Brazilian aircraft maker Embraer is not bracing for any order cancellations because of high jet fuel prices but does expect the surge to limit the size of future orders, a company executive said on Wednesday.
With global oil prices hitting one record after another, many airlines around the world -- some of them Embraer customers -- are bleeding losses and scrambling to cut costs.
"Clearly this is a scenario that worries us a lot and we're evaluating the impact this might have on the industry as a whole," Antonio Luiz Pizarro Manso, Embraer's executive vice president for finance, said.
"But at this moment, we haven't seen any indication that there will be any order cancellations in the near term," he said, adding that Embraer stands by its delivery forecasts for this year and next.
Embraer, the world's leading producer of regional jets in the 70- to 120-seat niche, expects to deliver between 195 and 200 aircraft this year, plus 10 to 15 Phenom executive jets. In 2009, it also expects to deliver 195 to 200 planes and between 120 and 150 Phenoms, which cost much less then the rest of the company's line-up.
In the first quarter, it already delivered 45 planes, up sharply from 25 in the same period in 2007.
As airlines grapple with skyrocketing costs, it is less likely that they will place large orders for planes any time soon, Manso said.
"In the past, we received some orders of up to 100 planes. Today I would say that 30 is the number that we're targeting for big orders," he said, adding that orders of around 20 aircraft are more likely.
One exception, he said, is Asia, where the fast-growing aviation market is pushing up demand for fuel-efficient passenger jets.
"In the Asian market I think we can still get orders of 30 or more planes," he said.
The last big order Embraer signed was with Azul Linhas Aereas Brasileiras, the new Brazilian carrier that JetBlue Airways' founder David Neeleman is starting. In March, Azul agreed to buy 36 Embraer 195s for USD$1.4 billion, with options to buy 40 more. If all options are converted, the value of the deal could surpass USD$3 billion.
Embraer, whose rival in the regional jet market is Canada's Bombardier, finished the first quarter with a firm order backlog totaling USD$20.3 billion.
