Embraer’s outlook improves as supply chain stabilizes, near-term availability drives demand

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By Judson Rollins

Introduction 

July 8, 2024, © Leeham News: Embraer is on track for a relatively upbeat Farnborough Airshow later this month, having been spared most of the supply chain headwinds plaguing Airbus and Boeing.

It is expected to reveal updates to its E-Jet family at Farnborough, including lower maintenance costs, cabin upgrades, and more.

Source: Embraer.

In May, the Brazilian OEM reaffirmed its target of 72-80 commercial deliveries this year, citing the stabilization of its global supply chain. It doesn’t disclose its commercial production rate. But its peak production reached 96 E-Jets per year pre-COVID.

Embraer’s reported backlog as of March 31 was the highest in company history: 187 E175s, 12 E190-E2s, and 178 E195-E2s. The company has since taken orders for 10 more E190-E2s and 13 E195-E2s, and has delivered approximately 18 E2s overall, according to Planespotters.net.

Most previous-generation E175s are being built for major US airlines subject to pilot “scope clause” or regional airlines operating on their behalf. Scope clause restricts how many aircraft can be flown below a certain number of seats (generally 76-80) or 86,000 lbs MTOW to protect mainline pilots from having their work outsourced to lower-paying regional airlines.

Summary

  • E2 delivery slot availability is a key advantage.
  • E195-E2 economics favor smaller markets, while the A220 is better suited to longer routes.

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Aircraft production woes stretch far beyond Boeing

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By Judson Rollins

June 17, 2024, ©. Leeham News: Estimating airplane delivery rates isn’t much more than a guessing game nowadays.

While many headlines point fingers at beleaguered Boeing and Spirit AeroSystems, aviation’s production woes are much more complex. Even in 2024, the labor shortage legacy of COVID-19 and raw material shortages exacerbated by the Russia-Ukraine war loom large over the industry.

Airbus struggles to deliver airplanes on time, and engine makers also see their deliveries constrained by supply chain issues.

Source: AFP via Aviation Week Network.

Summary
  • Boeing commercial production is far below advertised rates.
  • Airbus deliveries suffer from shortages of seats, other parts.
  • Embraer says deliveries would be higher without supply chain issues.
  • COMAC’s disruption opportunity is dampened by likely trade conflict.
  • Pratt and GE Aerospace slowly ramp up delivery of redesigned components.

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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. Read more

Embraer goes for growth after ‘solid’ 2023

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By Tom Batchelor

March 18, 2023, © Leeham News

A strengthening order backlog and an uptick in deliveries helped Embraer turn a profit last year.

In a call with investors as the company outlined its 2023 earnings results, Francisco Gomes Neto, president and CEO of Embraer, said commercial activity had “intensified” over the last 12 months, with “solid demand” across its markets.

Unsurprisingly, Embraer has felt the effects of supply chain delays buffeting the entire industry (though it said not as acutely as in 2022). The company still managed to deliver a total of 181 jets, up from 160 in 2022.

Of those, 64 were commercial aircraft, 115 were executive jets (74 light and 41 medium, helped by the strong performance of the Phenom 300) and two were military C-390s. E2 family deliveries more than doubled year-on-year, from 19 to 39 in 2023.

The recent firm order from American Airlines for 90 E175s, with purchase rights for 43 additional jets, had resulted in a “great start to 2024”, Neto added.

Revenues totaled $1.975bn in the fourth quarter and $5.269bn across 2023, which was 16% higher than in 2022 but at the lower end of the guidance range for the year.

In 2023 as a whole, the company reported adjusted EBIT of $350m, with adjusted EBIT and EBITDA margins of 6.6% and 10.7%. Adjusted EBIT stood at $181.7m in 4Q23, with adjusted EBIT and EBITDA margins of 9.2% and 12.8%, respectively.

Looking ahead to 2024, Embraer said total company revenues would sit in the $6 to $6.4bn range, with an adjusted EBIT margin of between 6.5% and 7.5%.

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Outlook 2024: Embraer’s continued recovery

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By Bjorn Fehrm

January 8, 2024, © Leeham News: Embraer was hit by a double whammy before and during COVID. The non-closure of the merger of Boeing’s and Embraer’s Commercial Aircraft Divisions and the halving of its E-Jet deliveries during COVID. The year that passed marked the recovery from the extra cost and effort of the non-merger and an increase in E-Jet deliveries and orders.

It was also a progress year for the EVE eVTOL venture, with Embraer finalizing design and starting prototype production. Despite the EVE lagging behind other programs by about a year, the customers believe it’s one the most viable programs. Eve doubles the preorders of the nearest competitors.

The past year will also be seen as the break-trough year for the KC-390, Embraer’s bet to replace the venerable Lockheed-Martin C-130 military airlifter. The customer list went from three to five, with more country air forces in serious negotiations for the KC-390.

Summary:
  • The E-Jets are trending back to normal volumes with better margins.
  • EVE is the best-selling eVTOL, as operators trust Embraer’s knowledge and support.
  • The KC-390 is on its way to capture a big slice of the C-130 Hercules replacement marker.

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Embraer’s EVE brings some reality to UAM/eVTOL sector

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By Scott Hamilton

Dec. 18, 2023, © Leeham News: There are hundreds of “alternative energy” concepts under study for commercial aviation and a new air taxi industry. Most will fail to prove technically feasible or obtain the funding required to successfully bring the ideas to market and production.
A few concepts are based on reality. EVE is one of them.

EVE is an air taxi concept floated by principal owner Embraer.

Embraer’s EVE urban air mobility vehicle. Credit: EVE.

During a media briefing last month, Johann Bordais, EVE’s CEO, said the Urban Air Mobility (UAM) concept for EVE is a spin-off from an idea Embraer had in 2017. EVE was later spun off, while Embraer retains a majority stake.

“We became independent because we understand that we need to be agile, and go faster because the air mobility revolution was happening already,” Bordais said. “We needed to get moving. We also needed to get some funds and that’s why we also had a SPAC and we merged with Zanite.” SPAC stands for Special Purpose Acquisition Company.

EVE went public on May 10, 2022. With added funding, EVE began production earlier this year of the prototype.

Bordais said Embraer’s 54 years of legacy sets EVE apart from other concepts.

“It’s about knowing what we’re talking about. It’s not about just having prototypes flying around the cities. It’s about the whole ecosystem,” he said. “It’s about also the know-how.”

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Embraer’s C-390 builds momentum; civilian freighter pondered

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 By Scott Hamilton

 Dec. 11, 2023, © Leeham News: Embraer’s flagship defense program, the KC/C-390 finally took off this year. Orders began rolling in, after a long drought and cancellations by the Brazilian government that cast doubt over the viability of the program. This month, an order for an undisclosed number of C-390s were announced with South Korea. Embraer is in contention for an order for around 80 transports from India.

Brazil, Portugal, Hungary, the Netherlands, Austria, and the Czech Republic have ordered the C-390. Some are in NATO configuration.

Embraer C-390 Millennium. Credit: Embraer.

The C-390 Millenium also comes in a tanker version, the KC-390, The twin-jet is about the size of a Boeing 737 dimensionally and a fuselage cross-width about the diameter of a Boeing 767. It is the Brazilian company’s largest aircraft. Its closest competitor is the Lockheed Martin C-130J.

The C-390 and the single-engine propeller trainer, the Super Tucano, are the defense unit’s to leading programs. In a media briefing last month, Bosco da Costa Jr, President, and CEO of Embraer Defense & Security, said the company developed more than 20 models of various types since Embraer was formed 54 years ago.

In 2017, Embraer and Boeing proposed a joint venture by which Embraer Commercial Aircraft (ECA) would divest from the Group into Boeing Brasil. Boeing would own 80% of the JV and Embraer would own 20%. A JV for the KC-390, with a 51%-49% in favor of Embraer would provide EMB with Boeing’s marketing heft to market the then-stalled sales of the tanker-transport. Both JVs were terminated by Boeing in April 2020 before the combination could be consummated. Since then, Embraer agreed with US defense contractor L3 Harris to help market the airplane.

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Pontifications: Embraer sees easing in pilot shortage, wave of sales coming

By Scott Hamilton

By Scott Hamilton

 Dec. 5, 2023, © Leeham News: Embraer officials see the pilot shortage easing in 2025 or 2026.

Francisco Gomes Netos, CEO of the Embraer group, said during a media briefing last month that the “situation” is getting better. Boeing, in its latest 20-year forecast, reported that 649,000 pilots will be needed globally over the next 20 years.

With a wave of pilot retirements, especially in the US, coming in the next few years, the shortage and demand seem daunting.

“In our internal market intelligence, I would say that the situation should be much better in 2025 and 2026. We see the situation improving,” Gomes said.

The biggest impact of the pilot shortage was on the 50-seat regional jet, CFO Antonios Carlos Garcia said. The majors want 76-seat aircraft.

Orders for Embraer’s E-Jet E2 have been slow. Because the E175-E2 exceeds the weight limit in the labor contracts, known as Scope Clauses, this model isn’t sold in the US, the biggest market for the 76-seat aircraft, and for Embraer.

The E190-E2 is an “in-between” aircraft that isn’t selected by many customers. The largest of the family, the E195-E2, has a backlog of a few hundred aircraft. But Embraer hasn’t been winning orders of the magnitude Airbus and Boeing are winning.

Gomes believes the E2’s day is coming. “It’s coming, the wave to focus on our segment.”

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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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Embraer’s 3rd Quarter 2023 results contain good news

By Bjorn Fehrm

November 6, 2023, ©. Leeham News: Embraer presented its 3Q2023 results today. Commercial aircraft deliveries increased by 50% to 15 E-Jets compared with 10 jets in 3Q2022, and Executive jets delivered 28 jets versus 23 for 3Q2022.

Revenue for the group increased by 38% to $1,284m ($929m) for the quarter. The Services side increased revenue by 24% to $366m ($295m). The Defense revenue was up 40% to $133m($95m).

EBIT was $84m versus $11m for the same quarter last year. The company retained the 2023 guidance to deliver 65-70 E-jets and 120-130 Executive jets for the year.

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