UPDATE 2-American Airlines orders four Embraer E175s for Envoy Air
(Recasts throughout; adds background, share reaction, analyst comments)
SAO PAULO, Oct 19 (Reuters) - American Airlines has placed a firm order for four Embraer E175 jets to fly with its subsidiary Envoy Air, the Brazilian planemaker said on Thursday, marking the carrier's second order for the regional jets this year.
American's previous deal for seven E175s, announced in June, underscored a U.S. regional aviation market recovering from rough years marked by the COVID-19 pandemic.
Shares of Embraer rose as much as 1.2% on Thursday's order news, which analysts flagged as a sign of improving demand and stronger deliveries going forward.
"It highlights that the company's efforts to increase its commercial backlog is bearing fruit and also indicates that demand for E1s in the U.S. could be picking up again," Santander analysts told clients, referring to the first generation of E-Jets still popular with U.S. regional carriers.
"We maintain our optimistic view on Embraer, and believe that 2024-25 could translate into a period of a solid pipeline of deliveries."
Embraer said in a statement that the order, worth more than $230 million at list price, will be added to its fourth-quarter backlog, with deliveries expected to take place in the fourth quarter of 2024.
The order will take Envoy Air's fleet of E-Jets to more than 150 aircraft by the end of next year, Embraer said. The United States is the main market for the first-generation E-Jets, which Embraer dubs "the backbone" of that country's regional network.
"These new jets will allow us to continue growing with American Airlines ... as the U.S. domestic and regional markets recover from a very challenging few years," Envoy Air Chief Executive Pedro Fabregas said in a statement.
Last month, Embraer also announced a firm order for five E175s from Nigeria's Air Peace. Luxembourg's Luxair and Aerolineas Argentinas recently said they would add the next-generation E195-E2 to their fleets.
Embraer's backlog "continues to grow and book-to-bill is approaching 1.0x," analysts at JPMorgan said, "easing the commercial concerns on E2 and E175 demand."
Embraer is confident it will meet its outlook for aircraft deliveries in 2023, seen growing by about a quarter, and expects to be able to maintain that pace next year, Chief Executive Francisco Gomes Neto told Reuters earlier this month.
(Reporting by Gabriel Araujo; Editing by Steven Grattan, Brad Haynes and Jonathan Oatis)
