In addition to the two videos posted below, here’s the third and last one from this week’s briefing in New York.
While the others were also available on the live stream, this session was not, making it quite different.
The media Q&A is far more interesting because it is interactive. In this session, several people from various outlets ask questions. While it is fair to assume each media attendee has a similar version of these questions, as each is asked, these thoughts and questions are immediately recalibrated. As each question is asked, everyone (both media and panelists) becomes more focused. As you watch the video, notice how questions are framed and which items are sensitive and responded to accordingly. It’s fascinating to witness this in real-time. There’s a great deal of nuance on both sides, and parsing the questions and answers gives you a sense of what might be happening.
Embraer is at or close to the top of their game.
- They are ahead in the eVTOL space compared to competitors because they understand certification better. They also understand the crucial nature of the ecosystem required to make it work.
- Their defense segment is humming because of the C-390, while the Tucano has had less success. That does not matter because the C-390 is opening doors in markets they never had before, possibly creating Tucano opportunities. A big win in India and Saudi Arabia will be game-changing.
- The services division will keep growing accordingly.
- The Business Jets division is sitting on winners, and customers are asking for large airplanes.
- This request competes with the Commercial division, which faces a “once in a lifetime” opportunity to go bigger—much bigger, like ~ a 200-seater. The lessons from Bombardier’s overextension make Embraer wary of the same risk.
- At the same time, the company’s engineers keep developing technologies that can be used in various programs. An example is the new auto-takeoff system (E2TS). This is a clever solution with far-reaching implications that the market may not fully understand. A significant feature is optimizing takeoff to use runway length efficiently and allow for more range or payload. Put that into a business jet or the C-390 and think about what happens. Embraer’s talent pool is the company’s greatest asset and came up peripherally when discussing suing Boeing for talent poaching. It is a far more significant point than it appeared to be.
In summary, Embraer mentioned “harvesting” several times. It is good to have reached this stage after a tumultuous few years. However, aerospace is more about investing than harvesting because it is a long-game business. They dare not harvest too long.
The Commercial division must execute new models and not miss a cycle – we have seen how this has hobbled Boeing. They will not see an opportunity like this again. It is an open secret that their most influential airline customers are asking for this. While the focus is on getting production back up to pre-pandemic rates, this division must also win more E2 orders. They can afford to harvest on the E175, but only on that model.
The Business jet division must unleash its talent pool on a model that can compete with the larger Gulfstream and Bombardier models. A key customer openly asked for this yesterday. Embraer knocked Bombardier once before and has the talent to do it again. Embraer can harvest on the Phenom 300E and Praetor models in this market. However, it cannot be ignored that the entire market is moving up to larger cabins and ranges.
Several challenges exist. Finding the resources to develop a larger commercial airplane and a larger business jet is among the most significant. How does Embraer overcome this hurdle? A new commercial aircraft might find an investor in the Saudi PIF. That allows Embraer to fund a larger business jet more easily.
Moreover, the company is doing well, and revenues from EVE have not even started. Embraer is investment grade and bankable. Another little nugget from yesterday – Embraer sees itself as “Brazilian-American.” Think about that momentarily as one ponders the new US political future. Embraer is poised to, perhaps, more than harvest.
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