Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing’s new fighter award moves away from money-losing fixed price contracts March 24, 2025
- Airbus still struggles to deliver planes on time March 24, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 14. March 21, 2025
- How good is the COMAC C919? March 20, 2025
- Boeing CFO Brian West: OK on tariffs for now, backlogs and inventories help March 20, 2025
Embraer reports record revenue in 2024, eyes growth in 2025
By Leeham News Team
Feb 27, 2025, © Leeham News: Embraer closed 2024 on a high note, posting record-breaking revenue and strong aircraft deliveries across its commercial, executive, and defense sectors.
The Brazilian aerospace manufacturer reported total revenues of $6.4 billion for 2024, a 21% increase year on year (YoY), reaching the high end of its guidance range. The company’s Defense & Security division saw 40% revenue growth.
The fourth quarter of 2024 was particularly strong, with revenues totaling $2.31 billion. Embraer delivered 75 aircraft during the period, including 31 commercial jets (20 E2s and 11 E1s) and 44 executive jets (22 light and 22 medium).
For the full year, the company delivered 206 aircraft, comprising 73 commercial jets, 130 executive jets, and three C-390 Millennium military transport aircraft. This marked a 14% increase in total deliveries YoY, aligning with its guidance. Read more
Earnings: Pay closer attention to the supply chain than to the OEMs
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By Scott Hamilton
Jan. 23, 2025, © Leeham News: Earnings season begins today. Among the companies followed by LNA, GE Aerospace and Hexcel report today. RTX and Boeing report next week. ATI and Spirit AeroSystems follow the week after. Other suppliers follow then.
Airbus doesn’t report until Feb. 20. Rolls-Royce reports on Feb. 27.
The manufacturers draw the headlines, but LNA found long ago that the supply chain often provides better information to draw conclusions about the future than listening to the OEMs. All it takes is one supplier to fall down on the job to muck up the works for the OEMs.
That’s not to say listening to the OEMs is not important. Clearly, it is. But there’s just no getting around it: the credibility of many of the OEMs is damaged. Airbus hasn’t hit its production ramp up targets in years. Quality control suffers. And deliveries are consistently late.
Steven Udvar-Hazy, executive chairman of the board for Air Lease Corp, says that every single Airbus aircraft, 250 of them, has been late since 2017. That’s long before the pandemic began in March 2020, which caused such disruption continuing to this day. Airbus was still delivering A320ceos during 2017 and 2018, which didn’t have engine issues.
Boeing’s credibility speaks for itself. It doesn’t matter that it has a new CEO. Until Boeing starts performing, anything it currently says is hope, not performance. Post-strike delivery recovery will be an important indicator of Boeing’s performance in the essentially truncated fourth quarter and January.
Suppliers often discuss information on their earnings calls that provides a better understanding of production rates at the OEMs and where downstream issues are or are emerging.
2025 remains another year for recovery in commercial aerospace
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By Scott Hamilton
Jan. 6, 2025, © Leeham News: Don’t look for any dramatic new product launches in 2025.
Nor should you expect any dramatic news, absent global upheaval of some kind.
This year is going to be yet another year dominated by recovery. Recovery from the COVID-19 pandemic, which officially ended in 2022. Recovery by the supply chain. Recovery for Pratt & Whitney’s nearly decade-long problems with its Pure Power GTF engines supplying the Airbus A220, A320 family and Embraer E2 jets. Recovery by Airbus from its production and delivery delays. Recovery by Boeing from its series of self-inflicted crises, now beginning the sixth year.
There is just no getting around the fact that the commercial aerospace industry isn’t a smooth-running industry. It’s a long way from 2018, when all sectors were running smoothly. There is still a long way to go to recovery.
Here’s LNA’s take on what’s to come this year.
How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer
By Scott Hamilton
Dec. 6, 2024, © Leeham News: President-elect Donald Trump vowed to immediately impose a 25% tariff on “ALL” imports into the US from Canada and Mexico, and 10% from China.
Last week, he threatened to impose a 100% tariff on imports from the BRIC-aligned nations if they move away from the US dollar in international economics.
The BRIC nations begin with Brazil, Russia, India, and China (the “BRIC” part of the group). Egypt, Ethiopia, Iran, South Africa, Iran, and the United Arab Emirates round out the group.
There is widespread criticism of the potential damage the Trump tariffs could impose on the US economy. The targeted countries would be certain to impose tariffs on US goods.
The impact could be significant for commercial aviation—and Boeing in particular. Before its repeated self-inflicted wounds began with the 2018/19 737 MAX crisis, which continues today, Boeing was by far the largest US exporter. Deliveries of its 7-Series airplanes outside the US helped balance the trade deficit the US usually has.
Before Trump’s first term, China was the largest customer for Boeing airplanes. Deliveries accounted for 25% or more of Boeing’s annual deliveries. After
Trump took office in 2017 and imposed tariffs on China, Beijing stopped ordering Boeing airplanes. China was the first country to ground the MAX after the two fatal accidents. It was the last to recertify the airplane. And there still remains a sizeable inventory of undelivered 737s awaiting Beijing’s approval for delivery, one by one.
Trump also imposed tariffs on Airbus imports into the US as part of the two-decade-long World Trade Organization (WTO) trade dispute between Airbus and Boeing.
However, imposing tariffs is a complicated process. LNA extensively reported on the WTO battle (see related articles). We explain this further below.
Related Articles
Leeham News articles:
- Boeing files trade complaint vs Bombardier with Trump Administration 4-27-17
- Boeing C Series trade complaint is no surprise 5-1-17
- Boeing-Bombardier trade complaint revisited 7-31-17
- Decision was expected, tariff is a shocker in Boeing-Bombardier case 9-26-17
- Assessing the impact of the Bombardier tariff decision 9-27-17
- No harm to Boeing, what happened and what’s next 1-26-18
- Insignificant impact from steel tariff 3-2-18
- China tariffs on Boeing airplanes unlikely 3-14-18
- Boeing yields on C Series tariff case; what’s next for Bombardier? 3-26-24
- Trump proposes tariffs on Airbus; EU likely to retaliate 4-9-19
- EU ready to instantly retaliate if US imposes tariffs in WTO case 9/29/19
- US imposed $22m in Airbus tariffs in 2019 3/3/20
- EU tariffs on Boeing airplanes in effect 11/16/20
- US to tax fuselage, wings, tail imported for Airbus’ Mobile plant 12/31/20
Engineering, Innovation is our DNA: Embraer
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By Scott Hamilton
Nov. 25, 2024, © Leeham News: Embraer’s revenues may be small compared to Airbus and Boeing.
Luis Carlos Affonso. Credit: Embraer.
But “under the hood,” the company is, in many respects, more innovative and aggressive in developing new airplanes.
Compared with Boeing, which in 2017 wanted to take over Embraer’s commercial airplane unit, Embraer is far more efficient and more dedicated to making safety and engineering the top of its culture.
Airbus hasn’t developed an all-new commercial airliner since the A350, launched in 2013. Boeing hasn’t launched an all-new airliner since the 787, launched in December 2003. Each has developed derivatives of existing products since then. Airbus launched the A330neo in 2014 and the long-range and extra-long-range versions of the A321neo. It added the Ultra-Long-Range model to the A350.
Boeing launched the 737 MAX derivative in 2011, the 747-8 in 2005, and the 777X and 787-10 in 2013.
Since 2000, Embraer developed and certified more than 20 aircraft types across its commercial, military, and executive product lines.
During the same period, Airbus launched the A320neo family in addition to those listed above. Boeing launched the KC-46A (a derivative of the 767-200ER) aerial tanker in 2011 and a few new military programs.
Credit: Embraer.
“One thing that is incredible at Embraer is the amount of new designs, new platforms that we have developed in the last 25 years. I don’t know any other company that has developed so many airplanes in this time frame,” Luis Carlos Affonso, Senior Vice President of Engineering and Technological Development, said during the Embraer investors’ day on Nov. 18 in New York.
No changes to US labor Scope Clauses for indefinite future, says Embraer
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By Scott Hamilton
Nov. 22, 2024, © Leeham News: Embraer doesn’t see any changes in the US airline labor contract Scope Clause for the foreseeable future. This means that the E175-E1, equipped with previous generation engines, will remain in production for the same period.
Arjan Meijer, president and CEO of Embraer Commercial Aircraft. Credit: Embraer.
The E175-E2 with current generation Pratt & Whitney Geared Turbo Fan engines is stillborn.
The Scope Clause is a long-standing contract provision for American, Delta, United, and Alaska airlines that restricts the passenger capacity, weight, number of aircraft, and sometimes the operating range of regional aircraft that may be operated by airline subsidiaries or independent regional carriers on behalf of the mainline airline.
The Scope Clause aims to protect higher-paying pilot jobs from being farmed out to lower-paid pilots flying regional aircraft.
Airline managements see a cost benefit to farming out these jobs. They also recognize that many markets can’t support bigger airliners, yet these markets are crucial to feeding the hubs that dominate the US airline industry.
Embraer is now the only manufacturer outside China and Russia producing a regional jet designed specifically for these markets. The E1 entered service in 2004. The company launched the E2 program with a new engine, updated systems, and aerodynamic improvements only nine years later. The smallest original E-Jet, the E170, was dropped. The E175/190/195 was offered as the E2.
However, US unions refused to alter the Scope Clause to allow the E175-E2 to replace the E175-E1 to accommodate the heavier weight of the E2, which exceeded Scope restrictions by only a few tons due to heavier engines. Thus, Embraer put the E175-E2 on indefinite hold and continued to sell updated E1s to US airlines.
Supply chain problems weigh on Embraer deliveries
By Leeham News Team
Nov 8, 2024, © Leeham News: Embraer has revised down its expected commercial aircraft deliveries for 2024 to between 70 and 73 aircraft, from 72 and 80, amid what CEO Francisco Gomes Neto called continued “obstacles” in the global supply chain.
In its 3Q24 results released on Friday, the Brazilian plane-maker reported revenues totaling $1.692 billion in the period, up 32% yoy.
Both the Executive Aviation and Defense & Security divisions performed particularly strongly, with 3Q24 revenues of $561.5 million and $219.6 million respectively, with each achieving a 65% yoy growth.
On the commercial side, 3Q24 revenues totaled $473.3 million, 11% higher yoy, though gross margin decreased from 6.5% to 4.3% yoy because of supply chain delays, and the product and customer mix. Supply and Services unit revenues were $425.5 million, 16% higher yoy.
Embraer said its revenue guidance for the year remained unchanged at between $6-6.4 billion, with the adjusted EBIT margin between 9-10% (up from 6.5% and 7.5%).
Speaking to investors to mark the release of the Q324 results, Gomes Neto said “supply chain problems” and “ongoing obstacles” had impacted deliveries on the commercial aircraft side of the business.
Embraer versus Boeing JV arbitration decision results in $150m cash payment
By the Leeham News team
September 16, 2024, © Leeham News: Embraer issued a short investor release today stating that the arbitration was concluded regarding Boeing’s unilateral termination of the agreement of a Commercial Aircraft Joint Venture and a partnership regarding the C-390 aircraft. Boeing did the M&A termination in April 2020.
The result is that Embraer will receive a $150 m cash payment from Boeing. The payment is below the market expectations, which were around $300m to cover the Embraer carve out and carve in costs. The issue of the Boeing merger and its effects on Embraer is now history, which is positive even though Boeing’s damages payment was lower than expected.
Embraer will most likely use the cash injection to lower its net debt, which is already at a low $1.3bn and has a leverage to EBITDA of 2.0.
It was in July 2018 that Embraer announced it would sell 80% of its Commercial Aviation business, then valued at a 100% value of $5.25bn to Boeing. The Master Transaction Agreement was signed in January 2019. It included a joint venture for marketing the C-390 Millenium multi-mission military cargo jet.
Bullish Embraer sees backlog reach 7-year high in 2Q24 results
By Leeham News Team
Aug 8, 2024, © Leeham News: Embraer presented a strong set of results for 2Q2024 on Thursday, with a jump in aircraft deliveries pushing the Brazilian planemaker’s order backlog to a seven-year high.
Revenues totaled $1.494 billion in the period — an increase of 67% compared to the previous quarter, with the commercial aviation division achieving revenue growth of 176% over the prior three months.
Embraer delivered 47 jets in 2Q24, including 27 executive jets (20 light and seven medium), 19 commercial jets and one of its multi-mission C-390 Millennium transport aircraft. Collectively, that amounted to an increase of 88% versus the 25 aircraft delivered in the first quarter.
For the commercial division, aircraft deliveries were up 12% year-on-year, although defence deliveries were flat and business jets were down 10%. Read more
Boeing, Embraer differ on the future of upgauging
By Judson Rollins
Introduction
July 30, 2024, © Leeham News: Embraer’s new 20-year Market Outlook, released during the Farnborough Air Show, forecasted the demand for jets with more than 150 seats for the first time. This comes as market observers speculate the Brazilian jet maker is mulling a move into aircraft larger than its current flagship E2 family.
However, the Brazilian jet maker delivered temperate commentary on the future of upgauging, citing one-time developments it believes are unlikely to repeat. It said, “The market environment that led to [an] increase in average aircraft size will not be the same in the future. Consequently, the growth trend likely will not continue.”
For instance, a typical two-class Boeing 737-800 Layout of Passenger Accommodations (LOPA) in the mid-2000s comprised approximately 150 seats. By the late 2010s, this shifted to 160-166 seats. A similar Airbus A320 LOPA went from 140 to 150 seats.
Source: Embraer Market Outlook (data from Sabre).
Will the pre-COVID upgauging trend continue, and what are its implications for future aircraft selection? Boeing and Embraer have decidedly different views, and the latter’s view will drive its decision whether to enter the market for 150+ seaters.
Summary
- Boeing says upgauging will continue, driven equally by cabin densification and aircraft size selection.
- Embraer believes upgauging is largely over.
- Both OEMs’ views have key flaws.
- The upshot: “Bigger” doesn’t always equate to “more profitable.”