--Embraer jet sale to SkyWest could boost backlog by 20%
--Spate of orders from U.S. carriers signals a turnaround in
demand
--Firm order backlog still trailing 2008 record
By Rogerio Jelmayer and Paulo Winterstein
SAO PAULO--Brazilian aircraft manufacturer Embraer SA (ERJ,
EMBR3.BR) on Tuesday unveiled its third major contract this year to
sell jets to a U.S.-based aircraft operator, providing the world's
fourth-largest aircraft manufacturer with breathing room for the
coming years.
SkyWest Inc. (SKYW) has agreed to buy as many as 200 jets, worth
as much as $8.3 billion in coming years if all the orders are
confirmed. The deal is one of the largest in Embraer's history. A
2003 order by JetBlue Airways Corp (JBLU) for 200 jets was
subsequently revised down to just 100.
Analysts say that the deal is the latest sign that the U.S.
travel market is starting to recover following the financial and
economic crisis that began in 2008, albeit at a tepid pace.
"I see this as a light at the end of the tunnel for the global
economic recovery," said Mario Bernardes Jr., transportation
analyst at BB Investimento, the investment-banking arm of Banco do
Brasil SA. Along with improving European vehicle sales, "this
Embraer sale shows that there is an improved outlook in the medium-
and long-term."
SkyWest, a regional airline that flies short routes on behalf of
the major carriers, said it will initially buy 40 of Embraer's
E-175 jets, with deliveries starting in the second quarter of 2014
and ending in mid-2015. SkyWest will operate the aircraft under a
12-year contract with United Airlines Inc. (UAL).
SkyWest said it may buy another 60 aircraft, depending on talks
with major airlines. It didn't provide details about the final
option for another 100 aircraft.
In April, United bought 30 E-175 jets, with options for a
further 40, while in January, Republic Airways bought 47 of the
E-175 planes, with an option for another 47.
"Since 2008, Embraer's backlog of orders had fallen
significantly as the crisis took its toll on companies here and
abroad," said Pedro Galdi, chief analyst at brokerage SLW in Sao
Paulo. "Airlines have to start buying again because, whether they
like it or not, demand is increasing. But we're still far from
where we were in 2008, and will be until the whole world starts
growing again."
Embraer shares climbed 1.9% in Sao Paulo, trading to BRL19.25,
and traded for as much as BRL19.81.
The order of 100 planes from SkyWest, if exercised entirely,
would lift Embraer's backlog by 20%, after ending the first quarter
at $13.3 billion. That's up from $12.5 billion in the fourth
quarter of 2012.
The backlog peaked at $21.6 billion in 2008. Since then, Embraer
has focused on its defense and executive-jet division to try to
bring up flagging revenue. It's building a military transport
plane, which could be delivered as soon as 2015, as part of its
effort to increase defense's share of revenues to 20%.
Write to Rogerio Jelmayer and Paulo Winterstein at
brazil@dowjones.com