Brazilian aircraft maker Embraer SA (ERJ - Free Report) foresees a $70 billion growth opportunity over the next two decades in Asia-Pacific including China. The region is poised to take delivery of 1,500 new jets in the 70-130 seat segment over the said period. This will comprise almost 20% of the global demand in this segment. The Asia-Pacific region is believed to be the latest hunting ground for commercial aircraft manufacturers as encouraging demographic factors are driving unprecedented growth in the regional airline industry.
Embraer with an 80% plus stake in the 70-130 seat Asia Pacific market estimates that 65% of the projected new deliveries will aid in market growth while 35% will replace an ageing fleet. Since 2004 the company has delivered almost 150 E-Jets to 10 operators from 6 countries in the region.
Intra-regional liberalization supported by economic growth is expected to drive air transport demand by 6% annually by 2032. Embraer expects the Asia-Pacific region to gradually become the world's largest market for aircraft makers. This expansion is expected to come mostly from China and India where an emerging urban middle class is increasingly taking to air travel.
In a separate release, the company announced that it had signed a deal with U.S.-based Hawker Pacific Aerospace Inc. for maintenance and support services for its Legacy 500 and Legacy 450 executive jets in the Asia-Pacific region.
The Embraer E-Jet family is a series of narrow-body, medium-range, twin-engine jet airliners. Since 2004, Embraer holds a global market share of 51% of orders and 62% of deliveries in the 70 to 130-seat segment.
Embraer customers use these E-jets either as network carriers, as charter operators or as low cost and regional airlines. E-jets help the airlines in balancing demand with capacity, in substituting old and inefficient aircraft, and developing new markets at lower costs and greater efficiency.
Embraer is the world's third largest commercial aircraft manufacturer on the heels of The Boeing Co. (BA - Free Report) and Europe's Airbus. Embraer’s latest announcement came after Boeing revealed that Asia-Pacific will require 12,820 airplanes worth $1.9 trillion in the next two decades. The deliveries will account for a sizeable 36% of the global commercial airplane delivery in the aforesaid period. These deliveries will triple the size of the Asia-Pacific aircraft fleet by 2032 from 2012 levels.
In 2013, Embraer delivered 209 commercial and business jets and had a firm order backlog of $18.2 billion at year end.
Embraer carries a Zacks Rank #2 (Buy). However, other better-ranked stocks in the space include Lockheed Martin Corp. (LMT - Free Report) and Northrop Grumman Corp. (NOC - Free Report) , both with a Zacks Ranks #1 (Strong Buy).