Embraer: Improved results, but no plan for new narrowbody

By Leeham News Team

May 7, 2024, ©. Leeham News: Embraer presented its 1Q2024 results today, showing revenues for the period up 25% and deliveries up 67% year-on-year.

Notably, however, the Brazilian planemaker dampened speculation of a push to launch a new narrowbody to compete with the A320/B737.

Embraer’s firm order backlog now stands at $21.1 billion, its highest point over the past seven years.

That was helped by the firm order from American Airlines for 90 E175 jets, plus purchase rights for 43 more.

Francisco Gomes Neto, Embraer’s CEO, highlighted during a call on Tuesday the company’s campaigns for more than 200 aircraft within the commercial division – including both the E1 and E2 family.

For 2024, Embraer is still expecting to deliver between 72 and 80 commercial aircraft, compared to 64 in 2023.

Strong demand

Embraer delivered 25 jets in 1Q24, of which 18 were executive jets (11 light and 7 medium) and seven were commercial jets – an increase of 67% compared to the 15 aircraft delivered in 1Q23 (Figure 1). This was the highest number of deliveries in 1Q of the last eight years.

Revenues totaled $897 million in the quarter, an increase of 25% versus the previous year. Adjusted EBIT reached $6.8 million with a 0.8% margin in 1Q24 (-4.4% in 1Q23).

Broadly speaking, executive aviation was the top performer, with revenues 2.75x higher year-on-year.

Commercial aviation revenues totaled $200.8 million – flat year-on-year – while revenues within Embraer’s defense and security business only reached $80.7 million, 17% lower year-on-year.

Figure 1. Embraer’s aircraft deliveries. Source: Embraer.

Supply chain delays and different stages of production for C-390 units drove a decline in the reported gross margin from 24.8% in 1Q23 to 12.7% in 1Q24

New aircraft?

Embraer has made clear it is open to new product options, but the company is focusing on how to “harvest the results from recent products”, according to a post-call briefing note from J.P. Morgan.

Crucially, there is no plan to launch a new narrowbody in the short term.

With Boeing in disarray and Airbus hamstrung by delays and daunting order backlogs, the world’s third largest planemaker had been rumoured to be exploring how it could move out of the regional 90-120 seat market.

But Neto said there were no “concrete plans” to develop a narrowbody within “the next few years”.

Embraer responded to the reports last week, saying that while it “certainly has the capability to develop a new narrowbody aircraft … we have a young and very successful portfolio of products developed in recent years, and we are really focused on selling those products and making Embraer bigger and stronger.”

60 Comments on “Embraer: Improved results, but no plan for new narrowbody

  1. Did any of the participants on the earnings call ask about a potential JV with COMAC?
    – China brings the cash, materials and industrial base;
    – Embraer brings the engineering and certification experience.

    Huge potential market in the “global south” and Asia.

    • How did that work out for Bombardier during its Cseries. having the centre fuselage made in China under a design build caused major grief- amoung others.
      No airlines from China even ordered the plane.
      The reality is China doesnt need any western expertise on building aluminium airliners.
      Also Embraer had a license build deal with china maybe 20 years back over their ERJ regional jet. Only a few were ordered/built and of course back then construction/assembly expertise did need to be ‘migrated from the west’.
      Embraer has been burnt once

      • Looks like somebody is stuck in the past…but things have changed a lot in recent years.

        • Sounds like a broken record …

          Remind me how many C-series/A220 have been delivered? Who made those centre fuselages? Unlike a major airframer who has numerous production issues/scandals one after another. It’s totally understandable how upset it can be especially FAA may take away the production certificate anytime.
          https://twitter.com/AvWeekSean/status/1787668535486844958

          • Back to What About Ism we have come to know is on the way.

            One of the Setbacks for BBD was the failure to mfg acceptable fuselages.

            That had a huge impact and its a prime example of if you don’t control the plant you don’t control the quality either.

            And of course they won’t buy an A220, it compete with their crummy rear engine ARJ-21 and the equally me too C919.

            State of the art aircraft, 50 years ago. Well the C919 would be more 20 years ago.

            And how about the C929?

          • Whataboutism is to deviate from Embraer, the subject of the thread. The pot now jumps in and adds C929 to the mix!!
            The C-series suffered major setback because there’s an uncontained engine failure which also damaged the aircraft. It also grounded the whole test fleet.

            The nice little aircraft unfortunately caused a major meltdown by Boeing when United was about to place an order. Boeing went as far as lodging a trade complaint to kill it off once and for all. Airbus has no suppliy issues from Spirit. There’s karma for PFS as Boeing never treats its contractors as partners, more like how much money they can get from their repeated shakedowns.

          • Don’t forget which airframer fails to push its derivative aircraft program across the finish line after (check note) … thirteen years. Looks even less competent than the little guy BBD, right?

            Oh time to refresh, ARJ-21 and BBD’s C-series don’t compete with each other. BBD even signed up to invest $100m to develop a ARJ-21 variant. Don’t spew out nonsense.

        • The future ain’t what it used to be.
          ” But when the Chinese regime reached the conclusion that the demand could help buttress its own aerospace industry, it placed prohibitively high import duties on Western products, effectively closing the market to Embraer and its competitors.”

          https://www.ainonline.com/aviation-news/air-transport/2007-01-31/first-chinese-erj-145-complete-no-takers

          I bet the quality was a shocker. A bit like the early Tesla’s
          Theres no there there for Embraer with China

          • Ah yes…churning up articles from 17 years ago…

          • “prohibitively high import duties on Western products” How heavy is the import duties on 737? Comparable to Trump’s 50% tariff on imported washers and 25% tariff on steels from EU, Canada and Mexico?

            Stuck in the past .. 2007 was good time before 787 8.8.08 debacle happened.

      • The A220 is not certified in China so Airbus isn’t offering it in China. It is officially not known if and when Airbus will apply for certification.

    • China want to have home-built airplanes, Embraer will be left empty-handed afterward. Also the US won’t tolerate a transfer of such knowledge to China.
      So, not gonna happening.

      • Explain to us how “tolerance” by the US can in any way determine what Embraer and China do together?

        • Besides, the US has *willingly* transferred most of its own tech and industrial base to China, already..

          Shortsighted and stupid, but the C-suite types made out great.

  2. My guess is that the trial balloon of a new narrowbody entrant was floated by Embraer themselves, which they then quickly denied.

    A rather old but still useful technique..

    • I’ll wait for the fat lady to sing her final aria in this particular opera…I suspect that it may have several surprise acts to come 👀

      • I hear ya, Abalone.

        Can you say “Airbus, COMAC, Embraer”?

        😉

    • Did anyone note that the denial included the phrase, “At this time”?

      • Yes, that was the first thing I noticed.
        Carefully chosen words.

      • Well the rear mounted twin TP was a go until it wasn’t.

        An aircraft with 500 mile economics when the ATR and Dash 8 had the market?

        Embraer is just playing the PR game.

        E2 175 is off the table as it has no place other than the US and it has no place in the US.

        Now the E175 is a nice jet, got to ride in one last year.

        Love the Banderati in the day as well. Passed Twin Otters like they were standing still. I was on a flight that the TO left 10 minutes before us and we zapped past it half way. Fun.

      • They are going through the paces. The wider fuselage manufacturing is being tested with the military jet C-390.

        And like the others they are waiting for new engines. They will consider launching the program when the new engines become available. Be it Rise or Ultra fan.

        Will be interesting to see if they keep the unfavored high wing design as a low cost alternative to Airbus’ flapping wing or Boeing’s truss braced wing.

        • A high wing only suits a cargo aircraft unless its a TTBW type.

          They have the new engines, they are called LEAP and GTF by P&W.

          Advance is not going to get you into single aisle and P&W has that capability now (yes they are fixing issues but the core and the gear box work perfectly well)

          Embraer has to look at 10 billion invested and a me to to the A220 and is it worth it?

          Sans TTBW working, there is no magic to be had in aerodynamics.

          If Embraer was serious they would have P&W do a new engine based on the GTF but with all P&W has learned that they would change.

          Currently they want any upgrades to work with the existing GTFs.

          They have said they would change things if they did a new engine (more at a wide body level but same ideas) based on their experience. Not huge but refinements that take advantage (pun) of conservative thought that they know can be pushed now and be safe.

      • What would a 6-abreast E-2 derivative look like performance-wise? Covering the 150-240 seat range? Time for another Leeham analysis series!

        • If you are going to commit to a new aircraft program then it needs to step into the heart of the market.

          Airbus is shooting for 14/month on the A220 while the A320 family is going after 75/month…Boeing something like 60 if they can ever get going again. The reality is that both Airbus/Boeing could probably make 150 aircraft/month and sell every one of them given their backlogs.

          Go big or go home.

      • @Scott Yes until the time a rich uncle turns up, with billions to burn. So never.
        On a more serious note, the only plausible way would be a joint venture with Boeing.
        The C-Series is a cautionary tale that determination is not enough. You’ve reported it all here. Bombardier wasnt big enough to get deals good enough from suppliers to make the project profitable. And their cashflow was too weak to carry the project through ramp up. I dont see how Embrair would be in a better position to launch such a program, at least on their own.
        Even Airbus didnt manage yet to make the A220 really profitable. They will make it, but it’ll still have been quite a long journey.

  3. Clearly Embraer is going to crush it with the E175 in a pre buy before the 2027 ICAO stuff kicks in.

    You see that each time Diesel Emissions goes to a higher Tier. Hauling operations want the stuff to be proven before they have to get into it.

    In this case with Scope issues, an E2 is like a never to be option.

    Its actually a help with the P&W issues though those will probably be sorted out by the time anyone got an E2 now.

    • E175 is already ICAO compliant , so not effected by any cutoff date

      • Duke:

        Not it is not. It has old non compliant engines.

        American is just getting in line as existing orders can be filled under the every bizarre rules that are lines int he sand that are erased by the wind.

        Like EU diesel emissions holes (legal) that even without defeat devices you could drive a Tractor Trailer through.

        EU and those so called International Bodies are experts at making grand sounding green wash rules and then violating them legally and illegally.

        I can remember back in the 70s of pictures of Vienna that were worse than LA for smog. Well we got the ball rolling that got them to sort of start to clean things up.

        • You are wrong . The current E175 is CO2 compliant for various reasons.
          Its production that must make the cut-off , pre orders dont count

          Your friends at Alaska airlines even confirm
          ‘Our E175s are equipped with new wingtips that help improve fuel efficiency to reduce CO2 emissions by 6.4%.’

          • Duke:

            Its the engines not the airframe.

          • “reduce CO2 emissions by 6.4%.”

            Make your PLANE more fuel efficient by airframe tweeks, maybe even a engine PiP as well

            ICAO has made it easier for regional aircraft and like the CO2 numbers for cars is a “kg/km” target which for RJ is 0.68 from 2028 for new builds. Thats an average 3% reduction

            Thats the smallest reduction , even less the BJ at 6% and single aisle at 9%

            INTERNATIONAL CIVIL AVIATION ORGANIZATION’S
            CO2STANDARD FOR NEW AIRCRAFT
            https://theicct.org/sites/default/files/publications/ICCT-ICAO_policy-update_revised_jan2017.pdf

    • The PW E175 E2 engine would have had even more challenges yet. It would have been an orphan engine installation on a rather low volume aircraft. At least the E190/95 engine is common with the A220. This was a 17K version that was supposed to be common with the SpaceJet.

      • Casey:

        I don’t see that as an issue but as its not going to be as the E175 is a US focused aircraft, anyone else buys a bigger one as the economics are not there for an E175 without the scope clause.

        • @TW
          Saying that it is difficult supporting an engine program that is low volume because of industrial challenges. It is difficult getting supply chain excited about making parts when the volume is that low. Way too easy to divert your resources where there is meaningful volume.

          • Casey:

            That is valid, but P&W also was going to do the Mitsubishi, I have read nothing that says they would not honor their agreement on the E2 175.

            But its not an issue as we won’t see it unless they can pull some magic weight reduction (which I would be working on but its a pretty hard amount in an aircraft that small)

            P&W does lower volume Business Jet engine and Turbo Props.

            Of course GE thought they would break into that and the Denali still is not being delivered.

  4. “While Embraer has not made a final decision on the new aircraft, discussions are underway regarding potential payload and range requirements, the report said. Additionally, the company is exploring financial and manufacturing partnerships to support the endeavour, including collaborations with entities like Saudi Arabia’s Public Investment Fund and manufacturing firms in Turkey, India, and South Korea.”

    “Despite the technical challenges associated with developing a new aircraft, Embraer’s proven track record, exemplified by successful projects like the KC-390 military aircraft, instills confidence in its capabilities. Moreover, Embraer’s manufacturing cost advantage positions it favorably against competitors, offering a compelling proposition in the market.

    “As Embraer continues to evaluate its options, industry experts anticipate a decision within the next 18 to 24 months. With the aerospace landscape evolving rapidly, strategic partnerships and prudent decision-making will be instrumental in shaping Embraer’s future trajectory.”

    https://www.halldale.com/articles/22744-cat-embraer-explores-new-aircraft-to-challenge-boeing-and-airbus-dominance-report

    • I would be interested to see what Embraer would bring to market. Certainly would have to at least be as competitive to any Airbus or Boeing response.

      • And that is the issue.

        At best its a copy of the A220.

        10 billion or so and to break into the market.

        I suppose its possible that Boeing and Airbus simply failing to be able to fulfill orders would make it possible.

        Get South West on Board and ……..

        That said they had all sort of orders for their rear TP and then it fell through or move vapor ware more accurately.

      • @ Casey
        Boeing has no resources to “respond” to anything anymore…and it’s current narrowbody offering is a shambles.

        So, all the new Embraer plane has to do is match Airbus, and provide extra slots.

        • Hate to say that this might be the case, and including the comment above regarding engines. I would add that PW GTF2 might be a contender as well.
          It will all come down to how Embraer will be to finance this project without puting the company at risk. I wouldn’t doubt to see a JV with another party. The only thing is that I doubt that it would be any government. Maybe an industrial partner even outside aerospace.

        • Just take a look at what happened in the last fifty years to BA. Would be interesting to see how the future unfolds for the next fifty years.

  5. “Foolish” would not be nearly adequate to describe the behavior if Embraer were to try to develop a “737” competitor. Why on earth would anyone want to spend boatloads of money to develop a plane to split the market 3, rather than 2, ways?

    The 737 is based on 1950’s technology. The A320 family is based on 1980’s technology.

    If Embrarer wanted to have the smallest chance to succeed, they would have to offer something to make it worth the Ryannairs and Southwests of the world to ditch a couple lifetimes of long established product support.

    And that doesn’t even address all the other issues that left Mitsubishi and Canadair’s projects smoking wrecks.

    • There is 3rd and 4th narrow body contenders flying now. Embraer would be 5th

      • There are actually 3, 4 and 5, you miss out on the A220.

        The A220 is the only competitor, the C919 and MC-21 are going no where other than local sales and that is not a competitor, that is a close market.

    • Good point but never underestimate the power of human stupidity, BBD is a good example.

      Amazing they managed a design and build that worked, but fell apart on the industrializing end.

      Any offering would be an A220 competitor that would beat the MAX.

      50s tech or 80s tech, they are still the same ops costs and SFC because neither has a composite wing.

      Mitsubishi was a failure of self BS on a market, aka Scope Clause not going away as was the E2 175.

      Changed the goal posts and a failure to execute (which at least BBD did but then BBD had been building jets all along)

      • Bombardier also made the mistake of launching 3 projects when they had resources for two.
        They launched a Global series update and an ill-fated Lear 85 at the same time.
        Another strategic failure was the fact that it was going to be an orphan airline program (like the MRJ). Boeing and Airbus can sell a whole family of options. Having a one-trick pony is a tougher sell.

        • Valid but also keep in mind it was a 3 series aircraft and the -500 would have been an interesting competitor.

      • Never underestimate the power of money, Stonecipher and MD’s shareholders made a lot of money by starving off any major new aircraft development program. The longer you wait for an all-new aircraft program, the less capability you retain. It’s not a given or a right that an airframer has the institutional memory/muscle to design a new aircraft.

  6. When someone starts talking about “whataboutism”, what they’re really doing is attempting to keep others from speaking, from advocating for their own position.

    that kind of silencing can work- in the short term.

    • Silly comment, read into what you want because you will anyway.

      Its not relevant and its known, Pedro is free to comment and I can respond as long as its within the Leeham guidelines.

      I prefer to see things kept on topic and on an intelligent level. But as always, Scott has the say fortunately not you or Pedro.

      And yes I have gone off the rails and been called on it as well as suspended a couple of times. Just to keep the air clear, I am not perfect. I do try to provide intelligent and relevant assessment.

  7. I have moved to Trash several comments that have nothing to do with the topic in this post.

    Shape up, people, or I will close comments.

    Hamilton

    • Here we go again…

      C’mon guys – don’t put Scott in this position. Thanks

  8. https://www.reuters.com/business/aerospace-defense/airbus-deliveries-rose-13-april-2024-05-07/

    PARIS, May 7 (Reuters) – Airbus (AIR.PA), opens new tab delivered 61 aircraft in April, up 13% from the same month of 2023, bringing deliveries so far this year to 203, the European planemaker said on Tuesday.

    —————————-

    ‘For 2024, Embraer is still expecting to deliver between 72 and 80 commercial aircraft, compared to 64 in 2023.’

    Seems the dilemma for Emb is to stay a small profitable OEM or jump into the big leagues, with larger capex, where a years production is done in just over a month.

    Huge numbers, all around.

    —————–

    For all of 2024, Airbus has delivered 203 aircraft or 50 a month. So they’re at 600 a year, during the slow part. Now the A220 contract is worked out, things should improve there.

    • “..which may not need advanced propulsion to justify its undertaking..” plenty to parse there, for those so inclined.

      Thanks for the link.

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