Leeham News and Analysis
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Leeham News and Analysis
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Embraer shows some improvement YOY
April 29, 2021, © Leeham News: Embraer posted improvement in some of its year-over-year financial results today.
Revenue for the first quarter was up 27.3%, from $633.9m to $807.3m. The 1Q20 period was largely unaffected by the global COVID-19 pandemic, which didn’t hit until March 10. But Embraer Commercial was at a standstill, awaiting approval from the European Union on the proposed joint venture with Boeing. (Boeing terminated the JV late in April.)
Embraer reported an EBIT loss last year of $46.9m. It still reported a loss this year, of $33.1m. Adjusted net losses for the two quarters weren’t much different: $104m in 1Q20 vs $95.9m this year. But Net income attributable to shareholders improved from a loss of $292m to a loss of $89.7m.
Adjusted Free Cash Flow remained negative YOY but improved from $676.5m to $226.6m.
Embraer delivered nine E-Jets, including five E195-E2s, and 13 executive jets during the quarter. Post quarter, EMB signed a firm order for 30 E-195 E2s with an unidentified customer. Deliveries begin in 2022.
Initial analyst reaction is below.
Credit Suisse
Solid top-line and adjusted Free Cash Flow beats driven by YOY growth at all segments ex-Services & Support. E175-E2 EIS pushed to 2024. As expected, no 2021 guidance due to Covid.
Goldman Sachs
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A good company, reigning the market around 100 seats, offering a good transport and trainer on top and a good portfolio of affordable business jets. .
I hope they find a strong partner, respecting their independence, agility and drive. Not a cherry picking, value extracting kind of ally.
Finally a significant order for the E195-E2. I believe it is the first high volume order in 3 years, since the KLM one and the end of the Boeing JV discussions.
Embraer’s strategic problem is what to do next, now to grow?
Scope seems secure for another 4 years or so so the E2 is locked out of the US.
Doing a modern but conventional turboprop would be a mistake. That market is almost definitely going to be attacked by one or more hydrogen aircraft which will sell in numbers large enough to kill the business case. There may even be legislation in Europe mandating net zero emission aircraft for short ranges.
And longer term the small hydrogen turbo fan may be coming for the EJets as well.
One obvious step would be to get the E series certified for synthetic and bio fuels. But that is a very reactive step.
I am going to disagree on the Hydrogen. I don’t see it flying
Agreed no Turbo Prop but that also is a Hydrogen Turbo (economics are iffy now and with a Hydrogen, much worse)
I see the E2-175 is being set back, that is a shame but the market non US is the 195.
Embraer is in a tough spot.
I think the EU will subside hydrogen research building domestic expertise. If Airbus or any other European company develops a zero-emission aircraft they will eventually impose enough carbon taxes on short-haul flights to let the business case fly. This will help with CO2 emissions, advance local companies and, be a barrier to manufactures selling conventional aircraft in that segment.
For example Norway is being explicit about it. Saying they want to see a zero-emission aircraft for 500kn routes ASAP. Sweden is going ahead with carbon taxes.
The very idea that nations will start to mandate non-conventional short haul aircraft should scare anyone thinking of starting such a program.
https://www.flightglobal.com/air-transport/norwegian-authorities-aim-for-electric-aircraft-debut-by-2030/137146.article
https://centreforaviation.com/analysis/reports/aviation-emissions-swedens-flight-shame-possible-jet-fuel-tax-479859
“Saying they want to see a zero-emission aircraft for 500km routes”
So they are shutting their oil and gas fields ‘ASAP’ as well ?
Or are they using their huge wealth to develop a LH2 conversion of a TP airliner…… didnt think so.
I’m ROFL as Norway has long pumped oil from the North Sea.
Politics!
Somehow I believe that at some point Embraer, Saab and Bombardier (what remains) will sit down for coffee and realize that they have important issues in common. Above all, they are strong in some segments but they are in a world where they need to be competent and LARGE.
Cooperation in critical technologies, procurement and technical maintenance services are obvious areas of cooperation.
Nothing in common. Saab doesnt make (small) airliners anymore. Bomabardier is in the medium to high end business jets ( which are significantly different to airliners) and Embraer has a mixed bag of regional jets, low to medium size business jets and a new military airlifter. Then theres the differences in languages.
The reality is that all most of the airframe structures and other systems are made outside or Brazil for Embraer. Those companies are the ones they talk to as they mostly have their own design capability for the work they do.
Think of Airbus and its different plants ( but mostly subsidiaries now), Embraer doesnt have any ownership of those production facilities.
The companies that should have had a joint partnership should have been Bombardier and Mitsubishi ( when the Cseries started and before Mitac got stuck with the MRJ issues). They already worked together for the Global Express BJ where Mitac design/build the wing. It could have been a true partnership with each side being the lead on Cseries and MRJ designs and using their capabilities and experience for design-build-certification-sales-aftermarket etc.
Embraer should go bold and forget about a turboprop regional sized airliner and get into a final assembly/licence build of the MC-21 russian airliner to provide true competition in the 180-220 pass single aisle where the volume is for the immediate future. Embraers passenger planes are already mostly built else where with a FAL in Brazil, so it suits their existing methods.
You miss the JAD 39 Gripen, which Brazil’s military will soon have.
Getting involved with autocratic Russia would be a mistake, it is undependable.
“Article Aviation Week
Bombardier Flies Into Uncertain Future As Business Aviation Specialist
Michael Bruno, Jens Flottau, Molly McMillinFebruary 19, 2020
Widely expected deals to sell train unit and the last of Bombardier’s commercial aero business, still leaves OEM in fragile bizav market.”
In this struggle of giants such as Boeing, Airbus, Lockheed, totalitarian governments and protectionist economic blocs, just being very competent is insufficient.
Good thought re Saab though I know little about them, the 340 was a good machine, the 2000 a sales flop but that IIRC due decline in demand for turboprops plus too many in market.
The JAS 39 Gripen fighter may still be competitive, Canada is interested as an alternative to the very costly F-35, F-18E/F another alternative, neither as stealthy as the F-35. Saab suggests it can make the JAS 39 interoperable with US fighters. (Touted for the F-35 is being able to link surveillance data between it and F-22s out of Alaska, so each force need only send one fighter up instead of one plus a backup.) Brazil has committed to the JAS 39.
Bombardier OTOH offers only a wide-body business jet, the Challenger, why they hang onto it is a mystery to me.
deHavilland Canada has a big turboprop so might be a good fit with Embraer, and sister companies have CL-415 series utility and fire fighting aircraft, plus the renowned Twin Otter which works well with or without floats so useful in Brazil. Also parent company owns rights to a batch of out-of-production designs, from a small amphibian through Shorts Brothers utility/small airliner models – some operated by military forces, and the Buffalo military transport that would complement Embraer’s relatively large C-390. I think Brazil could use them all, I don’t remember if Viking Aircraft was keen on exporting to Brazil – Communists China and Russian hopes were busts.
Embraer has design, production, and support operations in the USA.
And Japanese tend to have money, longtime connections in Brazil, and airplane ambitions like the airliner they’ve paused (for which they needed safety and configuration advice).
Bombardier is a sales leader in the medium and large business jets. With Learjet gone they have 3 distinct models. The Challenger 350, and bigger Challenger 650 and the even bigger ( length of a DC-9) Global Express
https://businessaircraft.bombardier.com/en/aircraft