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Embraer slips to Q2 loss and delays KC-390 service entry

Embraer has delayed the entry into service of the KC-390 with the Brazilian air force to 2019, after a runway excursion in May pushed the airframer to a $17.7 million operating loss in the second quarter.

While Embraer is still committed to delivering the first production KC-390, aircraft 003, to Brazil by year-end, it says the air force has agreed to make the aircraft available so that the manufacturer can use it, along with aircraft 002, to complete the flight-test campaign.

Entry into service will take place in 2019 – pushed back from late 2018 – with the delivery of aircraft 004, the second production KC-390. Subsequent delivery dates are not impacted, says Embraer.

The changes to the flight-test campaign will result in a one-time special charge of $127 million, impacting Embraer's second-quarter results. The airframer had reported a $178 million operating profit in the second quarter of 2017.

Revenue was down 29% at $1.26 billion on lower deliveries of commercial and executive jets as well as cost-base revisions related to the KC-390 development contract. These resulted from the May accident involving aircraft 001.

Embraer sustained a net loss attributable to shareholders of $127 million in the quarter, falling into the red after a net profit of $62 million in the corresponding period of 2017.

Excluding the special charge related to the KC-390, Embraer would have reported an adjusted operating profit of $110 million and adjusted net profit of $6.1 million, it says.

The airframer delivered 28 commercial and 20 executive jets in the second quarter, including the first three E190-E2s to Norway's Wideroe. Delivery numbers were down from the 35 commercial and 24 executive jets handed over in the second quarter of 2017.

Embraer's firm order backlog stood at $17.4 billion at the end of 2018's second quarter, down from $19.5 billion at the end of the first quarter. An order for 50 E-Jet E2s from now-defunct Indian carrier Air Costa was removed from the backlog in the second quarter.

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