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Embraer Receives Firm Order for 18 E175 Jets from SkyWest

Zacks Equity Research
Updated

Brazil-based Embraer SA ERJ received a firm order from SkyWest Inc. SKYW, the holding company of SkyWest Airlines and ExpressJet Airlines, for 18 E175 jets.

At list prices, the order is estimated to be valued at $800 million. The latest order will add to Embraer’s third-quarter 2015 backlog.

The transaction will take the total number of E175 jets booked by SkyWest to 73. The first aircraft is expected to be delivered in 2016. Delivery of all 18 units is expected in mid-2017.

SkyWest Airlines will operate the aircraft under a modification of an existing Capacity Purchase Agreement (“CPA”) with United Airlines.

Under the United Express brand, the E175 jets will have a 76-seat dual class pattern, including 12 First Class seats, 16 Economy Plus seats and 48 Economy seats.

The E175 jet additionally features a wingtip for enhanced aerodynamic performance. The new fleet of the model is also 6.4% more fuel efficient than the first-generation E175s. Over the last two years, Embraer has been able to grab the lion’s share of 80% of orders for airplanes in its class from airline companies in the U.S.

We note that Embraer is the only company that manufactures a family of four airplanes for the 70-to-130 seat segment. The program was launched in 1999, while the first E-Jet entered into revenue service in 2004.

SkyWest operates as the holding company for two scheduled passenger airline operations and an aircraft leasing company. Armed with 3,500 flights and a fleet of 678 jets, SkyWest offers commercial air service in various cities across the U.S., Canada, Mexico and the Caribbean. SkyWest Airlines has partnerships with United Airlines, Delta Air Lines, US Airways, American Airlines and Alaska Airlines.

Zacks Rank

Embraer currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace and defense sector are Leidos Holdings, Inc. LDOS and Northrop Grumman Corporation NOC. While Leidos sports a Zacks Rank #1 (Strong Buy), Northrop carries a Zacks Rank #2 (Buy).

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NORTHROP GRUMMN (NOC): Free Stock Analysis Report
 
EMBRAER AIR-ADR (ERJ): Free Stock Analysis Report
 
SKYWEST INC (SKYW): Free Stock Analysis Report
 
LEIDOS HOLDINGS (LDOS): Free Stock Analysis Report
 
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Zacks Investment Research