Exclusive: Embraer ramps up Middle East sales pitch after halting $1bn Iran jet talks
Brazilian planemaker seeks to attract new operators in region, focusing on low-cost airlines
Brazil's Embraer, which is in talks with Boeing for a jet joint venture, is boosting efforts to woo Middle East buyers for its aircraft as the US withdrawal from a nuclear deal with Tehran slammed shut Iran's lucrative market for the planemaker.
The world’s third largest aircraft manufacturer joined other planemakers in halting talks with the Islamic Republic but remains optimistic about its discussions with other prospective customers in the region for the latest version of its E-jet series, John Slattery, chief executive of Embraer, told The National. Last week it appointed a new executive in Dubai to strengthen its regional sales effort.
“There are a number of meaningful conversations going on now right now with the Gulf carriers as they consider their fleet for the next 10 to 15 years,” Mr Slattery said on the sidelines of a conference by CAPA Centre for Aviation in Sydney, declining to reveal prospective customers or timeline for a possible deal. “I’m hopeful that we’ll be able to add some new operators in the region and in parallel, I’m as interested in having the existing operators moving to the E2.”
The E2 is Embraer's latest re-engined family of 70 to 130-seat passenger jet. The new narrowbody jet, which flew into commercial service in March, will take on rival Bombardier. The competition is part of a bigger battle between heavyweights Boeing and Airbus over the new generation of 100 to 150-seaters, a market they previously ignored in favour of bigger models. Airbus is taking control of Bombardier’s C Series programme and Embraer is in talks with Boeing for a commercial jet joint venture.
Embraer expects 350 E2s to be operated in the Middle East over the next 20 years. The projections are based on an estimated 5.8 per cent annual growth in air travel passengers over that period in the region.
Traditionally smaller seating capacity jets have not sold well in the region, particularly in the Gulf, where major carriers have positioned themselves as global hubs for intercontinental traffic between Europe and Asia. For years, the narrowbody plane market in the region has been dominated by Airbus A320s or Boeing 737s.
Some smaller operators in the region have opted for Embraer’s first-generation of E-jets including Oman Air and Royal Jordanian.
Embraer is hoping to make advancements in the Middle East with its new E2, which is well-suited to handle the region’s hot weather and sandy conditions, Mr Slattery said.
Changes on the 195-E2, including up to five extra rows and an additional 30 per cent range, makes it a viable option for low-cost airlines but Embraer is also targeting flag carriers.
“As airlines look increasingly to complement their larger narrow body aircraft with the cross-over regional jet that’s 80-150 seater, I’m confident we have the right aircraft type to make that a viable proposition compelling,” he said.
Last week, Embraer said it is expanding its team in Dubai with the appointment of Hussein Dabbas, former Royal Jordanian chief executive, as general manager of special projects for Middle East & Africa.
The planemaker was in talks with Iran for the sale of 20 E1-195 jets worth more than $1 billion at list prices before the US administration decided to reimpose sanctions on the country.
Embraer is subject to US export restrictions to Iran because some of its plane engine technology originates in the US.
Iran, which was positioning itself to build Tehran as an aviation hub to compete with regional aviation super powers, urgently needed to upgrade its ageing fleet. It struck $40 billion plane deals with Airbus and Boeing but was in talks with other manufacturers for more orders.
Iran with its significant domestic market represents a missed opportunity for the Sao Jose dos Campos-based Embraer.
“Embraer has to respect the guidelines of OFAC (United States' Office of Foreign Assets Control) in that context, we’re not in a position under the current sanctions to transact with the carriers,” he said. “It’s fair to say that the dialogue Iranian carriers are having with all manufacturers that have US content on their aircraft have pragmatically come to a halt.”
For now, Embraer is counting on a deal with Boeing to help expand its reach.
Last month, Brazilian defence minister Joaquim Silva e Luna said the government is optimistic about a deal between Boeing and Embraer and that talks would wrap up by the end of the year.
Mr Slattery declined to comment on the timeline to close the deal.
“We have to respect the integrity of the process and see how it materializes,” he said.
Updated: June 7, 2018 04:45 PM