Government policy constrains Embraer, Bombardier jet offerings for China regional airlines

The logo of Brazilian jets maker Embraer is seen on a factory in Sao Jose dos Campos, Brazil, December 23, 2017. REUTERS/Leonardo Benassatto

SINGAPORE/MONTREAL (Reuters) - Embraer SA and Bombardier Inc are targeting the Chinese market with a limited offering of smaller aircraft for regional airlines because they are allowed to only operate jets with 100 seats or less, according to company executives.

A government policy aimed at boosting domestic flights serving secondary markets in China requires fledgling carriers to operate at least 25 city-hopper jets with 100 seats or less, before graduating to bigger aircraft, the executives said.

The Civil Aviation Administration of China (CAAC) policy issued in 2016 but never fully published in its entirety, would exclude the newer Embraer E190-E2 and the Bombardier C Series. CAAC did not respond to a request for comment on Wednesday.

Embraer Commercial Aviation CEO John Slattery said the policy was designed to stimulate economic activity beyond China’s heavily populated eastern seaboard.

“As we look at the terms of the detail of the policy document, the E175 is an ideal aircraft to be compliant with the policy and address those requirements,” he told Reuters at the Singapore Airshow. The E175 has around 80 seats.

Bombardier Commercial Aircraft sales head Colin Bole said he sees Chinese regional carriers “graduating to the C Series,” eventually but the 100-seat cap could delay the plane’s proliferation in the country.

“We are definitely going to get to the point where the C Series will have a significant footprint in China,” Bole said. “But because of that polarisation at this stage there will be a delay before that actually happens.”

Bombardier is looking to boost sales of the 90-seater CRJ 900 regional jet and Q400 turboprop which meet the regional policy requirements, Bole said.

(This version of the story has been corrected to clarify headline, paragraph 1 to show regional airlines are affected, not all airlines)

Reporting By Jamie Freed in Singapore and Allison Lampert in Montreal; Additional reporting by Tim Hepher and Brenda Goh in SingaporeEditing by Muralikumar Anantharaman