Has Embraer turned the corner? – Part 4

Embraer, in the last few years, has been hit by several events outside of its control, including the deal breakup with Boeing, the global pandemic, and continued pilot union intransigence regarding the scope clause, impacting the regional jet segment in its largest global market. The impacts of these actions sent revenues plummeting from $5.4 billion in 2019 to $3.7 billion in 2020, which recovered to $4.5 billion in 2022. The company is projecting revenues between $5.2 and $5.7 billion in 2023, which would be close to 2019 results before the multiple crises. Their CEO, Francisco Gomes Neto, has set a target of $8 billion in revenue in 2027, an ambitious growth plan. Has Embraer turned the corner since the Boeing breakup and global pandemic in 2020? We’ll examine that question market segment by market segment. Embraer has four major business segments, commercial aircraft, business aircraft, military aircraft, and service and support. The company also holds the majority of equity in Eve, the leader in urban mobility that it spun off as an IPO to fund development. In this series of articles, we will examine each of the sectors and comment on the near and longer-term outlooks for each business unit. SERVICE AND SUPPORT Embraer's annual media day was held in Lisbon, Portugal this year and hosted by OGMA, a key entity in Embraer's Services and Support growth. OGMA, which Embraer acquired a controlling share of 65 percent in 2012, is a major manufacturing and service center for the company. Founded in 1918, the company has a long history in both component manufacturing and maintenance. Of the 4.000 service and support employees at Embraer, 1.700 are with OGMA, making it a very significant focal point for the company's service in support. OGMA will grow in importance with the establishment of a new engine maintenance facility for the Pratt & Whitney GTF family. that is scheduled to come on line in 2025 and will service the PW1100G-JM engine used for the Airbus A320neo family as well as the PW1900G engines used on the E2 Jets. Long-term plans include expanding resources to include the PW1500G used on the A220. OGMA's growth in engine maintenance builds on their long experience with Rolls Royce engines, including the AE1107C and AE2100 series of engines. OGMA will continue as an authorized Rolls Royce facility in Southwestern Europe. While OGMA is a large facility, it is not the only service and support facility for Embraer. The company operates nine factory-owned service centers, 83 authorized independent service centers, 8 parts warehouses, 210 field support representatives at customer locations, and 92 flight simulators around the world. Embraer has more than 4,000 people servicing over 5,700 products in service with more than 2.000 customers in over 100 countries. From a revenue standpoint, service and support is a growing element of Embraer's business, moving from $1.1 billion in 2020 to $1.5 billion in 2022. Expectations are for double-digit growth and a significant contribution to Embraer's $8 billion revenue target for 2027. Embraer's service and support encompass multiple functions, as shown in the diagram below: Two significant elements merit special attention. One is Aerostructures at OGMA, which not only builds components for Embraer and the C390, but also builds components for other airframe manufacturers, including major fuselage sections for the Pilatus PC-12 as well as parts for Airbus, Daher, Dassault, and Lockheed-Martin. About 500 of the 1.700 OGMA employees are in Aerostructures. The second is modifications, which will include passenger-to-freighter conversions for first-generation EJets. That will represent a new business opportunity for Embraer and be a part of the forecast double-digit growth for Services and Support. Embraer has grown its global services and support network and expects it to be an important revenue and cash flow contributor as fleets grow and new capabilities, such as GTF maintenance, commence with the completion of new facilities at OGMA. The following chart illustrates Embraer's global MRO support network: The Bottom Line - Services and Support Embraer's service and support group is growing in both capabilities and customer base and will be a key element in the company's growth plan to $8 billion in revenue by 2027. GTF engine maintenance will be a key element providing incremental growth to a business unit achieving double-digit growth, enabling that growth to continue apace. We are optimistic that OGMA and Service and Support can generate its portion of the planned growth for the company.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

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