The Exeter-based regional airline FlyBe is to spend $950m (£520m) on a fleet of Brazilian-made Embraer jets to expand its network to airports in the north of England and Scotland.
FlyBe announced yesterday that it was to be the global launch customer for a new 118-seat Embraer 195 aircraft. The plane is the largest model yet from the South American manufacturer, which is beginning to challenge Airbus and Boeing in the market for mid-sized commercial jets.
The airline has placed a firm order for 14 planes, with options for a further 12. They will replace FlyBe's ageing fleet of BAe 146s and will provide greater range, allowing for longer flights.
FlyBe's chairman, Jim French, said: "These are the right size for our market and they give us better range capability than the 146, allowing us to tackle new markets."
The privately owned carrier is concentrated in Exeter, Southampton and Birmingham but it wants to expand at airports including Belfast, Glasgow, Edinburgh, Newcastle and Leeds. The new jets are sufficiently powerful to fly from these cities as far as the south of Spain.
Mr French said the Embraer planes consumed 20% less fuel per seat than their rivals, giving a further competitive advantage.
"We believe that in future, emissions trading will be a factor we have to live with," said Mr French. "Fuel emissions and noise will be considerations."
FlyBe has positioned itself as a regional carrier, specialising in flights from local airports. Although it offers budget fares from as low as £29 to the continent, it has avoided competing head-on with easyJet and Ryanair at airports around London.
The carrier, which is owned by the family trust of the late Blackburn Rovers tycoon Jack Walker, has elected to buy smaller planes than its low-cost rivals which typically choose Boeing 737s or Airbus A319s, with at least 150 seats.
A year ago, FlyBe embarked on a major expansion, ordering 61 Q400 aircraft from Canada's Bombardier. The airline expects its fleet to increase from 36 to 91 aircraft by 2009.
An industry source told the Guardian that before it signed yesterday's order, FlyBe came close to clinching a cheaper deal to buy a dozen BAe Avro 100 regional jets secondhand from Turkish Airlines. The deal fell through at the last minute, blamed by insiders on the discovery of a corrosion problem.
FlyBe expects to generate revenue of £300m this year from 5.6 million passengers. The airline operates 101 routes from 41 airports and describes itself as Britain's third-largest low-cost airline.
However, it is presently up for sale. The Walker family trust is looking for an exit as it considers that too much of its capital is tied up in the airline.
In November, Mr French set an 18-month deadline to resolve the question of the airline's ownership. He said yesterday that he believed a flotation or a venture capital buyout were the likely options.
"We're still on track to deliver a partial or full exit strategy in 18 months," said Mr French. "I think a trade sale is looking very unlikely."
Embraer's chief executive, Mauricio Botelho, issued a statement welcoming FlyBe's purchase: "FlyBe's choice is yet another testimony of the capabilities and right-sizing factor of our family of aircraft.
"We are proud to be part of the carrier's continued expansion in the low-cost market."
Flying up from Rio
The Brazilian city of Sao Jose dos Campos is dominated by aviation. Midway between Rio and Sao Paulo, it is home to one of Brazil's most successful exporters, Embraer.
Embraer describes itself as the world's leading maker of commercial jets with up to 110 seats. Yesterday's deal with FlyBe took it a shade further, to aircraft capable of carrying 118 passengers.
Employing 16,500, Embraer has an order book of $9.9bn (£5.5bn). Its small aircraft, seating 30 to 50 people, are used for shorter routes by the likes of BMI. Its new range of mid-sized planes has already been chosen by America's JetBlue, which placed a $3bn order two years ago.
Embraer's biggest rival is Bombardier, which recently became embroiled in a furious war of words with the Brazilian company after accusing it of relying on military contracts.
Established in 1969 and privatised in 1994, Embraer has seen off European competitors such as BAe, Shorts and Saab. Yesterday's deal with FlyBe marks a new foray into Europe's burgeoning budget airline industry.
