Analysis:Short-haul jet makers land deals across Asia

Embraer's Lineage 1000E business jet is displayed at the Singapore Airshow this week. The Brazilian plane maker is |making inroads into Asia as regional airlines connect smaller cities. Photo: Bloomberg

Embraer's Lineage 1000E business jet is displayed at the Singapore Airshow this week. The Brazilian plane maker is |making inroads into Asia as regional airlines connect smaller cities. Photo: Bloomberg

Published Feb 14, 2014

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Siva Govindasamy and Anshuman Daga Singapore

After flying under the radar for many years, makers of smaller jet and propeller-driven passenger aircraft are finding a bigger market in the Asia Pacific region with a slew of orders at the Singapore Airshow.

Canada’s Bombardier, Embraer of Brazil, European joint venture ATR, Russia’s Sukhoi and Japan’s Mitsubishi Aircraft do not roll off the tongue as easily as Airbus or Boeing, but in the lucrative Asian market there is room for all.

Embraer, the largest maker of short-haul aircraft, forecast that the region would take delivery of 1 500 new jets with capacity of 70 to 130 seats over the next 20 years. That translated, it said, into $70 billion (R768bn) worth of business. Importantly, the two largest plane manufacturers do not make aircraft that compete in the below-130 seat segment.

Low-cost airlines such as AirAsia, Lion Air, and Cebu Pacific, with orders for hundreds of Airbus A320s and Boeing 737s, have driven much of the growth in the Asia Pacific airline market.

Increasingly, the major hub airports are getting crowded and there is demand for services to and between smaller second- and third-tier cities.

“The great opportunity in south-east Asia is to get more people to fly, and that is about tier two and tier three cities,” said Torbjorn Karlsson, who leads aircraft sales for Bombardier in south-east Asia.

He identified countries such as India, where about 1 percent of its 1.2 billion population flies, and Indonesia and Thailand as inviting markets.

While there may still not be enough passengers to fill an A320 or a 737 from secondary centres, there are enough for smaller aircraft. Thousands of this type of aircraft have been sold across Europe and the Americas, but few have found their way to Asia. That’s now changing.

Embraer announced its first major Indian deal in Singapore, with start-up Air Costa ordering 50 jets valued at $2.94bn yesterday. In a country like India, where Airbus and Boeing planes have saturated the market with airlines like IndiGo and SpiceJet, Air Costa is trying to find a niche by connecting the smaller cities with Embraer jets.

Air Costa chairman Ramesh Lingamaneni, which began operations in October last year and has four Embraer jets, said: “Regional air services have enormous potential in India.”

Bombardier has not won any orders for its CSeries or CRJ jet aircraft, but Thai low-cost carrier Nok Air said it would order up to eight of the Canadian company’s Q400 turboprop.

ATR, which dominates the turboprop market, inked a deal to sell up to eight of its 72-600 aircraft to Thai airline Bangkok Airways. It also agreed to sell 20 aircraft to leasing firm Dubai Aerospace, with options for 20 more, in a deal valued at $1bn. Sukhoi displayed a Superjet in the livery of its customer, Indonesia’s Sky Aviation, on the static display at the show.

Japan’s Mitsubishi Aircraft and China’s Aviation Industry Corporation are developing aircraft to compete in the segment, and their executives sought to impress potential customers in Singapore.

There is intense rivalry too, with turboprop operators like ATR maintaining that their aircraft are more efficient on short-haul routes.

“On short-distance routes the turboprop is the most efficient. Jets burn twice as much fuel. And a lot of airports are not accessible for jets,” ATR’s head of global sales, John Moore, said. – Reuters.

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