Harvest season at Embraer

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By Scott Hamilton

Francisco Gomes Neto, CEO of Embraer.

Dec. 4, 2023, © Leeham News: Embraer had a tough time beginning in 2017. A joint venture with Boeing was proposed following the Airbus acquisition of the Bombardier C Series program. The latter sent flares overhead with the expectation that Embraer could not compete against the rival C Series now that Airbus’ marketing would be in control.

A proposed turboprop program was struggling to close the business case. There were no advanced engines to power the model. The market was forecast to be a mere 2,100 airplanes over 20 years. The only remaining turboprop manufacturer outside China and Russia was ATR, which is 50% owned by Airbus. Airbus could crush any new entry from Embraer, should it choose. The E175-E2 was too heavy to comply with the US union contract Scope Clause, effectively killing this model. Without the E175-E2, the world’s biggest market for the E2 was closed to Embraer.

The JV held big promise for Embraer. The E-Jet E2 program engineering was largely done and the engineers needed work. Under the terms of the proposed JV, Embraer would participate in the development of Boeing’s proposed New Midmarket Airplane (NMA). Engineering and production were elements of the work package.

Additionally, Embraer would be responsible for developing a new 100-150 seat airplane for Boeing.

But the March 2019 grounding of the Boeing 737 MAX killed the NMA in January 2020, when David Calhoun became CEO. The COVID-19 pandemic cratered demand for all airplane types (including Embraer’s). In April 2020, Calhoun withdrew from the JV. Boeing claimed Embraer failed to meet all terms and conditions. Embraer denied this and the matter is in arbitration now. A decision is expected in the first half of 2024.

Today, Embraer is roaring back.

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