Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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- Boeing’s future depends on FAA approvals May 26, 2025
- Department of Justice, Boeing OK to Non-Prosecution Agreement May 23, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 23. May 23, 2025
- Services are driving revenues and profits in difficult times, Part II May 22, 2025
Embraer downplays tariff impact on 2025 results
May 6, 2025, © Leeham News: Embraer CEO Francisco Gomes Neto sought to reassure investors on Tuesday, emphasizing the limited effect of new U.S. tariffs on the company’s operations as its Q1 2025 results were published.
“Our initial analysis points towards limited impact and we remain confident in and reiterate our 2025 guidance,” Gomes Neto said. He added that the company is “working on initiatives to limit impact of U.S. tariffs on our business.”
Gomes Neto credited the resilience in part to its high U.S. content, with Embraer aircraft incorporating substantial American-sourced components and systems—a factor that helps blunt the impact of cross-border tariffs.
But he added: “We join other companies in calling for a return to zero tariffs… for a highly globalised industry.”
Strongest first quarter since 2016
The Brazilian planemaker posted $1.1 billion in Q1 2025 revenue, its strongest first quarter since 2016, and a 23% increase year-over-year—though this was slightly below market consensus for the period.
Embraer also strengthened its balance sheet in Q1 through a $650 million 10-year bond issuance. The company extended its average debt maturity to 6.3 years, with net debt-to-EBITDA improving to 0.5x, down from 1.8x a year earlier.
The company’s firm order backlog rose to $26.4 billion, surpassing the record set in the prior quarter.
Deliveries and backlog. Embraer delivered 30 jets in 1Q25, of which 7 were commercial jets (3 E2s and 4 E1s) and 23 were executive jets (14 light and 9 medium); +20% versus the 25 aircraft delivered yoy. The number of deliveries for Executive Aviation was 28% higher compared to 1Q24, while Commercial Aviation was flat. There were no deliveries for Defense & Security. Credit: Embraer.
Antonio Carlos Garcia, executive vice president and CFO, told investors the “great results” included the “best first quarter [revenue] results of the last nine years.”
On tariffs, Garcia said the “initial estimate is that it could negatively impact our EBIT margin by 90 basis points” for the next three quarters.
He added that the company was implementing “additional cost reduction measures” to mitigate the potential hit from higher tariffs, but “for now we remain confident we can deliver our guidance for 2025.”
Asked whether there was any evidence of U.S airlines shying away from the E175 (American placed a firm order with Embraer for 90 E175s, with purchase rights for 43 additional jets, in 2024) as a result of the tariffs, Neto told analysts: “We still don’t know everything,” before adding that the 90 basis point hit was “highly concentrated in executive aviation and services and support.”
Embraer is making operational changes to reduce specifically the exposure of the Phenom and Praetor aircraft lines to the tariffs.
Deliveries up
Embraer delivered 30 aircraft in the quarter, up from 25 a year earlier, including seven commercial jets and 23 executive jets. Growth was particularly strong in Defense & Security, which saw revenue surge 72% year-over-year.
Embraer’s Q1 was marked by key program successes, including a new order from All Nippon Airways (ANA) for the E-Jet family, amounting to 15 E190-E2s, the launch of Helvetic Airways’ E195-E2 operations at London City Airport—the largest jet to use the airport—and continued international traction for the KC-390 Millennium, with additional sales to European defense customers.
Adjusted EBIT rose to $62 million with a margin of 5.6%, up from 0.8% in Q1 2024. Despite reporting negative free cash flow of $385.8 million (excluding Eve Holdings), the company attributed the dip to planned inventory buildup ahead of higher deliveries expected later in the year.
The company reaffirmed its full-year 2025 guidance, which includes delivery targets of 77 to 85 commercial aircraft and 145 to 155 executive jets.
Revenue is forecast between $7.0 billion and $7.5 billion, with adjusted EBIT margins of 7.5% to 8.3% and at least $200 million in free cash flow.
Breaking the duopoly
Commenting on speculation in the recent past that Embraer could seek to challenge the Boeing-Airbus duopoly with an expansion of its product line, Neto said: “We are very focused on selling the E2s and we are working and investing in new technologies to be prepared for new products in the future, which could be a bigger executive jet or a bigger commercial jet.”
These technologies include the areas of autonomous flight, and new fuselage, wing and flight deck systems and materials. “We don’t have any concrete decision to go this way or that way,” he added.
He said the scoping work would “allow us to decide about a new product in the future. At this point in time we are really focused on selling the aircraft that we have.”
It is a real shame that the E2 doesn’t enjoy the same popularity in the marketplace as its predecessor did.
I agree, but the US is the drag with the Scope Clauses. Lots of E1-175 on order.
I am no aeronautical engineer, so what they could have done to make the E2-175 scope is just guesses.
But rather than believe scope was going away, they should have talked to the unions as they were the only ones that controlled that.
Mitsubishi also bought into that, I did not think the Unions would give it up. Granted that was my feeling but major direction decision they should have been talking to people other than the self styled experts.
Its a horribly tough business.
Indeed, it was not apparent what Embraer could do to make the E175-E2 US Scope-compliant. Of the extra 5 tons in OEW vs. the E1, 80% came from the “more efficient” engines.
Also agree it is a shame the E2 generally is not enjoying the same popularity as the E1. Goes to show how fixated so much of the industry has become on minimal number of fleets, maximum numbers of seats, and the overall race to the bottom for lowest possible CASM and to hell with RASM.
Small wonder profitability continues to elude the majority of the world’s airlines…
As for E2 popularity, the E1 EIS was 2004 and the E2 program launch was 2013–only nine years after the E1 EIS. The E175 was the most widely sold version (to the US airlines), and the E2 as noted is shut out of the market due to unions refusing to adjust the Scope weight clause. Many of the E1s are just coming up on replacement age, so history suggests sales should be ramping up in the coming years (excluding the all-but-dead 175).