Embraer will push back the planned entry-into-service date for its E175-E2 until 2023, as the Brazilian manufacturer contends with weak airliner demand in the wake of the COVID-19 pandemic.
The successor to its most popular E-Jet variant, which has already been delayed multiple times over concerns about pilot contract scope clauses in North America, will see its planned entry postponed until 2023 due to “current market conditions for commercial aviation as a result of the COVID-19 pandemic,” the company announced Aug. 5.
Despite the popularity of the original E175, the E175-E2 has not yet recorded any orders from airlines, while the type’s larger siblings—the E190-E2 and E195-E2—have recorded a combined 173 firm orders, all to customers outside North America. Despite the repeated delays, Sao Paulo-based Embraer said it expects the E175-E2 will still be available “with more than adequate time to enter into service in the commercial aviation market to meet market demand for the jet.”
The move to push out the type’s development follows a historically weak period for Embraer, which posted an adjusted net loss of $198 million in the 2020 second quarter (Q2), as weakness in its commercial segment offset resilience in its defense and executive jet businesses. Total revenues fell by 61% to $537 million, harmed by an 82% plunge in commercial revenues.
The OEM delivered just four commercial jets in Q2—two E175s and two E190-E2s—compared to 26 aircraft in Q2 2019. The latest deliveries bring Embraer’s total for the first half of the year to just nine jets, compared to 37 commercial deliveries in the first six months of 2019.
Still, Embraer executives sounded optimistic about the state of the regional jet business and the future popularity of E-Jets during the company’s earnings call, noting that 90% of U.S. airlines’ combined E175 fleet returned to active service in July, compared to 75% of Bombardier CRJ-900s and 61% of total narrowbodies. The company has 314 outstanding firm orders in its commercial backlog, and while it has deferred some upcoming deliveries, it has yet to record a single cancellation as a result of the pandemic.
“We are cautiously optimistic for the future, as we have seen the rebound in domestic flight activity in several markets around the world,” Embraer CFO Antonio Garcia said. “We see a fast recovery path for domestic RASK [revenue per available seat kilometers], which we believe is going to impact our regional and E-Jet products.”
V-Shape Recovery For Bizav?
Embraer’s executive jets business fared slightly better, but revenues still declined by 49% year-over-year to $150 million. The company delivered 13 business jets in the June quarter, comprising nine light jets and four large jets. Executives said they are seeing a strong rebound in executive jet travel, noting that preliminary data shows global business traffic recovered to 10-15% below 2019 levels in July, after falling by 65% in April.
“These figures give us confidence of a V-shape recovery in this segment of the market,” Garcia said.
Defense Revenue Rises
Embraer saw continued strength in its defense business, which reported revenues of $188 million, up 33% from the same period in 2019. The company delivered the third KC-390 tanker-transport aircraft to the Brazilian Air Force (FAB) in June, while five more of the type remain under assembly, with four intended for delivery to the FAB and one for the Portuguese Air Force. The Nigerian Air Force, meanwhile, received its first Super Tucano during the quarter, while the Brazilian Army received its final six Saber M60 air defense radars.
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