Jetrader - Autumn 2018 - 61

Mike Yeomans
ISTAT Certified Appraiser
Head of Valuations
IBA Group Limited
+441372 22 44 88
mike.yeomans@iba.aero
www.iba.aero

Background
The Embraer E-Jets E2 program was
launched at the Paris Air Show in 2013
and is composed of the E175-E2, E190-E2
and E195-E2 models. The E2 family represents an evolution of the original E-Jets
family of aircraft. The E2 products feature new engines, in the form of Pratt &
Whitney's PW1900G Geared Turbofan (GTF).
Embraer dropped the smallest variant of
the original E Jets, the E170, from the
new product range due to its weaker sales
volumes, highlighting an upsizing trend in
the regional jet market. The E175-E2 and
E195-E2 both feature a fuselage stretch,
while the E190-E2 maintained its predecessor's capacity characteristics. The
E190 is the best-selling aircraft model
of the E-Jet family, followed very closely
by the E175.
Embraer aims to build on the success
of the original E190, which achieved wide
market acceptance and has an operational
fleet of over 500 aircraft worldwide.
The Embraer E190-E2 entered service this
year when the first aircraft was delivered
to launch customer Wideroe in April. The
Norwegian regional carrier has a fleet of
three E190-E2 aircraft in service alongside an otherwise all-turboprop fleet of
Bombardier DHC8-100, -300 and -400 series
aircraft. Wideroe has deployed its three
E190-E2 aircraft predominantly on its
domestic network, connecting the cities
of Bergen, Bodo, Kristiansand, Tromso and
Trondheim, as well as the Finnish capital,
Helsinki. Wideroe will also use the aircraft
to provide service to the German cities of
Hamburg and Munich from its Bergen hub.
Embraer currently holds a backlog of 47
aircraft for the Embraer-190 E2. According
to IBA.iQ, the E190 had received gross
orders totaling 175 aircraft by the time it
entered service in 2005. IBA records the
E190-E2 has received 86 gross orders to
date, with a total of 50 net orders after
the failure of carriers Kalstar Aviation
(Indonesia) and Air Costa (India).

IBA considers that the current backlog
is relatively thin and would benefit from
increased operator diversity. There are
relatively few aircraft on backlog, and IBA
notes an important feature of the current
order book: The vast majority of commitments are from lessors. The current customer base for the E190-E2 is dominated
by AerCap (23), Aircastle (12) and ICBC
(10). Tianjin Airlines, with two aircraft on
order, is currently the only E190-E2 airline
customer in the backlog.
With so few orders and limited direct
interest from airlines to date, the E190-E2
faces some challenges to achieve the same
success as its forebear. The well-established
operator base should present the easiest
wins in terms of attracting new orders.
However, JetBlue, the launch customer for
the E190, recently announced it will be
up-gauging the smaller end of its fleet
with a commitment with Airbus to acquire
the A220-300. JetBlue currently has the
largest E190 fleet worldwide with 60 units,
followed by Aeromexico Connect with 48
and Tianjin Airlines with 33.
IBA expects a drive from Embraer to
secure E2 orders from its existing E-Jet
customers. Kenya Airways in particular is
in Embraer's sights, as a current operator
of 15 E190s. The East-African carrier has
indicated that it is also considering the
A220, so there will be fierce competition as
to who will be the supplier of their future
regional fleet. Embraer has recently demonstrated the aircraft in Kenya in a bid to
secure an order.
At present, the A220-100 has a lead on
the E190-E2. Since Airbus has taken over
the sales and marketing efforts for the
CSeries program, there have been questions
as to how this will affect Embraer's hold on
this market. The A220-100 currently has a
backlog of 109 aircraft.
The recent news that Boeing plans to
take an 80 percent interest in Embraer's
commercial aircraft division will heighten
competition in this market. Embraer will
benefit from access to Boeing's sales and
marketing resources, supply chain and
customer base. These are all factors from
which the CSeries/A220 will benefit from
Airbus' involvement.
Since the announcement of the Embraer/
Boeing tie-up, there has been a further
commitment for the E190-E2. Helvetic
Airways signed an LOI for 12 E190-E2s with

THOR JORGEN UDVANG/SHUTTERSTOCK.COM

appraisal

Embraer E190-E2

Embraer E190-E2 Half-Life Market
and Base Values in million USD,
1.5% annual inflation
E190-E2

2018

Current Market Lease Rate

0.220-0.270

Current Market Value

34.65

Current Base Value

35.564

2019

33.328

2020

31.401

2021

29.6

2022

27.906

2023

26.305

2024

24.786

2025

23.337

2026

21.951

2027

20.62

2028

19.337

2029

18.098

2030

16.896

All values in million USD

options on a further 12. Helvetic currently
operates a fleet of seven E190s and five
Fokker 100 aircraft according to IBA.iQ,
which will be replaced by the initial order.
The options will represent an opportunity
for fleet growth and include conversion
rights to the larger E195-E2 variant.
Embraer is strongly positioned in the
regional jet market, with a current market share of around 60 percent in the
100-150-seat regional jet segment in terms
of in-service fleet size. The type also faces
competition from the Bombardier CRJ in
the form of the CRJ900 and CRJ1000 along
with the Sukhoi Superjet SSJ100 aircraft.
In IBA's view, the A220-100 currently offers
the greatest competition to the E190-E2.
The value and lease rate profiles above
consider a mid-year 2018 delivery Embraer
E190-E2 aircraft, equipped with Pratt &
Whitney PW1919G engines and with a maximum take-off weight of 49,990 kg.
Jetrader * Autumn 2018 61

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Jetrader - Autumn 2018

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