(Adds Embraer statement)
By Allison Lampert
MONTREAL Nov 25 Delta Air Lines Inc
pilots are expected to keep existing rules in their new labor
contract that prevent the U.S. No. 2 carrier from flying
aircraft above a certain weight on regional routes, in a blow to
Embraer SA and Mitsubishi Heavy Industries Ltd
, whose latest models exceed that limit.
The pilots' new labor contract will keep what is known as a
"scope clause," which restricts planes heavier than 86,000
pounds and with more than 76 seats from being flown on regional
routes, two sources familiar with the matter told Reuters.
Voting results on the new contract are expected on Dec. 1.
The clause effectively protects well-paid pilot jobs at
major airlines, as it prevents the carrier from using bigger
planes on outsourced regional routes, which generally pay less
well and have inferior working conditions.
When planemakers such as Brazil's Embraer and Japan's
Mitsubishi designed their latest regional jets, with heavier but
more fuel-efficient engines, they expected the scope clause to
have loosened, but unions have managed to hold on to it.
Delta's vote will follow similar decisions by unions at
American Airlines Group Inc and United Continental
Holdings Inc earlier this year and in 2015.
Pilots' opposition to relaxing scope clauses is a problem
for Embraer's E175-E2 regional aircraft that is to be delivered
in 2020, and Mitsubishi's MRJ90 jet, slated for delivery in
mid-2018, which both exceed the weight limit.
UBS downgraded Embraer to a 'sell' rating this week after it
resumed coverage, citing risks from the scope clause pushback at
American, Delta and United. Analyst Darryl Genovesi said it was
unlikely the carriers would fly the E2 on only mainline routes,
due to higher costs.
"This puts the viability of the E175-E2 at risk since most
of the demand for it originates at those three airlines,"
Genovesi wrote in a note to clients.
Regional carrier SkyWest Inc, which operates
flights for Delta, among others, is the launch customer for the
E175-E2, with 100 firm orders.
In a statement, Embraer said its existing E-175 dominates
the 70-seat market where it holds 84 percent of market share and
the Brazilian planemaker would continue to sell that jet past
2020 if scope clauses do not change.
However, the statement said: "Embraer believes scope clauses
will eventually be relaxed in the future as fuel prices increase
and airlines look for more efficient products."
A Mitsubishi spokesman was not available for comment,
outside normal business hours in Japan.
In September, the company said it is working with customers
to address weight issues for the MRJ90, which is about 600
kilograms (1323 lbs) too heavy.
U.S. pilot unions have taken an increasingly hard line on
higher salary demands and are making fewer concessions to U.S.
Their current stance against changing scope clauses could,
however, be a boon for Embraer's Canadian rival Bombardier Inc
, which sees it as an opportunity to boost sales of its
CRJ-900, which fits current weight limits, one of the sources
Mesa Air Group Inc Chief Executive Jonathan
Ornstein said he will not purchase new planes that do not comply
with existing scope clauses as he does not believe the current
limits will be changed in the near future.
Instead, the Arizona-based regional carrier will buy more
current generation E-175s, along with additional CRJ900s to
replace 38 regional jets being phased out over the next four
"I don't think there's any chance the pilots will change
their weight requirements. Zero," Ornstein said.
(Reporting By Allison Lampert; Editing by Bill Rigby)