--Embraer jet sale to SkyWest could boost backlog by 20%

--Spate of orders from U.S. carriers signals a turnaround in demand

--Firm order backlog still trailing 2008 record

SAO PAULO--Brazilian aircraft manufacturer Embraer SA (ERJ, EMBR3.BR) on Tuesday unveiled its third major contract this year to sell jets to a U.S.-based aircraft operator, providing the world's fourth-largest aircraft manufacturer with breathing room for the coming years.

SkyWest Inc. (SKYW) has agreed to buy as many as 200 jets, worth as much as $8.3 billion in coming years if all the orders are confirmed. The deal is one of the largest in Embraer's history. A 2003 order by JetBlue Airways Corp (JBLU) for 200 jets was subsequently revised down to just 100.

Analysts say that the deal is the latest sign that the U.S. travel market is starting to recover following the financial and economic crisis that began in 2008, albeit at a tepid pace.

"I see this as a light at the end of the tunnel for the global economic recovery," said Mario Bernardes Jr., transportation analyst at BB Investimento, the investment-banking arm of Banco do Brasil SA. Along with improving European vehicle sales, "this Embraer sale shows that there is an improved outlook in the medium- and long-term."

SkyWest, a regional airline that flies short routes on behalf of the major carriers, said it will initially buy 40 of Embraer's E-175 jets, with deliveries starting in the second quarter of 2014 and ending in mid-2015. SkyWest will operate the aircraft under a 12-year contract with United Airlines Inc. (UAL).

SkyWest said it may buy another 60 aircraft, depending on talks with major airlines. It didn't provide details about the final option for another 100 aircraft.

In April, United bought 30 E-175 jets, with options for a further 40, while in January, Republic Airways bought 47 of the E-175 planes, with an option for another 47.

"Since 2008, Embraer's backlog of orders had fallen significantly as the crisis took its toll on companies here and abroad," said Pedro Galdi, chief analyst at brokerage SLW in Sao Paulo. "Airlines have to start buying again because, whether they like it or not, demand is increasing. But we're still far from where we were in 2008, and will be until the whole world starts growing again."

Embraer shares climbed 1.9% in Sao Paulo, trading to BRL19.25, and traded for as much as BRL19.81.

The order of 100 planes from SkyWest, if exercised entirely, would lift Embraer's backlog by 20%, after ending the first quarter at $13.3 billion. That's up from $12.5 billion in the fourth quarter of 2012.

The backlog peaked at $21.6 billion in 2008. Since then, Embraer has focused on its defense and executive-jet division to try to bring up flagging revenue. It's building a military transport plane, which could be delivered as soon as 2015, as part of its effort to increase defense's share of revenues to 20%.

Write to Rogerio Jelmayer and Paulo Winterstein at brazil@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Embraer (NYSE:ERJ)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Embraer Charts.
Embraer (NYSE:ERJ)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Embraer Charts.