TheWeatherman

Yep, looks like United was counting on scope release and backing Skywest and Republic to order more ERJs. I think United saw the writing on the wall that scope release just isn't going to come. Ooops, too bad so sad

amcnd

Read the whole article...

A total of 134 jets were removed from Embraer's backlog in 3Q18. The majority of these planes belong to an order placed by Skywest for 100 E175-E2s, and were removed largely due to IFRS accounting changes. Given current timing uncertainty of the scope clause changes in the U.S. market to allow the heavier E175-E2 to be flown by regional airlines under capacity purchase agreements (CPAs) for mainline airlines, Embraer has proactively adopted best practices to align with the latest IFRS principles and remove the order from backlog given its conditionality terms. Skywest remains committed with the E175-E2 order and its terms are unchanged.

Tpinks

There are essentially four levels to aircraft purchases.

* Firm order: Production position(s) are set, down payment(s) are made, pre/production payment(s) are made, final payments are made at delivery and ownership is transferred.

* Letter of Intent: Production position(s) are normally set (either a hard position or a range) with a date to firm the production slot by. A down payment is normally made and production payments do not start until the production slot is firmed. Then it follows the path of a firm order.

* Memorandum of Understanding: similar to an LOI but with looser terms. Normally a wider range of time for production slots to be firmed and normally minimal or no payments are made at signing. Productions Positions that were set are not hard positions, so if someone else comes in and makes a large order, it can bump the MOU planes.

* Options: Commitment to a given number of additional airframes past the initial airframe amount. These options can be assigned production slots or date ranges and will receive the same pricing preferences as the initial order. Normally a small (overall) monetary fee is paid by the airline when they order options.

In the last decade, with the rapid expansion and massive orders being placed, there has been some muddying of the waters when it comes to how a Firm vs LOI vs MOU order is considered. It has become less cookie cutter and each deal is tailored more and more for the individual need.

It depends on the individual airlines, but typically you see LOI's used when a massive order is announced but the carrier is either financially or operationally not in a position to firm the order upfront. This would include us on possibly both ends, but I would assume more operationally.

For example, American Airlines initially ordered 787's in 2008 via a LOI. It was rumored within the industry, they had 22 months from the date a specific airframe was set to begin production to firm it up. It was not until Jan '13 that the 787's were firmed for delivery in Dec '14. This excessive delay in firming was due in part to the delays to the 787 program.

So while our initial report was that they were to be signed by end of third quarter, it does not mean since it has not happened yet that it is completely off. It also does not mean that deliveries can not commence as it was originally announced.

Contrary to Flyingkat's assertions, there has never been anything said nor have I heard any rumor about these 175 replacing 145's. The timeline to cross the hurdles to allow 175's to replace 145's does not match up with the proposed delivery timeline that was initially said.

If anything, I would say these would be used to replace CRJ-700/900's operated by other carriers or our own 170's before any 145's. Mesa's CRJ700's are up for renewal next year as well as some of their 175's. Mesa's AA CRJ9 flying is also up for renewal I believe as well. Gojets is also in a position to lose at least some of their CRJ7's. The 25 UA 175's are still up for grabs as far as we know (Expressjet CBA can be satisfied by shifting Skywest 175's to them), so we still don't officially know where those planes are going and who will be losing the CR7 flying they are replacing.

I personally do not believe the aircraft order is directly tied to any merger. If it is, then there would be no need to be hiring 100 FO's per month. The push on hiring says these will be growth aircraft at the expense of another carrier(s). Any 145 for 175 swap, if one should ever occur, would not be done on a 1v1 basis either, so in a merger we would be overstuffed in that case, again no reason to be pushing 100 new hires per month.

This is all, of course, me reading between the lines.

Longhornmaniac8

The data are pretty readily available on the APC profiles of the legacies. 200 pilots retired at AA in 2017. At least 3 times that will be retiring each year between 2021-2027, with an effective 3-year peak between 2023-2025.

Delta retires 350 pilots in 2018. At least twice that will be retiring each year between 2021-2025, with at least 500 retiring each year until 2030.

United retires fewer than 100 pilots in 2018. At least 500 will retire each year between 2023-2032.

Southwest has a long ramp up until they peak in 2035, with not much difference in the preceeding 7-8 years.

We are at the very beginning of the bell curve. Be patient.

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