JetBlue Orders 100 Jets in $3B Contract

SAO PAULO, Brazil - JetBlue Airways placed a $3 billion order with Brazil's Embraer for 100 regional jets as the low-cost carrier embarks on a growth strategy that involves challenging the country's largest carriers in mid-sized markets.

The strategy represents an evolution for JetBlue on two fronts. First, it means the New York-based carrier is abandoning its reliance on a single aircraft, the Airbus A320. It also means JetBlue is ready to compete with major airlines on short-haul trips.

David Neeleman, JetBlue's chief executive, said Tuesday's announcement makes the carrier "well-positioned to offer a better product to markets of all sizes across the U.S."

Based at JFK international Airport in New York, JetBlue has mainly provided discount long-haul service to larger markets, or those with at least 600 passengers a day in each direction. In that category, there are about 300 possible cities to serve.

By deploying the fleet of Embraer regional jets into mid-sized markets with 200 to 500 passengers a day, Neeleman said JetBlue will have another 900 cities to choose from.

Neeleman said JetBlue's low-cost strategy will not change and that his company will be able to charge $60 for flights under 300 miles — less than half of what major carriers can afford to charge.

The contract, which makes JetBlue the launch customer for the new Embraer 190, could double in size if the carrier exercises an option to purchase an additional 100 jets from Embraer, the world's fourth largest commercial airplane manufacturer.

The order comes less than two months after JetBlue ordered 65 larger planes from European aircraft maker Airbus with an option to purchase 50 more over the next eight years. That deal is worth more than $6.6 billion.

JetBlue plans to take delivery of the first seven Embraer 100-set jetliners in 2005, with about 18 more planes delivered per year through 2011, when the options would begin.

JetBlue's fleet currently has 42 A320s, plus orders and options for future aircraft from Airbus. After delivery of the Embraer and Airbus jetliners, the fleet could grow to 290 by 2011.

Neeleman conceded that by adding a new type of plane to JetBlue's fleet, the carrier's maintenance and pilot-training costs would rise somewhat.

The new Embraer jets will offer the satellite television service DirecTV, a feature included on JetBlue's A320s.

JetBlue shares fell $1.86, or 5.4 percent, to $32.75 in late morning trading on the Nasdaq Stock Market after the deal was announced. Embraer shares rose nearly 7 percent on Sao Paulo's Bovespa exchange.

From their press release page:

6/2/2003
EMBRAER SELECTS JACKSONVILLE, FLORIDA, FOR U.S. DEFENSE AND HOMELAND SECURITY AIRCRAFT PRODUCTION
Embraer, one of the world’s largest aircraft manufacturers, today announced that it intends to open an aircraft production facility in Jacksonville, Florida, for the U.S. defense and homeland security markets.
This production facility, to be located at Cecil Commerce Center, will fully qualify the company as a compliant U.S. government supplier for defense and homeland security programs.
“We believe this initiative, aimed at the U.S. defense and homeland security markets, will lead to a multi-year expansion of Embraer capabilities in the United States on defense related operations,” said Maurício Botelho, Embraer President and Chief Executive Officer. “Embraer first established its U.S. presence in 1979 with a sales and product support facility in Fort Lauderdale. In the past years, besides the significant expansion of that facility, we added an engineering office in Palm Beach Gardens, and a maintenance, repair and overhaul facility in Nashville, Tennessee.”
“Embraer has been actively pursuing U.S. defense and homeland security market opportunities that have requirements for advanced, reliable and affordable Intelligence, Surveillance and Reconnaissance (ISR) systems such as those on our current products ordered by Brazil, Mexico and Greece,” Botelho said. “We are very pleased that Embraer has selected Jacksonville as a strategic location from which to successfully compete in the U.S. defense market,” said Florida Governor Jeb Bush. “Florida is host to many of the world's top aerospace and defense companies, and of our ability to play a vital role in maintaining the security of our nation is a source of great pride for us.”
Embraer selected Jacksonville from a short list of attractive cities because it best satisfied the company’s checklist of requirements primarily focused on facilities and logistics, but also included factors such as skilled labor and cost of living.

MORE: Press release

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