Embraer’s excellent 2024 – harvesting has limits

Readers have seen our upbeat posts on Embraer all last year. Yesterday, the company announced its numbers. Notably, it is the first OEM to do so. [caption id="attachment_89195" align="aligncenter" width="903"] Source: Embraer[/caption] Embraer commands its business jet segments. The only segment it has yet to enter and conquer is the top end, where Falcon, Bombardier, and Gulfstream operate. Embraer has been there before with the Lineage 1000, and it wasn't a great experience. In terms of the military segment, things have never looked better. Dirty little wars make the Tucano a winner. The Millenium is winning campaign after campaign. This aircraft is becoming a standard within NATO, making it a compelling solution for other governments. Like Saudi Arabia and India, both are looking at big orders. The commercial segment is facing challenges. In terms of regional jets, Embraer is the de facto monopolist. That is great, but the most significant market is slowing down. Finding customers for the E-175 outside the USA is critical. That leaves us with the E2 models. The table above clearly shows that the E195-E2 is the best-selling model. Embraer likes to talk about "right-sizing," but the market is interested in larger aircraft. We see this across the board. Airbus A321 is a best-seller, and the MAX 10 is the second-most popular model in that family. Embraer's E195-E2 competes with the Airbus A220. Where Airbus can, it mixes in its A321 for campaigns, which stymies Embraer. Even so, Embraer has seen several good wins over the year. For example, KLM went with the E2, while Air France went with the A220. The biggest question facing Embraer is, what's next? In the media briefing late last year, we heard the company wants to focus on maximizing its FAL output. Fair enough, but that's a short-term issue. As was clear from the assembled media, the concern is longer term. The key question is, what is Embraer planning? Embraer's leadership was wisely taciturn. They do not need to tell the media what they are planning. However, this has become a fundamental issue for supply chain firms or those investing in aerospace. Perhaps they are aware and under NDAs. The rest of us watch and read the tea leaves as best we can. Despite an excellent year, Embraer can only harvest for a limited time before planting again. Therefore, it is important to watch closely for the company's seed choice.

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