over. Any retrenchment should entail the full payment of all accrued entitlements.

The ACTU is fighting hard to protect Virgin Australia’s employee’s interests. Photo: Bahnfrend via Wikimedia Commons

“Our number one priority throughout the administration procBidsess will continue to be protecting these workers and their jobs,” said ACTU President Michele O’Neil this week.

Has the local favorite cruelled its chances?

BGH Capital is a blue-chip Melbourne firm with a lot of local support. The key movers and shakers in the firm are well known and well regarded in Australian corporate circles. This, combined with their inside knowledge of local aviation conditions, has seen a lot of people tip BGH as the ultimate new owners of Virgin Australia.

But the shortlist will be further whittled down this weekend. Deloitte and Virgin Australia have had a very explicit narrative about where they want to see a re-booted Virgin Australia go. Of the four current bidders, BGH Capital has stepped outside that box the most.

Their thinking may well be grounded in commercial realities, but will it cruel their chances, local boys or not? By Monday, we should know.

Source : Simple Flying More   

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