U.S. Airways $4.3 Billion order


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CHICAGO (Reuters) - US Airways Group Inc. (OTC BB:USALA.OB - News; NYSE:U - News), which recently emerged from bankruptcy, on Monday said it has placed a $4.3 billion order for at least 170 regional jets from Canada's Bombardier Inc. (Toronto:BBDb.TO - News) and Brazil's Embraer SA (Sao Paolo:EMBR3.SA - News).The deal, which also includes 380 options to purchase aircraft, is part of US Airways' post-Chapter 11 strategy of expanding its network by developing short- and medium-range routes using the smaller regional jets. Arlington, Virginia-based US Airways, the nation's seventh largest, emerged from bankruptcy protection in March.

"These new regional jets will enable US Airways to generate additional revenue by growing our route network and competing more vigorously in short-to-medium-length haul markets," US Airways Chief Executive David Siegel said in a statement.

US Airways had said previously that it planned to order 50 50-seat regional jets and 50 70-seat regional jets from either Bombardier or Embraer.

Its regional jet orders come as the airline industry faces a historic downturn that has forced other large carriers to delay deliveries for larger aircraft because there is not enough demand to fill planes.

The Bombardier agreement includes firm orders for 60 CRJ-200 50-seat planes, which are scheduled to be delivered beginning in October, as well as firm orders for 25 CRJ-700 75-seat jets.

Delivery for the other part of the deal -- firm orders for 85 Embraer 170 70-seat aircraft -- will start in November, Embraer said.

US Airways is the first carrier in North America to order the new Embraer 170, part of a new family of Embraer jets designed to tap the gap between 50-seat regional jets and larger jets with more than 120 seats.

Many of the Bombardier and Embraer jets will offer both first-class and coach service, with every seat either an aisle or window seat, US Airways said.

Embraer, the world's fourth biggest manufacturer of civilian aircraft, has cut its forecast for jet deliveries in 2003 twice since the start of the year due to an order cancellation from Swiss International Air Lines (Zurich:SWIn.S - News) in March and an order delay by top client ExpressJet Holdings Inc. (NYSE:XJT - News) in February. Houston-based ExpressJet operates as Continental Express.

Embraer said the total value of its portion of the US Airways' contract is $2.1 billion, with a potential value of more than $6.2 billion if options are converted to purchases.
Great business move.. bet the farm on a plane that has ultra-high CASM, and that customers loath.
What's a RJ world.. sigh.

I do like those RJs, they are really nice lookin' planes, but I am really afraid of our big boys being replaces by massive networks of regional jets.

Other than that, yay for USAirways!
RJs are not going to replace all the big jets. Right now they are popular because a) they are "trendy" and b) with lower demand for travel the need for lots of capacity does not exist.

As travelers return to the air, however, it will not make economic sense to run four RJs where one or two 737s/MD-XX/757 etc. To do this means the airline now needs more mechanics, at least twice as many crews, more gates/or time slots which will increase delays in turn costing money. etc.

A perfect example of demand dictating capacity ilies in Asia. They use 747s for domestic routes. Why? Because demand is high and they need the seats. If RJs were more economical don't you think they'd be all over 'em by now?
I actually think it was a great move for US Airways. They have been holding off on those RJ orders for quite some time. I am glad to see that they are back on their feet and looking to make long term improvements. The RJ's are a good idea because they'll keep the load factors higher on the routes with less demand. It's not like they are going to replace the 737s and A320s with the RJ on every route. The RJ's will be great aircraft to get pax from the outstations to the major hubs. Hopefully it will lead to more stations opening at the regional airports (and maybe reopening the closed stations). Demand will pick up, especially as summer arrives and the vacation season begins. I also think the US Airways may start looking into opening more of their routes to the Western US that they were forced to stop when things got rough. The RJ's will allow more of the larger aircraft to be used on the long hauls. I guess it looks like my friends at PSA will finally be moving up to the RJ from the D328 prop (which I personally thought was a great plane). Just my thoughts...

Happy Flying!