- Embraer delivered 47 jets in 2Q24, of which 27 were executive jets (20 light and seven medium), 19 were commercial jets, and one multi-mission C-390 Millennium in Defense – an increase of 88% compared to the 25 aircraft delivered in 1Q24.
- Firm order backlog of $21.1bn in 2Q24 – a 7-year high, up more than 20% annually. For more information – see 2Q24 Backlog and Deliveries release.
- Revenues totaled $1,494m in the period, an increase of 67% compared to the previous quarter (QoQ). Highlight for Commercial Aviation revenues with 176% growth.
- Adjusted EBIT reached $138.8m with a 9.3% margin in 2Q24 ($6.8 million and 0.8% in 1Q24).
- Adjusted free cash flow w/o Eve in 2Q24 was negative $215m because working capital needs to support the higher number of deliveries in the second half of 2024.
- 2024 Guidance reiterated: Management believes current estimates are valid and represent evenly balanced opportunities and risks for full-year operations. Commercial Aviation deliveries will be between 72 and 80 aircraft, and Executive Aviation deliveries will be between 125 and 135. Total company revenues will be in the US$6.0-6.4 billion range, with an Adjusted EBIT margin between 6.5% and 7.5% and Adjusted free cash flow of $220m or higher.
Embraer is now a vastly different company than a few short years ago, reeling from the rejection of Boeing’s merger. The Embraer management team has pulled the team back together and come out stronger than it was.
The disruptive period saw the company pause new developments. The E175-E2 appears to be a closed program. Reports are that the sole frame is now engineless. The other E2 programs are delivering quite rapidly. This program has a better delivery schedule than its competitor, which means it is unexpectedly winning deals against Airbus.
Having passed through a great disruption, Embraer can now look forward and restart R&D with the necessary resources. Senior company leadership is coy about anything regarding a new commercial program.
The turboprop project is on hold because no viable engine option meets Embraer’s requirements. The Energia project is also slowing down as engine options are being examined—the E175 soldiers on, winning orders to replace retiring E170s in the US regional market.
However, a company that has developed 14 programs over 14 years, on time and on budget, should be expected to keep that creativity rolling.
The business jet division dominates the smaller segment with its successful Phenom range. The sweet spot in this business is the large segment, a territory dominated by Bombardier, Gulfstream, and Dassault. Will Embraer be happy to keep dominating at the lower end or start to grow into the largest segment? It previously offered the Lineage range, but it did not sell well. Might the E175 allow for an attractive option regarding size, capability, and price work? It won’t be as fast as the competition, but it has a bigger cabin.
The most obvious move for the commercial division is something larger than the E195-E2. This means entering the duopoly and the consequent risks that come with that. With a tighter supply chain control, Embraer’s risks here are perhaps not too high. Moreover, the Global South organization (formerly BRICS) provides more derisking. For example, as a member, Saudi Arabia could provide a useful capital source to develop a ~200-seater. Saudi Arabia is already in the aircraft leasing business. There is a path to follow that is not as daunting as it may appear.
Finally, Embraer’s military side is doing well with its C-390 winning orders. The biggest order the market is waiting for is not surprising: Saudi Arabia. A synergy is at play that de-risks Embraer’s future like no other OEM.
Looking at the turnaround at Embraer, customers see a viable OEM option. Can these customers de-risk their own business by encouraging and coaxing Embraer to expand? Because circumstances have never been better.
