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Republic Airways makes $2.1B order for 50 jets

September 17, 2014

Embraer SA won a jet order valued at $2.1 billion from U.S. commuter operator Republic Airways Holdings Inc., while European regional carrier Flybe dropped plans to take 20 of the planes.

Indianapolis-based Republic will take 50 of Embraer’s current-version E175 aircraft and fly them for United Airlines under the United Express brand, the companies said Wednesday. Flybe will sublease 24 Bombardier Inc. Q400 turboprops while canceling the 20 Embraers and deferring deliveries of four more.

The transactions will increase Embraer’s third-quarter backlog by 30 jets, a pivotal boost for the Sao Jose dos Campos, Brazil-based planemaker. Embraer, the world’s largest manufacturer of regional jets, is working to maintain production of the existing models ahead of a shift to the upgraded E2 aircraft family later this decade.

Analysts have been watching Embraer’s order book because of the pending transition. U.S. carriers including United parent Chicago-based United Continental Holdings Inc. have been stocking up for their commuter fleets since 2012.

Deliveries of the E175s to  Republic will start in 2015’s third quarter and run until 2017.

Embraer’s shares have been rallying this year, rising 23 percent through Tuesday, beating the 15-percent advance for Brazil’s benchmark Ibovespa index.

The Q400s, with 71 seats compared with the E175’s 88, fit Flybe’s “fleet replacement and growth profile” and supplant 21 of the same aircraft type whose lease periods are ending over the next four years, according to the Devon, England-based carrier.

Flybe CEO Saad Hammad, a former EasyJet Plc executive, is scrapping unprofitable routes, cutting jobs and closing bases to raise cash.

“We are committed to flying the right aircraft on the right routes,” Hammad said in a statement. “Our core U.K. branded fleet is now right-sized to our capacity growth and aircraft renewal plans at a net cost broadly in line with our expectations.”

Shares in Republic, which owns Chautauqua Airlines, Republic Airlines and Shuttle America, rose 4.1 percent in early trading Wednesday, to $10.70 each.

Deliveries of the E175s to Republic are scheduled to start in 2015’s third quarter and run until 2017. The $2.1 billion value of the sale is based on list prices, which are typically discounted.

Republic is Bombardier’s biggest customer for its new CSeries. Bryan Bedford, the carrier’s CEO, said in a May interview that Republic was reconsidering a $3.06 billion order for those planes, expected in 2016.

“There is no place to operate the CSeries” as the company refocuses on regional flying for larger airlines, he said then.

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