Embraer bullish on potential in China's regional aviation market

Brazilian conglomerate Embraer SA, a commercial aircraft manufacturer, said it is bullish on prospects in China's rapidly growing low-cost and regional aviation market, triggered by an increasing air travel demand from smaller Chinese cities.

The company, which makes commercial aircraft with a capacity of 150 seats, plans to introduce its latest single-aisle E195-E2 jets, the biggest ever built by Embraer, to the China market. The company said it is an ideal aircraft for growing regional business and complementing existing trunk line fleets, and is suitable for point-to-point flights among second-tier and third-and fourth-tier cities.

"With continuously rising local demand from second-and third-tier cities, China has introduced a series of favorable policies to support the development of regional aviation. This will create great market potential for aircraft with up to 150 seats. We are proud to keep pace with the growing industry," said Guan Dongyuan, senior vice-president of Embraer and president of Embraer China.

Last year, civil aviation passenger traffic reached 610 million, and it continued to grow at a double-digit rate, adding 10.9 percent year-on-year, according to the Civil Aviation Administration of China.

Among the total passenger traffic, the Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area have witnessed the largest passenger flows, but the growth rate in those mature and saturated markets had been relatively slower when compared to smaller cities.

Currently, Embraer accounts for nearly 70 percent of the market share of regional aircraft in the 70 to 150 seat segment in China. Eight airlines, including China Southern Airlines, Hebei Airlines, Tianjin Airlines, Colorful Guizhou Airlines and Guangxi Beibu Gulf Airlines, operate 105 Embraer commercial aircraft in China and Mongolia. Bombardier Inc of Canada, China's home-built ARJ 21 and Russia's Sukhoi take the rest of the market.

In April, the E195-E2 model received certification from the Brazilian Civil Aviation Agency, the US Federal Aviation Administration and the European Aviation Safety Agency, and it is waiting to get certified by the Chinese authority.

Embraer, the third-largest aircraft manufacturer after Boeing Co and Airbus SE, is now in discussions with domestic carriers about the potential purchase of its latest aircraft model.

China has the largest number of plateau airports globally, and they are mainly located in western China, such as the Tibet autonomous region, as well as Qinghai, Sichuan and Yunnan provinces.

"Those plateau airports require aircraft with good highland performances and a reasonable seat layout, to meet the demand of areas with high altitude and lower customer flows. The E195-E2 model would be a jet that is ideal for those areas," said Guo Qing, vice-president of sales and marketing at Embraer China.

"Airlines may choose to configure the cabin in two classes with 120 seats or a single class with up to 146 seats. It has significantly lower costs per trip, which will enable carriers, especially budget airlines, to extend additional secondary markets," he said.

Li Guijin, a professor at the Civil Aviation Management Institute of China, said China is a huge market with rich opportunities for the growth of regional aviation, and it is developing a model with its own unique characteristics. In the early stage, government subsidies and supportive policies play important roles.

"The central and western parts of China serve as the best market for regional aviation. There should be more types of aircraft that are suitable to fly in highland regions, to help advance the air transport connectivity of the region," he said.

"Besides, there is remarkable capacity for the development of smaller airlines. For instance, Beijing Daxing International Airport, which is set to start commercial operations in late September, could provide a chance for smaller airlines in the surrounding regions to grow, such as Hebei Airlines," he said.