When will the good news end for Motley Fool Stock Advisor pick Embraer (NYSE: ERJ ) ? No time soon, apparently. On Tuesday, the Brazilian jet maker reported that the Federal Aviation Administration had certified its E175 jet for service here in the U.S.
I'll understand if that doesn't seem important, but allow me to explain why it is. First, some background. The E175 is the upgrade to the E170, and seats 78 passengers. The E170 has been a relatively popular plane here; several regional carriers use it, especially those serving UALCorp.'s (Nasdaq: UAUA ) United.
But the E170 lost some of its sex appeal when the E190 and E195 rolled off the line. For example, U.S. Airways (NYSE: LCC ) recently amended an order with Embraer that allows it to trade an order for 57 of the E170s into a similar number of E190s.
As good as that news was -- it meant more money, for one -- it also left Embraer vulnerable without the E175. The E190, you see, is a bigger airplane, configured to seat between 98 and 106 and accommodate a first-class cabin for airlines that offer premium service on regional routes. (United does this now and U.S. Airways plans to.) Not all routes, however, are suited for these larger planes.
That's why Bombardier, Embraer's Canadian rival, has done pretty well with its line-up of 50-seat CRJ models. But now Bombardier is moving upstream with larger planes such as the CRJ705, which boasts up to 75 seats and, as such, is a direct threat to the E170. Entry of the E175 into service here could dull the threat, though we'll know more when NorthwestAirlines finally decides between the CRJ705 and the E175 for an upcoming order of 70 regional jets, according to analysts at Canaccord Capital.
Bottom line: Aerospace is a brutal business where small advantages can become useful weapons in the fight for market share. With Tuesday's largely unnoticed news, Embraer adds another arrow in a quiver that's already close to full.
Prepare for take-off with related Foolishness:
- It's nice to see Embraer flying again.
- China is one of the jet maker's many destinations.
- Small jets also provide fuel for Embraer's earnings engine.
Embraer is a Motley Fool Stock Advisor selection. Ask for us anall-access passand you'll get a backstage look at all of the stocks that are helping David and Tom Gardner beat the S&P 500 by more than 41% as of this writing.Go ahead; your pass is free for 30 days and there's no obligation to buy.
Fool contributor Tim Beyers has 33 picks in his Motley Fool CAPS portfolio, including Embraer, which he believes will outperform the S&P 500. He doesn't, however, have real money in the jet maker or any of the other firms mentioned in this article. What's your take on Embraer? Bombardier? Get in the game and let us know.