Wed, 17 February 2016

Embraer Forecasts Demand for 1,570 Deliveries of 70-130 Seat Jets in APAC Over Next 20 Years

Embraer Commercial Aviation has forecast that airlines in Asia Pacific, including China, will take delivery of 1,570 new jets in the 70 to 130-seat segment over the next 20 years (valued at US$ 75 billion, at list prices), representing 25% of the worldwide demand for the segment, in the period.

According to the global Embraer Market Outlook for the 70 to 130-seat capacity segment for the next two decades, the entire market will demand 6,350 new jets in this category, which is valued at US$ 300 billion over the period.

The Asia Pacific market will become more affluent, competitive, and open, further stimulating airlines to seek system efficiencies, brand differentiation, and improved service levels. In this context, the 70 to 130-seat jet segment will play a key role in supporting the intra-regional development in Asia Pacific.

We are showing to airlines the benefit of moving from red oceans to blue oceans, that is, to move away from a crowded marketplace and seek out opportunities in markets that are currently underserved, or not served at all, where yields are also stronger, moving from one to two digits, said Paulo Cesar Silva, President & CEO, Embraer Commercial Aviation.

Asia Pacific has experienced rapid social and economic development in recent decades. The regions above-average economic expansion, with a projected annual GDP growth rate of 4.1% for the next 20 years, combined with increasing urbanization and shifting demographic patterns, will result in higher household incomes and increased discretionary spending, including air travel.

The rise of Low Cost Carriers was a direct and natural response to the surge in demand for air travel in the region, in the last decade. However, the large inflow of capacity has influenced ticket prices and created a new dynamic: a vicious cycle in which lower yields force lower unit costs, leading to larger aircraft that add more capacity which, in turn, lower load factors that promote even more fare discounting. Reducing fares to offset falling load factors has its limits, and focusing primarily on ancillary revenues is not a sustainable business strategy. There are already signs of saturation; despite 8.6% RPK growth in 2015, carriers in the region are estimated to have earned a net margin that averaged only 2.9%, boosted by the lower price of oil. Profitability remains elusive for Asian carriers facing the challenge of surplus capacity.

Embraer sees untapped opportunities in Asia Pacific, where more than 250 markets, or 30% of narrow-body exclusive markets are served with less than one daily frequency. Also, 37% of intra-regional turboprop capacity is offered on routes longer than Headquarters (Brazil) North America Europe, Middle East and Africa China Asia Pacific 200 nautical miles, which are better suited to jet operations, due to their higher network productivity, better operating economics, and superior passenger appeal.

Another opportunity in the region is the replacement of aging fleets, where there are more than 250 jets in the 50 to 150-seat category with over 10 years of age, which will become targets for replacement in the near future.

Embraer Commercial Aviation is present in 11 countries in Asia Pacific, with more than 20 customers and more than 200 aircraft flying in the region. The E-Jets family has logged more than 1,700 orders and over 1,200 deliveries to date, and is in service with some 70 customers from 50 countries.

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