Smaller-Jet Firms Battle

By ANDY PASZTOR and JON OSTROWER .
 

LE BOURGET, France—The battle between Boeing Co. BA -2.55% and Airbus is often the main event at big aviation expositions like the Paris International Air Show. But this week the contrasting order books of two smaller jet makers—Embraer SA EMBR3.BR +1.43% of Brazil and Bombardier Inc.

BBD.B.T -2.16% of Canada—is emerging as a main theme.

Embraer this week launched its new E2 series jetliners, allowing the company to complete contracts and move ahead with design for a line of planes—with between about 80 and 144 seats—it hopes will solidify its favored position for smaller jetliners.

Embraer announced Utah-based SkyWest Inc. SKYW -3.64% as the first customer for the smallest of the three planned E2 models, with a firm order of 100 planes due to be delivered starting in 2020. International Lease Finance Corp. committed to buy up to 100 as well, including some larger models that will compete more directly with Bombardier. Embraer said Monday five undisclosed airlines stated their intent to buy 65 additional aircraft.
Bombardier, which is betting on a strategy of superior fuel efficiency, high performance and reduced emissions, so far hasn't snared any new orders for its next-generation CSeries aircraft at the industry gathering—though a last-minute announcement still could change the order scorecard before the business part of the air show winds down Thursday.

"I think Embraer has done a very impressive job of gaining market share very, very quickly. Their key is going to be sustaining the momentum going forward," said CIT Group Inc.'s CIT -1.62% president of transportation finance, Jeff Knittel, who expects an "aggressive" competitive response from Bombardier.

The two companies are taking sharply different approaches with their new models. Embraer is taking a page from Boeing and Airbus by upgrading—rather than replacing—its existing jets with new engines and wings, keeping its costs tightly in check. The company plans to invest $1.7 billion over eight years to develop the new jets, considerably less than the amount necessary to build an all-new design.

Bombardier's CSeries is envisioned as the first newly-designed Western single-aisle jet to take to the air since the late 1980s. Bombardier anticipates its new plane will be 20% more fuel-efficient than aircraft it is intended to replace, while reducing noise and emissions. In the absence of order announcements so far this week, the company has focused on boosting interest in the new jetliner's initial flight, expected in the next few weeks.

There are similarities between the planes. Embraer and Bombardier use the same Pratt & Whitney engine, which generates half of the anticipated improvement in fuel efficiency for the CSeries. Pratt is a unit of United Technologies Corp. UTX -1.94%
 
Bombardier has used the Paris show to tout the promised performance of its jet, able to fly from small city-center airports like the one in Toronto and London City Airport, while generating the same noise as smaller propeller airplanes.

Since its 2008 launch, Bombardier has booked 145 firm orders, and aims for around 300 by the time the jet enters service in mid-2014, ahead of Embraer, whose first E2s are scheduled to be delivered in 2018. But Bombardier's push to accumulate orders was hampered by the global financial crisis and the fallout of development and production woes at Boeing and Airbus, a unit of European Aeronautic Defence & Space Co. EAD.FR -2.46%
 
Bombardier says it doesn't hold orders specifically for air shows, but announces deals as they are completed.
Chet Fuller, senior vice president of Bombardier commercial aircraft, said the industry's bruising experience with new jets continues to depress orders and hamper the Canadian company's marketing campaigns.

Airline executives routinely pepper Bombardier with questions about how it intends to avoid the same mistakes, according to Mr. Fuller. "The cynicism and skepticism in the industry is just huge," he said.
In an interview before the show kicked off, Guy Hachey, president of Bombardier's aerospace unit, said at this point the "industry is perceived as high risk" because of a history of slip-ups on various airplane-development programs. "It's only with time that you can convince people that you can stick to your commitments," he said.

Write to Andy Pasztor at andy.pasztor@wsj.com and Jon Ostrower at jon.ostrower@wsj.com
A version of this article appeared June 20, 2013, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: Smaller-Jet Firms Battle.

http://online.wsj.com/article/SB10001424127887323300004578555953946997178.html

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