Business jet sales are stuck at a market-wide range of 650-700 aircraft per year. A few hopeful signs are visible in the market data, but nothing that fills forecasters with unbridled optimism.
One classic indicator of market stimulation is the entry into service of a new aircraft, but after a decade spent developing four new clean-sheet aircraft Embraer Executives Jets has no new designs publicly on the drawing board.
So how does Michael Amalfitano, the newly-appointed president of EEJ, plan to drive growth for the Brazilian manufacturer? His answer: change the conversation.
Gone is the word "price" from Embraer's marketing presentations. Instead, the Brazilian manufacturer of clean-sheet light and midsize jets and VIP derivatives of commercial jets substitutes the word "value".
"We're shifting and it's a very strategic shift away from price and towards value," he says. The price is the amount the customer pays. In a stagnant market with uncertain prospects, this can lead to discussions where the customer starts with the upper-hand. But the value is something different. It includes the price, but factors in other important aspects, including performance and reliability upgrades and customer service standards.
"We're seeing customers understand that value proposition and we are winning over the competition," Amalfitano says. "Customers are making value decisions.".
Amalfitano joined Embraer on 1 March, becoming the fourth person to lead EEJ. The business was launched under Sam Hill in the early 2000s, with the modest goal of converting Embraer 135 regional jets into VIP transports. Hill's team then conceived and launched the Phenom 100 and 300 light jets, which signalled the end for the legendary line of Hawker-branded business jets.
Hill's successor, Ernest Edwards, was charged with executing development of Phenom, which clearly emerged as one of the struggling industry's hottest sellers. An emboldened Embraer then made one of its smartest moves yet, launching the mid-size Legacy 450 and 500 jets to challenge the heart of Cessna's jet portfolio with the segment's first application of fly-by-wire technology.
Embraer has delivered more than 60 Legacy 450 and 500 jets since the first entered service three years ago, but the family is struggling to match the dominance of the Phenom series. Textron Aviation's nearest competitor – the Citation Latitude – single-handedly outsold the Legacy 450 and 500 combined last year, with 42 Latitude deliveries alone compared with 33 combined of the Embraer models.
Textron Aviation adjusted its strategy as 2017 began, declaring to the market that it would hold the line on pricing even if it meant lower production volumes. Despite the shift in philosophy, the Latitude's popularity in the market showed no signs of abating in the first quarter, with 10 deliveries through 31 March compared with one each of the Legacy 450 and 500.
The sales disparity drew questions from curious market analysts on Embraer's first quarter earnings call, but chief executive Paulo Cesar Silva shifted the discussion from market share to operating margins for Embraer Executive Jets. In doing so, he echoed Amalfitano's call for a sharper focus on value over pricing.
"I think we can have a little improvement of margins as we work with the new models and with the services attached to it. We believe that we can deliver a better value to our clients and be recognised for that in the market," Silva says.
So Amalfitano's marching orders are clear. The Phenom series jets have enjoyed a dominant sales presence in the market. The Legacy jets have struggled to gain market share, but the goal of the business now will shift to generating cash. That indicates Embraer is willing to trade production volume for better deals.
Amalfitano points to metrics showing Embraer's rising and often paramount position in various industry surveys of customer satisfaction.
"Embraer has a phenomenal value story. Let's recognise that advantage and highlight the customer experience that comes from delivering that value," he says.