When European regional carrier Flybe set out to make its latest fleet decision, the company’s board of directors had issued the team looking at options a clear mandate: identify what turboprop the airline should buy.
Flybe already operates the Bombardier Q400 (along with the Embraer E195), but to sustain growth and to avoid its fleet aging, it wanted to strike a new deal. By the time all was said and done, Flybe opted to buy the Embraer E175 regional jet.
Getting from the proposition of buying a turboprop to an RJ was not easy, in particular because of the higher operation costs associated with the jet. But through a lot of work, Flybe managed to craft a deal that it felt had little financial risk from going down the RJ route. Critically, the cost differential was almost eliminated not on a per-seat cost basis, where the larger RJ has an advantage, but on a per-trip basis, says Andrew Strong, Managing Director of Flybe U.K.
As Flybe looked at candidate aircraft to buy, it was interested in Bombardier’s Q400X concept, but the plans for that product were not solid and nor was the fielding timeline. The other turboprops that were considered, the ATR 72-500s and 72-600s, were deemed too slow, particularly to operate out of some of the airports with tight curfews restrictions serviced by Flybe, such as Southampton.
On the jet side, Flybe ruled out the CSeries as being “too big” and “too heavy.” The routes the aircraft flies are too long, and the timeline didn’t fit Flybe’s needs.
Flybe also looked at the CRJ-family, but didn’t want to add a third aircraft type and felt the small cabin was a drawback.
Not adding another aircraft type also worked against the Mitsubishi Regional Jet, as well as its development schedule.
That left the E175. Flybe put pressure on Embraer and engine-provider General Electric to come up not just with a good purchase price, but also an attractive maintenance deal.
Even so, Strong notes that the cost, per trip, of operating the E175 was £200 above that of a Q400. The E175 has ten more seats, and the higher cost would have meant Flybe had to sell at least three of those on a guaranteed basis to make up the difference. That was too much risk, Strong says.
In came BNDES, the Brazilian export credit agency, which offered 85% financing support on the deal at what Strong calls “competitive rates.”
The entire package meant that on a per-trip basis, the E175 could now match the Q400. In the end, Embraer signed a firm contract for 35 of the aircraft, 65 options, and 40 purchase rights. Some of the options are soon to be exercised. There is still one caveat, though. Flybe’s math assumes a $90 price for fuel. At $110, the airline has to sell at least one of the extra ten E175 seats to again reach cost parity with the Q400.