Bombardier and Embraer split American Airlines regional jet order

MONTREAL – American Airlines has split its purchase plans for regional jets between Bombardier and its Brazilian rival Embraer.

The U.S.-based carrier, which recently merged with US Airways, has awarded about one-third of the total orders to Montreal-based Bombardier after signing a deal to purchase 30 CRJ900 NextGen aircraft and options for 40 more planes.

The value of the contract is about US$1.42 billion at list prices but could rise to US$3.38 billion if the options are converted into firm orders. Customers typically receive large discounts.

“An agreement like this with Bombardier will greatly improve our ability to optimize our flying with the right aircraft to meet customer demand. This order will allow American to lower costs by replacing older aircraft,” stated Peter Warlick, American Airlines vice president fleet planning.

Mike Arcamone, Bombardier’s president of commercial aircraft, said the company is “delighted” that the world’s largest airline will use Bombardier aircraft for its future fleet requirements.

Embraer will supply 60 E175 planes with options for 90 more regional jets. The firm order is valued at US$2.5 billion at list price and maintains its current share of American Airlines’ regional fleet.

Bombardier (TSX:BBD.B) says the recently merged American Airlines will become the first customer to benefit from upgrades to the up to 90-seat aircraft that will reduce fuel consumption by nearly 5.5 per cent.

Bombardier spokesman Marc Duchesne says the CRJ900s will start joining American Airlines fleet in 2014 but that no production rate increase will be necessary.

The manufacturer has now received firm orders for 1,812 CRJ Series aircraft, including 339 CRJ900 and CRJ900 NextGen aircraft. The aircraft is in service with more than 60 airlines around the world.

Walter Spracklin of RBC Capital Markets said Thursday’s order from American Airlines is good for Bombardier. American Airlines is the last of the major U.S. carrier to announce regional jet re-refleeting planes.

“No question, if Bombardier secured the majority of the order it would have represented a major win and likely Embraer displacement,” he wrote in a report.

With the CRJ production backlog at 49 months at the end of the third quarter, the American Airlines order will likely lead to higher production rates in the second half of next year, Spracklin added.

The E175 planes ordered by American Airlines will be configured with 76 seats in three classes and replace the 50-seat ERJ145s. The delivery of the first aircraft is scheduled for the first quarter of 2015.

Paulo Cesar Silva, CEO of Embraer Commercial Aviation, said the E175 is “the clear choice of North American airlines, and proven with hundreds of orders this year.”

“Embraer is honoured to provide the new American with the E175, and it is committed to supporting the development of the new airline, to which we wish great success,” he said in a separate news release.

Embraer has received firm orders and options for more than 700 E-Jets from U.S. airlines this year, including its E2 aircraft that is under development. It says aircraft advancements have lowered its fuel burn by five per cent and reduced maintenance costs.

American Airlines (Nasdaq:AAL) and its regional partners American Eagle and US Airways Express operate nearly 6,700 flights per day to 339 destinations in 54 countries.

On the Toronto Stock Exchange, Bombardier’s shares decreased 10 cents or 2.22 per cent at $4.46 in Thursday morning trading.