How Embraer’s CEO Is Playing The Tough Hand He Was Dealt

Shortly before the last Paris Air Show, Francisco Gomes Neto, chief executive of a leading bus manufacturer, was hired as president and CEO of Embraer. His mandate was clear: oversee the carve-out and handover of the Brazilian aircraft company’s heart and soul—its commercial aviation operation—to Boeing.

Four years on, Gomes Neto is still leading the company, but his mandate looks much different. Boeing pulled out of the $4.2 billion acquisition in 2020, leaving Embraer intact but forcing it to weather the worst of the COVID-19 downturn on its own. As he prepares to return to Le Bourget, Gomes Neto says the company has turned the corner and is pursuing an ambitious goal of generating $8 billion in revenue by 2027, up from $4.5 billion last year. “The turnaround of Embraer was concluded in 2022,” he told journalists at a pre-Paris Air Show briefing in Lisbon, Portugal. “Now, we will focus on growth.”

• The OEM has brisk sales in aftermarket and executive jets
• The company’s airliner business faces an uncertain future

Embraer clearly has bright spots. Business is booming at its executive jets unit, its fast-growing services business is boosting sales, and defense revenues are rebounding. And the company’s Eve Air Mobility spinoff, which went public a year ago, has won 2,770 conditional orders for its four-­passenger electric vertical-takeoff-­and-landing (eVTOL) vehicle from an array of customers that includes United Airlines, Japan Airlines and Republic Airways.

But sales of the company’s signature airliner family, the E-Jet E2, remain sluggish even as demand for air travel has come roaring back. And Embraer recently was forced to put development of a cutting-edge civil turboprop on ice until at least the early 2030s after it could not find an engine partner capable of meeting its performance goals (AW&ST Dec. 26, 2022-Jan. 15, 2023, p. 14).

The turboprop project illustrates how difficult it is for Embraer to find new opportunities in the commercial aircraft segment without going head-to-head with Airbus and Boeing, a challenge company officials fear they would lose soundly. Before Boeing pulled out of the deal in 2020, there was talk of the companies jointly developing a new narrowbody larger than the E2. Embraer’s highly skilled engineering workforce also was seen as a natural fit if Boeing moved forward with development of a new midmarket airplane.

But as a standalone business, Embraer’s next move is unclear. If the E2 cannot reach a broader base of operators, the company risks being stuck in a relatively small niche with highly limited access to the U.S. market, given that none of the E2 versions are compliant with scope clauses in U.S. pilot contracts that limit the capacity and weight of regional airliners.

The company’s pre-Paris briefings, which usually take place in Brazil, were held instead at OGMA, a heavy maintenance facility in Portugal that is majority-owned by Embraer. OGMA performs maintenance on Embraer-­built C-390 military transports and last October was designated the first maintenance, repair and overhaul (MRO) partner for E-Jet E2 aircraft in Europe, the Middle East and Africa. OGMA plans to begin servicing Pratt & Whitney PW1000G engines that power the E2 in 2027.

Embraer’s decision to showcase OGMA reflects the growing role of the aftermarket in its business. The OEM’s services and support sales grew 12% last year and now account for 28% of total revenue, up from 19% five years ago. That has provided a cushion against softness in other parts of the business. Embraer also is expanding capacity at its aftermarket facilities in the U.S. (AW&ST May 8-21, p. 42).

Meanwhile, the backlog at the executive jets unit is swelling, bolstered by a recent order from U.S. fractional operator NetJets for as many as 250 Embraer Praetor 500 midsize jets worth up to $5 billion. Embraer’s business jets are sold out into 2025, and it is taking orders for 2025-26 deliveries.

But hitting the $8 billion revenue target also would require a sizable increase in sales of E2 airliners. JP Morgan estimates the company will deliver 70 commercial aircraft this year, up from 57 in 2022 but far below the peak of 160 in 2009. Commercial aircraft sales made up about one-third of Embraer’s revenues last year, down from 47% in 2018.

The E2 faces stiff competition from Airbus’ A220, and scope clauses forced Embraer to delay the rollout of its smallest E2, the E175. So far, the only E2 sale in North America has been to Canada’s Porter Airlines, which has ordered 50.

Embraer also is seeking a bigger foothold in China, where it produced ERJ145 regional airliners and Legacy 650 business jets for 13 years under a joint venture that was canceled by the Chinese government in 2016. In April, Gomes Neto accompanied Brazilian President Luiz Inacio Lula da Silva on a state visit to Beijing but left with no firm orders—although in a memorandum, China pledged that its airlines would cooperate with Embraer.

In the nearer term, Embraer is dealing with combustor degradation in Pratt PW1000G engines that has forced the grounding of some E2s (AW&ST May 22-June 4, p. 16). Embraer officials say the E2s are experiencing those problems at only a quarter of the rate seen in Airbus A220 and A320neo aircraft powered by similar engines, in part because the E2 airframe is lighter and stresses the engines less. Pratt is expanding its MRO capacity until it can implement a final fix for the technical issues in late 2025. “I believe we will survive this situation together,” Gomes Neto says.

While Embraer is clearly on better financial footing, some industry veterans say the company still needs a partner with deep pockets to help it fund development of future platforms. But Gomes Neto does not hesitate when asked if he is happy the deal with Boeing fell through. “Of course I am,” he tells Aviation Week. “I worked very hard to make that deal happen, but after they took that decision, if I look backward, yes, I’m happy. It’s much more fun to manage this company with commercial aviation than without it.”