Bloomberg News

Bombardier to Embraer Seen Ready to Court SkyWest on MRJ Delay

November 07, 2013

Embraer SA (ERJ:US) and Bombardier Inc. (BBD/B) may stand to gain business after SkyWest Inc. (SKYW:US), a commuter partner for carriers including United Airlines, voiced frustration with delays for Mitsubishi Heavy Industries Ltd. (7011)’s new regional jet.

The tardy debut for the plane known as the MRJ creates opportunities for both Bombardier and Embraer, which already supply aircraft to SkyWest, said Chris Murray, an analyst at AltaCorp Capital Inc. in Toronto. Last year, SkyWest ordered 100 Mitsubishi jets, a competitor to Bombardier and Embraer models.

“Both would go out of their way to accommodate” an order from St. George, Utah-based SkyWest, Murray said today in a telephone interview.

SkyWest’s comments yesterday about the second postponement for the 78- to 92-seat MRJ signal the risk of a cancellation, said Robert Stallard, an RBC Capital Markets analyst. Mitsubishi said in August that deliveries would be deferred about 15 months to 2017’s second quarter, which probably pushes SkyWest’s first jet into 2018, Stallard wrote in a note to clients.

“The folks at Mitsubishi have to deliver all the airplane as advertised and they need to do it in a time frame that makes sense for us,” SkyWest President Bradford Rich told analysts on a conference call. While SkyWest remains committed to the MRJ, “if that doesn’t happen, then of course, we have no financial obligations or commitments to take the type.”

Chief Executive Officer Jerry Atkin, speaking on a call today, said SkyWest’s MRJ delivery slots would start in 2018 without giving a month.

SkyWest, Planemakers

Jessica Bowers, a SkyWest spokeswoman, said she couldn’t immediately respond to questions on whether the airline was considering modifying the MRJ contract, or whether the carrier was speaking to other planemakers.

Phone messages left for comment about SkyWest with Bombardier and Sao Jose dos Campos, Brazil-based Embraer weren’t immediately returned. Hirofumi Takahashi, a U.S. spokesman for the aviation unit of Tokyo-based Mitsubishi, said he couldn’t immediately comment.

The MRJ is Mitsubishi’s effort to challenge the dominance of regional-jet builders Embraer and Bombardier, which started producing the planes in the 1990s. In 2012, Mitsubishi said the first flight was late while it confirmed manufacturing processes and finished technical studies.

Bombardier had long been SkyWest’s chief aircraft supplier. Last year, the airline ordered the MRJs, and this year, it agreed to buy 100 of Embraer’s upgraded E175 jets, with options for 100 more. SkyWest also flies Embraer turboprops.

If Skywest were interested in buying a current-generation plane as an MRJ alternative, Montreal-based Bombardier would be very interested, said David Tyerman, analyst at Canaccord Genuity in Toronto who has a buy recommendation on the Canadian planemaker.

“If they want to go next-gen then I’d believe Embraer would be in the driver’s seat,” Tyerman said.

Mitsubishi’s jets were attractive to SkyWest because they use newer engine technology, making them more fuel efficient, said Tyerman. Bombardier doesn’t have an upgraded jet of the same size.

To contact the reporter on this story: Caroline Chen in New York at cchen509@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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Companies Mentioned

  • ERJ
    (Embraer SA)
    • $38.28 USD
    • 0.13
    • 0.34%
  • SKYW
    (SkyWest Inc)
    • $12.46 USD
    • 0.13
    • 1.04%
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