The Squeeze on Embraer

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By Scott Hamilton


April 27, 2020, © Leeham News: The collapse of the Boeing-Embraer joint venture Saturday resurfaces the squeeze Embraer was under when the deal was announced in 2018.

Then, Embraer faced the prospect of competing against Airbus in the 100-150 seat sector with the former Bombardier C Series.

Embraer’s E2 Jets are squeezed from above by the Airbus A220 and, if Mitsubishi performs, the M100 SpaceJet from the bottom.

John Slattery, the CEO of Embraer Commercial Aviation (ECA), said he could not compete against the marketing might of Airbus alone. In fact, he lost a key customer when jetBlue ordered the A220-300 instead of the E195-E2 to replace 60 E190-E1s. Airbus, which took over the C Series July 1, 2018, wrapped the A321neo into the A220 order. This deal was announced shortly after Airbus assumed majority ownership of the C Series program.

  • E195-E2 will drive demand.
  • The E190-E2 won’t be a “door opener.”
  • The E175-E2 future depends on US Scope Clause relief.
  • Coronavirus upends everything.
  • M100 waiting in the wings.

E195-E2 will drive demand

Embraer’s chief North American salesman last September told a press conference at the US Regional Airline Assn. convention that the E195-E2 will drive demand for the E-Jet. The E190-E2 won’t be a “door opener,” he said. The E175-E2 may see some sales in Europe and Asia but until the US pilot contracts containing restrictive Scope Clauses are modified, there won’t be sales in the US. Embraer will continue to sell the 2000-designed E175-E1, he said.

The A220-300 is slightly larger than the E195-E2. In a single-class cabin at 31-inch seat pitch, the -300 has 13 more seats than the 132-passenger competitor.

While the E2’s trip costs are less than the A220-300 and seat mile costs are equal, the -300 provides more revenue opportunities.

However, the A220s have more range than the E2s. In certain circumstances, the A220 can make a trans-Atlantic hop. Its wider cabins provide flexibility for lie-flat seating in an upscale configuration. If airlines want maximum flexibility in the 100-150 seat sector, the A220 has it.

The A220-100 is slightly smaller than the E195-E2. The two-member A220 family brackets the E195-E2. The -100 is slightly larger than the E190-E2. When Embraer created the E2, it did not change the 190’s capacity. This limited the E190-E2’s attractiveness.


With the E175-E2’s sales mainly dependent upon the US market, and as a result, it’s stillborn, Embraer must rely on the aging E175-E1 for sales into the US.

Embraer updated the airplane to improve economics, but Mitsubishi is moving forward with its M100 SpaceJet competitor. Entry-into-service is planned for 2024 following seven years of delays of the MRJ program.

But with coronavirus, the long delay works to Mitsubishi’s timeline. Although forecasts associated with the virus are hazardous, several (including LNA’s) see economic and industry recovery in 2024—at the earliest.

The M100 has better economics than the E175-E1. Embraer plans another upgrade in case the pilot unions don’t grant Scope relief that will allow economical operations by the E175-E2. (The plane is too heavy under Scope limits to all maximum range and maximum payload.)

Fewer Deliveries

In an analysis Saturday, LNA concluded that Embraer will deliver a fraction of the nearly 100 E-Jets planned this year. LNA also concluded that Embraer will need more liquidity this year as a result of the virus crisis and the certain reduction in production and deliveries.


A senior Embraer official objected.

“We do have liquidity and access to sources of finance that allow us to overcome the crisis. The assumption that the E1s will not be delivered is wrong. There have been zero cancellations. Embraer has the best airplanes up to 150 seats and will continue to be leader.”

Although nearly 300 Boeing 737 MAXes have been canceled by customers, along with a smattering of wide-bodies, Airbus reported few cancellations. The larger threat is deferrals. This is what Embraer can expect.

Fifty-eight percent of the E-Jets (E175-E1s) scheduled for delivery between March, which the US was hit hard by the virus, are to US carriers. Few if any of these are likely to be delivered this year. Another 28% of the jets, E195-E2s, are scheduled for delivery to one airline in Brazil.

Sunday—the day after the Boeing deal collapsed–Reuters reported Embraer is planning a production cut, reducing cap ex and other spending, revamping payables schedules and other cost-cutting measures. Reuters also reported Embraer officials want to shore up liquidity.

Just as Airbus and Boeing are squeezed by the virus, so is Embraer. But its product strategy is also squeeze by Airbus from the top and, if Mitsubishi can perform, by the SpaceJet on the bottom. Only now, Embraer won’t have Boeing’s heft for protection.

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