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Embraer’s commercial aircraft division arrives at this year's Farnborough show with a new chief executive in place, albeit a familiar face, after long-standing chief operating officer John Slattery was selected to replace his promoted predecessor Paulo Cesar de Souza e Silva from 1 July.
As you might expect, Slattery says he does not envisage “any radical changes” as, having been his boss’s “co-pilot” for the past five-and-a-half years, he feels the business is “robust and built for purpose in order to execute our business plan”.
His priorities, he says, are to maintain Embraer’s momentum in the marketplace; retain its reputation for aftersales service and support; and, crucially, bring its developmental E-Jet E2 family to market “on schedule and in-line with its [promised] design characteristics”.
Sales of the current-generation E1 family continue to be strong, he says, having enjoyed a “tailwind of support” from airlines and lessors over the last four years.
Recent contract wins for the E175 have included an order from Horizon Air, the Alaska Airlines subsidiary, for 30 E175s, with deliveries to begin next year.
“I have every reason to believe that we will have a very strong year in sales terms, although it will be the customers who ultimately decide that,” says Slattery. He notes that the maturity of the aircraft, its large geographical footprint, strong residual values and ease of obtaining finance create a proposition that appeals to both CEOs and their finance chiefs.
“We are going to work very hard to maintain the momentum we have seen over the last couple of years,” he says.
Production of the E1-series should continue until at least 2020, although that could be extended if further deals come in. Slattery believes there will be additional interest in the E1 – both in terms of “incremental” orders from current customers and bigger commitments from carriers in growth markets like China, India and Indonesia.
“I’m certainly working on them”, he says, noting that there are “a number of opportunities across the world that we are very excited about.
“We do see those sort of opportunities in our skyline.”
With a robust backlog for the current-generation models, previous concerns over a potential “trough” between the E1 and E2 have receded, and Embraer is confident that it can produce both simultaneously.
First flight of the initial E190-E2 prototype took place on 23 May and the airframer is now ramping up the test hours as it looks to certificate and deliver the Pratt & Whitney PW1900G-powered jet by the second half of 2018.
Firm orders for the E2 family, however, have remained stuck on 267 aircraft for some time. But Slattery is confident that now the aircraft is flying – and present at Farnborough – more sales will come.
“I would be very disappointed if we didn’t break 300 firm aircraft this year,” he says.
“By any metric, that we are at that number in less than three years since launching the E2 is a great testament to the programme. I’m hopeful, in a humble way, that our customers will continue to support the aircraft with firm orders.”
However, for the moment at least, those orders are not being sought from the leasing community. Around 33% of E1s are owned – either via speculative deals or sales and lease-back arrangements – by operating lessors, says Slattery.
Although he says he expects E2 ownership to follow that pattern at “not dissimilar percentage” he is cautious about market saturation.
“I have a very definite vision that Embraer will not oversell directly to the lessors because I think that can create a level of volatility on lease rates and residual values that I want to be super-careful to avoid.”
Three lessors have so far committed to the E2 – AerCap (50), Aircastle (25) and ICBC (10) – representing nearly 32% of current firm orders.
“We are not proactively looking to bring any other lessors on to the programme at this point. We will support them placing that inventory.”
Embraer plans to keep direct sales to lessors at around 15-20% of the total, he says, but adds: “We have a responsibility to work with them to make sure there’s a good, orderly placement of those aircraft in the market to make sure they get the returns they anticipate.
“The one thing I can do is not oversell in that marketplace,” says Slattery.
Source: Flight Daily News
