Brazilian aircraft manufacturer Embraer says it has not had any order cancellations as a result of the current global coronavirus pandemic that has decimated the air transport industry, but it is seeing some customers ask for deferments of deliveries as airlines reduce capacity for an undetermined period.
“The discussion is dynamic,” says chief financial officer Antonio Carlos Garcia, who was named to his post in November and began on 1 January. “All these [discussions] are regarding the delivery schedule, but no cancellations. The situation is really changing, and we need to know for how long the capacity reductions will last in order to have an accurate assessment.”
The Sao Jose de Campos-headquartered company reported 2019 full-year results on 26 March, and withdrew its earnings guidance for the year as the outcome and length of the crisis is still unclear.
Embraer’s revenues for the full year rose 9% to $5.5 billion, up from $5.0 billion in 2019. The company reported an adjusted net loss of $218 million, more than three times that of a year earlier, as it took special charges and impairment costs, as well as costs in relation to the carve-out of its commercial division in preparation of a merger with Boeing.
The company ended the year with a backlog of $16.8 billion, and says it received 69 new firm orders during the year from the likes of American Airlines, KLM, Azul and United Airlines. Its new generation E2 jet backlog reached 153 firm orders and more than 570 commitments.
The company delivered seven new-generation flagship E195-E2 commercial aircraft during 2019, the second E2 variant to hit the market. The smaller E175-E2 had its first flight during the fourth quarter. Altogether, Embraer delivered 14 of the newer, re-engineered and more efficient E2 jets.
Total commercial deliveries for the year reached 89, with 109 executive jets going to their new customers in 2019, in line with the company’s previous expectations. Had the crisis not hit, Embraer’s 2020 deliveries would have been in the same range, executives say.
“Embraer has so far not suffered extensive delays in its supply chain, production operations, or material impacts on the demand for its products. Nevertheless, due to the uncertainty related to the impact of the spread of the virus, the company is suspending its [earnings] guidance,” the planemaker says in a statement.
That said, Garcia adds that the company’s liquidity is solid, ending the year with $2.8 billion, as well as $600 million raised this month. Embraer, like its peers, is taking active measures to preserve its cash. Less than 16% of the company’s total debt comes due in next 24 months, he adds.
Chief executive Francisco Gomes Neto says that Embraer completed the carve-out of its commercial division in January, in anticipation of its planned merger with Boeing, which was expected to close later this year. The transaction has been tied up in regulatory red tape in Europe and executives now expect it to take longer than the original June completion date.
“We still need still antitrust approval in Europe, and we are working together with Boeing to achieve that. It is an important strategic partnership and a priority for Embraer,” Neto adds. Boeing and Embraer secured approval of their planned partnership from authorities in Brazil in January.
The European Commission’s in-depth review of the deal was prompted by concerns in the single-aisle aircraft market, particularly in the 100-150 seat segment. Recent trade squabbles between the United States and the European Union could also delay the transaction’s closing.