SkyWest Airlines has signed a deal with Brazilian aircraft manufacturer Embraer for 16 E175 planes. The Embraers will start landing at Skywest in mid-2022. At current list prices, the deal is worth US$798.4 million.
“SkyWest operates more E175s than any other carrier in the world. With these aircraft, we will have nearly 240 E175s operating with airlines in North America,” says SkyWest CEO Chip Childs.
New Embraers destined to fly in Delta livery
Despite its low profile, SkyWest Airlines has one of the biggest fleets in the United States. The airline has over 450 planes. Skywest does the bulk of its business flying on behalf of other airlines, including United Airlines, Delta Air Lines, American Airlines and Alaska Airlines. These 16 Embraers will fly exclusively with Delta under a capacity purchase agreement and will be delivered in Delta’s livery.
“We are pleased to continue to strengthen our Delta agreement with these new, dual-class
aircraft,” the SkyWest Airlines CEO said.
Chip Childs says the 16 new E175 aircraft will replace 16 SkyWest-owned or financed CRJ900s currently under contract with Delta. The CEO says SkyWest is evaluating the impact of the anticipated displacement of the CRJ900s, including a potential non-cash impairment charge.
Flying for Delta, Embraer’s E175 planes carry 70 passengers across three cabin classes – first class, Delta Comfort, and economy class. SkyWest Airlines currently operates 71 E175 jets for Delta Air Lines.
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SkyWest order a welcome boost for Embraer
The order from SkyWest is a big boost for Embraer. As of June 30, Embraer had a backlog of 306 aircraft, including 141 E175 jets. The value of that backlog totaled US$15.9 billion. Embraer says this is a 12% increase compared to the backlog at the end of Q1 2021. The SkyWest Airlines order is Embraer’s first significant commercial jet order since Porter Airlines signed off for 30 E195-E2 aircraft in late April.
Like other aircraft manufacturers, the last 18 months have seen a decline in new orders at Embraer. That has had a material impact on Embraer’s bottom line. But Embraer is generally optimistic about its future. They are key players in the regional jet segment, and Embraer argues a trend towards short-haul, regional point-to-point flying bodes well for them.
“When traffic volume eventually returns to its pre-pandemic height, it will flow differently,” Embraer says in its most recent market outlook. “Expect demand to be less for long-haul travel and stronger for regional travel.
“That dynamic will create new interest in secondary, less populated destinations which, in turn, will open new opportunities with smaller-capacity aircraft.”
Bright prospects for Embraer’s regional jets in North America?
In the key North American market where SkyWest’s Embraers clock up their hours, Embraer thinks a combination of factors will drive demand for their planes. Embraer says North America’s airlines face growing pressure to return to profitability. They also believe scope clauses that restrict customer demand for regional jets will relax.
Further, passengers will demand more connectivity, and aside from the usual inconveniences of connecting flights, heightened health concerns will drive demand for more point-to-point travel between secondary cities.
It is a volatile mix, but Embraer thinks if their predictions are on the money, demand for their regional jets like the E175 will increase this decade. Monday’s SkyWest Airlines order provides some support to Embraer’s way of thinking.