Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Updated: Porter confirms E195-E2 after persistent denials in May
By Scott Hamilton
July 12, 2021, © Leeham News: Canada’s Porter Airlines today announced an order for 30 Embraer E195-E2s. The move comes shortly after the Canadian government agreed to loan hundreds of millions of dollars to Porter in the wake of the COVID-19 pandemic. Porter ceased operations shortly 
into the start of the pandemic in March 2020. It resumes service in September.
Embraer announced the order, from an unidentified customer, on April 23. Airfinance Journal first reported that the customer was Porter Airlines, which the company denied. LNA confirmed May 19 that the airplanes were going to Porter. Porter declined to directly comment on LNA’s confirmation.
Pontifications: The reshaped commercial aviation sector
By Scott Hamilton
July 12, 2021, © Leeham News: With Washington State and the US open for business following nearly 18 months of COVID-pandemic shut-down, there is a lot of optimism in commercial aviation.
In the US, airline passenger traffic headcounts are matching or exceeding pre-pandemic TSA screening numbers. Airlines are placing orders with Airbus, Boeing and even Embraer in slowly increasing frequency.
The supply chain to these three OEMs looks forward to a return to previous production rates.
It’s great to see and even feel this optimism. But the recovery will nevertheless be a slow if steady incline.
HOTR: Porter confirmed as customer in E195-E2 deal
By the Leeham News Team
May 19, 2021, © Leeham News: Embraer got a big boost for its E-Jet E2 order book in April when it announced a firm deal for 30 E195 E2s.
“On April 23, the Company signed a firm order for 30 E195-E2 jets with an undisclosed customer, with deliveries starting in 2022. The 30 firm
orders will be included in Embraer’s second quarter backlog,” Embraer said in its April 29 earnings release.
Embraer delayed E-Jet deliveries because of the COVID-19 pandemic. Thin backlogs for the E2 pre-date the pandemic. This order, with deliveries starting next year, illustrates Embraer’s thin skyline.
Airfinance Journal on May 13 first reported the customer is Canada’s Porter Airlines. Porter, pre-pandemic, operated De Havilland Dash 8-400s exclusively from Billy Bishop Airport, Toronto’s downtown in-city airport. AFJ cited multiple sources. Porter Airlines denied it ordered the airplane or that it had signed lease deals to acquire the E2. The carrier told the Toronto Globe and Mail it isn’t going to “switch” fleet types.
However, LNA confirmed this week that the airplanes are going to Porter. Porter declined to answer any questions from LNA.
“Our response to this speculation has been provided to others and published. We do not have anything further to add,” Porter said in an email.
2021 fleet trends: small jets get bigger, bigger jets get smaller – and the old makes way for the new
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By Judson Rollins
Introduction
May 13, 2021, © Leeham News: Aviation data provider Cirium said last week that just under 7,850 commercial aircraft were still in storage, down from 8,684 at the beginning of the year and a peak of 16,522 at the apex of the COVID-19 crisis last April.
Although there was an initial spike in aircraft retirements in March and April 2020, the total number has stayed in line with historical norms to date. However, order books for most types have stagnated or even gone backward since the start of the pandemic.
A few trends are becoming clear: larger single-aisles are thriving, larger twin-aisles are disappearing, and sub-100-seat orders are flatlining. Not surprisingly, older-generation aircraft are disappearing at an accelerated rate.
Summary
- Airlines are upgauging their single-aisle orders in anticipation of lower yields and competitive battles.
- Widebody order books continue to struggle; the bigger the airplane, the worse the demand.
- Regional jet and turboprop order backlogs have stagnated.
Embraer shows some improvement YOY
April 29, 2021, © Leeham News: Embraer posted improvement in some of its year-over-year financial results today.
Revenue for the first quarter was up 27.3%, from $633.9m to $807.3m. The 1Q20 period was largely unaffected by the global COVID-19 pandemic, which didn’t hit until March 10. But Embraer Commercial was at a standstill, awaiting approval from the European Union on the proposed joint venture with Boeing. (Boeing terminated the JV late in April.)
Embraer reported an EBIT loss last year of $46.9m. It still reported a loss this year, of $33.1m. Adjusted net losses for the two quarters weren’t much different: $104m in 1Q20 vs $95.9m this year. But Net income attributable to shareholders improved from a loss of $292m to a loss of $89.7m.
Adjusted Free Cash Flow remained negative YOY but improved from $676.5m to $226.6m.
Embraer delivered nine E-Jets, including five E195-E2s, and 13 executive jets during the quarter. Post quarter, EMB signed a firm order for 30 E-195 E2s with an unidentified customer. Deliveries begin in 2022.
Initial analyst reaction is below.
Pontifications: Embraer’s China ambitions
March 22, 2021, © Leeham News: Embraer wants to become a big player in China.
By Scott Hamilton
“We see a huge market potential there,” said Arjan Meijer, CEO of Embraer Commercial Aviation, in an interview with Nikkei Asia. The news outlet continued, “The company expects worldwide demand for 5,500 jets with up to 150 seats over the next 10 years. A third of that will come from Asia, with a large part of it from China, Meijer added.”
However, China presents risks and few rewards to companies wishing to gain a significant foothold. This is especially true for commercial aviation companies. China has high ambitions for the commercial aviation industry. Partnering with China in this sector produced more heartbreak than success.
Embraer 2020 results
By Bjorn Fehrm
March 19, 2021, ©. Leeham News: Embraer presented its full-year 2020 results today. Revenue for 2020 was down 31% at $3,771m versus $5,463m in 2019. The resulting loss was $323m, compared with $77m 2019.
The company managed to stay cash neutral with $2.8bn at exit 2020, the same as when exiting 2019. Due to the uncertainty of how COVID-19 develops during 2021, there was no 2021 guidance.
Small jet demand likely to stay depressed after COVID
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By Judson Rollins
Introduction
January 25, 2020, © Leeham News: As passenger travel trickles back to life, one trend that’s already apparent is a long-term diminution of airline yields in most regions.
This is largely driven by a reduction in business travel, some of which is likely to never return.
Regional jets and small single-aisles like the Airbus A220 and Embraer’s E2 family have higher unit cost, or cost per available seat-mile (CASM), than larger aircraft like the Boeing 737 or Airbus A320.
Achieving an operating profit with smaller jets requires high unit revenue, or revenue per available seat-mile (RASM). This will be difficult to achieve in a world where business travel is still down 70%-80% this year, even with a vaccine – and may be down 30% or more permanently.
What role will these smaller jets have after the pandemic? And will production match this new reality? A closer look is required.
Summary
- Regional jets and smaller single-aisles have higher unit costs.
- High costs require higher unit revenue to be profitable.
- Business travel likely slow to return, with some permanently impaired.
- Smaller jets previously used for routes now in danger of demand fragmentation.
HOTR: Boeing could further cut 787 production rate—JP Morgan
By the Leeham News Staff
Jan. 20, 2021, © Leeham News: There is risk of another production rate cut for the 787, JP Morgan wrote in a Jan. 12 note.
Boeing already is reducing the rate to 5/mo this year. There are an estimated 60 787s in inventory due to production and quality control issues discovered last year that halted deliveries in November-December.
Boeing 787 family. Source: Boeing.
Outlook 2021: Embraer faces recovery from failed JV, COVID
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By Bjorn Fehrm and Vincent Valery
Introduction
Jan. 7, 2021, © Leeham News: Embraer faces the twin challenges this year: recovering from the aborted Boeing joint venture and COVID.
Neither is going to be easy.
Embraer reintegrated the Commercial Aviation and 60% of its services unit back into the parent company.
Recovering from COVID depends on how soon and widespread vaccinations are accepted worldwide.
And, the E-Jet product line with its latest E2 variant has challenges.
Summary
- Overcoming the failed Boeing tie-up.
- Abating competition.
- Positive market outlook.
- E1 customers in one market…
- And E2 customers in the others.