Embraer has delayed first deliveries of the E175-E2 by one year until 2023, the Brazilian airframer said on August 5 in its HY1-results announcement. The smallest version of the E2-family has been rescheduled “given the current market conditions for commercial aviation as a result of the Covid-19 pandemic.”
Development of the E175-E2 will continue, although on a revised timeline. The sole test aircraft PR-ZXM has been active this week, doing flight tests out of Araraquara Airport Northwest of Sao Paolo. She made her maiden flight on December 12, 2019 and started a two-year test and certification program that was to be completed by the end of 2021.
Embraer says the type will be available “with more than adequate time to enter service in the commercial market to meet market demand for the jet.” But that is precisely the issue with the E175-E2, which has been without any orders so far. While the E190-E2 has 25 form orders and 63 options and the E195-E2 148 firm and 47 options, airlines have had no appetite for the smallest family member.
The airframer continues to offer the E175-E1, which has sold 798 firm orders plus 291 options, with a backlog of 159. Embraer delivered only five of them this first six months.
HY1-loss -302.8 million
Embraer recorded a difficult Q2 and HY1 2020. It ended the second quarter at a $-198,8 million adjusted net loss, adjusted EBIT of $-140.5 million), and revenues of $537.2 million. HY1 closed with a $302.8 million adjusted net loss, $-131.8 million adjusted EBIT on revenues of $1.171 billion.
Q2 includes $202 million in special items, incuding $16.1 million in provisions for expected credit losses because of the coronacrisis, a $91.1 million impairment for its Commercial Aviation business, and a $101.2 million in recognition of a previous period depreciation and amortization expenses of Commercial Aviation. This is related to the reinstatement of the unit which was originally planned to be integrated in the joint-venture with Boeing, which was subsequently terminated by the American airframer in April. Segregation costs in Q2 were $22.2 million. Since June, Embraer has started to reintegrate Commercial Aviation again under the leadership of the new CEO, Arjan Meijer.
Due to Covid-19, commercial deliveries were down by -84.6 percent to just nine aircraft. Revenues for the unit in HY1 were $247.6 million, lower than the $279.3 million from Executive Jets that delivered 22 jets. Services & Support lost 37.9 percent in revenues in Q2 and ended HY1 at $453.7 million. Those of Defense and Security were down -39.4 percent in Q2 and ended the first six months at $188.1 million.
Embraer ended June with $2.0 billion in net cash. It expects to reinforce its position in Q3 as terms of contracts for working capital and export financing with credit facilities from Brazil and the US will be finalized. This will add another $ 700 million in liquidity.
Adjusted free cash flow was $ -1.152 billion, affected by the higher level of working capital and fewer deliveries and higher inventories. This situation mirrors that of Boeing and Airbus, which both reported high inventories in HY1 last week. The situation should improve in HY2.
