No One Is Buying the Embraer E2. Here's Why...

commercial Aviation is often a zero-sum game very rarely does a big aircraft order leave all sides satisfied when the stakes are this High they're almost always winners and losers but just a few weeks ago something remarkable happened Air India placed an order so big and worth so much money that nearly everyone walked away happy both Boeing and Airbus secured orders for hundreds of new Jets adding over 50 billion dollars to each company's books suffice it to say this was a day of celebration for all sides but despite the momentous occasion there was one party who was left on the outside looking in that would be Embraer the Brazilian jet maker despite its long Legacy of building reliable efficient Jets it's been struggling as of late this has been punctuated by stagnant sales of its Flagship E2 jet which missed out on the Air India order Bonanza now the E2 is a modern Marvel and it boasts significant improvements over its predecessors and yet the program has flatlined so what's going on here why isn't anyone buying Embraer Jets and is there anything Embraer can do to right the ship let me explain now before hopping into the video some of you might know I just started doing YouTube full time but when this was still just a hobby my days were jam-packed I was working upwards of 16 hour days split between my job and the channel and I had very little free time because of that I was ordering a lot of takeout which was both expensive and bad for my waistline but then I tried hellofresh today's sponsor hellofresh sends pre-portioned ingredients and easy to follow recipes straight to your door that way you can make delicious home-cooked meals without spending excess time doing grocery shopping or meal prepping and the stuff they send you is really great you can choose from up to 40 different recipes a week and those recipes can be customized to fit any diet plus the ingredients travel straight from the farm to your home in less than seven days so you know it's always fresh the best part is that hellofresh is actually affordable and for a limited time my viewers can earn an additional 65 author hello fresh order plus get free shipping simply go to hellofresh.com and use the promo code explains 65 to do so first let's talk about what's new on the Embraer E2 it's the successor to the wildly popular ejet and improves upon its design in several key ways it boasts a new Wing to generate more lift a smaller horizontal stabilizer to reduce drag and fly-by-wire controls to reduce weight but by far the biggest change has been to its engines It Sports gigantic Pratt Whitney PW 1900s which have a fan diameter of 73 inches that's actually four inches bigger than what's found on the 737 Max a plane that's nearly twice as big their sheer size helps to increase the bypass ratio and decrease fuel burn and coupled with the e2's other improvements they make the jet up to 24 percent more efficient than its predecessor but despite all of these updates the E2 has really struggled to sell the program launched almost exactly a decade ago but across its three distinct variants it's only managed to secure orders for a measly 2 255 units during that time to add insult to injury the e175 E2 the smallest E2 variant hasn't corralled a single firm order this seems odd after all the original ejet sold like hotcakes in the E2 is its most logical successor and yet we're still faced with a substantial Gap in orders so what gives well to understand what's really going on here we need to find out who the biggest eject customers are and why they aren't buying the E2 today over 25 percent of all e-jets fly for American regional carriers now the way that Regional flying works in the US is kind of weird big Airlines like Delta United and American contract out their Regional operations to smaller carriers including the likes of Republic Skywest Envoy and Mesa Airlines combined these four regionals fly a total of 505 e-jets and nearly all of them are of the e175 variety the predecessor to the e175 E2 so how many e175 e2s have these stalwart customers ordered so far zero you see in order to fly on behalf of America's big three the regional carriers must abide by something called a scope Clause the scope Clause limits the size of jet that these Airlines can fly as it stands today they're limited to operating planes that have no more than 76 seats and an empto of 86 000 pounds now remember those giant fuel-efficient engines that emberf stuck on the E2 well they certainly help make the plane more efficient but they also make the plane heavier the e175 E2 has an MTO just shy of 99 000 pounds well above what's permitted by the scope Clause so long as the Clause goes unchanged The Regionals won't be allowed to fly the jet and I know this is going to come as a real shock but none of them want to buy a plane that they aren't allowed to use it's no wonder then that the e175 E2 hasn't won a single order now the good news for Embraer is that the scope Clause does get reviewed and renewed periodically so this MTO limit could get raised but exactly when that'll actually happen remains foggy and it doesn't seem like it'll be anytime soon you see the Regionals fly e-jets that are actually fairly young most of them simply aren't ready to be retired so there isn't a strong incentive to push for a change but even if the Regionals wanted the E2 right now changing the scope Clause wouldn't be a walk in the park that's because it's explicitly designed to protect Pilots today we're in the midst of a major pilot shortage and Delta United and American are paying more and more for their services now the regional Airlines typically hire younger pilots and they can get away with paying them less as such the mainliners would absolutely love to Outsource more of their flights to these Regional Partners in order to help save a buck but the scope Clause essentially prevents this from happening since The Regionals can only fly small Jets it would mean the airlines would be sacrificing capacity on denser Mainline routes this isn't a worthwhile trade-off so the mainline Pilots end up keeping their jobs ultimately whenever the Regionals push to modify the claws they'll have to go through the venerable Pilots unions to do so all in all this situation helps explain why the e-175 E2 has garnered zero orders thus far but what about the e190 and e195 E2 the other E2 variants the U.S regionals have never and likely will never fly planes of this size and thus they have no impact on their sluggish sales so why aren't they selling well either well if you ask Embraer they're sure dependent on Boeing in 2019 Boeing and Embraer agreed to enter into a joint venture under which Boeing would take an 80 stake in embraer's commercial business as the deal was being worked out prospective E2 customers put their orders on pause they wanted to see see how everything played out before buying the jet well by mid-2020 Boeing withdrew from the deal and when this happened all of those potential customers got cold feet Embraer contends that if Boeing had never pulled out the E2 would be selling better now there is certainly some Merit to this argument but It ultimately distracts from the biggest problem with the E2 in truth the plane isn't selling because It suffers from poor product Market fit in recent years we've seen a complete shift in how Airlines conduct business while narrowbodies were once confined to short hops they are now being asked to do much much more today it's not uncommon to find 737s in a320s flying on Journeys that last six hours or more and this would have been completely unheard of a couple decades ago it's abundantly clear that the narrow body landscape has changed significantly since the ejet was first launched in the mid 90s and unfortunately the E2 just hasn't kept up with the time it really doesn't add that much versatility over its predecessor sure it's more efficient but the missions it flies are largely the same this stands in stark contrast with the Airbus a220 the e2's biggest rival that plane has completely Rewritten the book on Regional travel so much so that it's kind of hard to call the a220 a pure Regional Jet it can fly up to 1 000 nautical miles further than the E2 despite holding a similar number of seats it also Sports a wider cabin which makes it better equipped to fly longer routes more comfortably coupled with remarkable operating economics the a220 is proving to be a Swiss army knife of a plane something the E2 isn't let me give you some examples of how this is actually playing out in the wild right now airlines are using the a220 to fly Roots like San Diego to Montreal and Riga to Dubai these routes are thin they don't draw a ton of passengers and are perfectly suited for the size of a Regional Jet however they they are so far apart up to six hours by air that most Regional Jets simply can't make the journey but the a220 can which unlocks a whole new Revenue stream for Airlines as a result historical ejet operators like JetBlue and Air Canada are defecting from Embraer and buying the a220 instead in addition new entrance to the Regional Jet market like breeze and air Baltic have gone with the Airbus as well the upshot is that the a220s outsold the E-2 by a count of three to one and it's expected that this Gap will grow so how does emperor write the ship where does it go from here well candidly there is no quick fix as far as the e175 E2 goes it remains at the mercy of the scope Clause now embra remains confident that that Clause will eventually get changed and they actually push back the plane's entry into service from 2021 to 2027 so for now at least they seem content to Simply ride it out until an amendment is madewise file the e190 and 195 E2 are in a trickier position Embraer could still try to develop an ER version of each jet to give it more parity with the a220 but that'll be expensive alternatively embryo can try to exploit the e2's cost Advantage the e195 E2 has a list price that's 50 percent less than the a22300 if Embraer can get even more aggressive on pricing it could convince more customers to come through the door one final Hail Mary that Embraer could try is selling its Commercial Business to Boeing now if you're experiencing Deja Vu it's not just you yeah M rare already tried to do this and it didn't work out but Boeing might have renewed interest in exploring a deal that's something I'm going to cover in detail in an upcoming video so make sure you're subscribed so you don't miss it at the end of the day this situation shows exactly why airplane makers take years and years to evaluate analyze and refine their commercial design before ever offering them to customers if they get it wrong it could impact their business for a very long time unfortunately this is exactly what's happened to Embraer while the E2 is an advanced jet and a significant improvement over its predecessor it isn't the right jet for the current market hopefully Embraer figures out a way to get the E2 back on track but doing so could be a tall task so what do you guys think umbrella should do do you see any other solutions that I might be missing here also have you ever flown on the E2 Embraer talks a lot about how much it's improved its cabin but based on the pictures I've seen they really don't look all that different if you've flown it let me know your thoughts in the comments section below thank you so much to my patrons for helping to make this video possible if you like what I do and want to help the channel grow go ahead and check out this link right here and as always if you learned something new today leave a like And subscribe to keep learning and until I see you again don't forget to look up

Channel: Coby Explanes

Views: 976,561

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Id: -EKpR4aYJZs

Length: 12min 42sec (762 seconds)

Published: Fri Feb 24 2023