Embraer’s CEO has spoken with confidence about the future of its aircraft in China. Despite being a historically difficult market for the Brazilian planemaker, he believes there is still huge potential. But with the ARJ21 a direct competitor, and the regional jet of choice for Chinese airlines, there’s a long slog up a big hill if Embraer is to realize its potential here.
A huge market potential
Embraer has attempted to gain traction in China for more than two decades, but to date, has had limited success. Nevertheless, the manufacturer’s CEO, Arjan Meijer, has said in an interview with Nikkei Asia that he still sees huge potential there.
The company’s end of year forecast for 2020 pegged China to require 730 new aircraft with up to 150 seats in the next decade. Embraer wants to ensure a significant slice of that pie. However, competition from the ARJ21 is proving difficult to fight off, with the type commanding significant orders from airlines for the sub-90 seat market.
At the other end of the scale, we have COMAC’s larger jet aircraft. The C919 is approaching certification and is set to begin snapping up market share for the 150-190 seat niche. It seems Embraer knows that there’s little point in attempting to outdo the COMAC offering, as Meijer is keenly pitching the flagship E2 as the perfect middle ground between the two. He said,
“With the ambitions of China to expand to the regional cities and surrounding Asian countries, we believe that giving the Chinese airlines access to the E2 offers great opportunities.”
The E2 family, which includes the 195 with 146 seats and the 190 with 100 seats, is nicely positioned between COMACs offerings. Meijer believes this makes it a complement to the local planes, rather than a competitor. Whether that translates into sales remains to be seen.
China has been a historically difficult market
Back in 2000, Embraer embarked on a three-week-long, six-city tour of China. The visit culminated with the opening of its Beijing commercial office, and was attended by top-level Embraer executives.
The ERJ145 performed flight demonstrations in six cities – Urumqi, Chengdu, Kunming, Shenzhen, Beijing, and Shanghai – from mid-May to early June. Government officials, airline execs and the media were invited along for the ride. Embraer’s then-president and CEO, Maurício Botelho, was heavily involved and spoke of the importance of China to the company, saying,
“The Chinese market is a critical component of Embraer’s global strategy, as we see a rapid growth for regional aviation in China. China has made great achievements since its opening up and reform. The establishment of Embraer’s Beijing Office is a result of the bright future we see for China’s market development, especially with China’s upcoming WTO entry. Our focus will be to expand our business development in China and do our part to promote bilateral trade relations between China and Brazil.”
In 2003, Embraer buddied up with AVIC (Aviation Industry Corporation of China) to open a plant in the Northern Chinese province of Heilongjiang. The plant was to manufacture the ERJ145, giving the planemaker a leg up in the country. However, over the next seven years, only 40 ERJ145s would be sold by the plant, and in 2016 it was dissolved entirely.
A key reason for the failure of this venture was the emergence of the COMAC AR21. It first flew in 2008, and quickly became the regional aircraft of choice for local airlines. Despite the protracted introduction into service of this aircraft, it remains strong in Chinese markets.
Embraer has some foothold here – around 100 of its larger E190 are flying with Chinese airlines. But for its smaller jets like the E175, the direct competition with the COMAC alternative has kept it out of the market. But with the E2 jets offering best-in-class efficiency, Embraer’s fortune in China could yet be turned around.