Embracing Embraer: small is beautiful in corporate aviationhttps://en.majalla.com/node/321963/business-economy/embracing-embraer-small-beautiful-corporate-aviation
Embracing Embraer: small is beautiful in corporate aviation
Private jets are in demand as status symbols and mid-size planes have taken off in popularity, helping the São Paulo firm show how the Global South can compete with the giants of the industry
Embraer
Embraer's Praetor jet
Embracing Embraer: small is beautiful in corporate aviation
Brazilian aircraft manufacturer Embraer this week celebrated its 55th anniversary with reason to cheer, with an order book approaching 400 planes.
Founded in August 1969 by the Brazilian state primarily to service the country’s military air force, it was privatised 25 years later and became a publicly traded company in 2000. Today, it is the world’s third biggest aircraft maker after Boeing and Airbus.
In the world of commercial aviation, Boeing and Airbus are by far the biggest players, but each have faced a series of problems relating to supply chains, technical and operational issues, legal disputes, and rising costs.
Delivery schedules have been missed, customers have been left angry, and revenues have fallen. Meanwhile, in Latin America, Embraer has quietly been making progress as a supplier to airlines and air forces of all kinds across the world.
A growing reputation
Although its name is not widely known, it is perhaps most synonymous with its smaller executive jets are favoured by business leaders, celebrities, politicians, royals, and high net worth individuals.
Embraer's executive jet 100EX
At its factories in São Paulo, the company—which employs around 20,000 people—produces larger mid-size jets capable of covering long distances with moderate maintenance costs.
According to Bloomberg, it offers “high-quality planes at competitive prices, allowing it to establish itself in the global aviation market despite its smaller size compared to major manufacturers”.
In the world of commercial aviation, Boeing and Airbus are by far the biggest players, but each have faced a series of problems
Embraer wants to generate revenues of $10bn by 2030, according to its chief executive, Francisco Gomes Neto, who revealed commercial negotiations with several airlines, including Vietnam Airlines, for the purchase of 20+ aircraft for domestic flights.
The company hopes to sell more of its E2 planes. These are a direct competitor to the Airbus 220A made in Toulouse, France. Launched two decades ago, Embraer's has already sold around 2,200 of its E-jets to-date.
In recent weeks, American Airlines has ordered 133 E175s, LOT Polish Airlines has added two E195-E2 planes, and Mexicana de Aviación placed an order for ten E190-E2 and ten E195-E2 craft.
Typically, the company delivers 72-80 mid-size passenger jets and 125-135 executive jets annually. The latter sell for more than $20m.
Expected revenue this year is around $6bn, with Embraer reporting a 20% increase in its order book for various types of commercial aircraft during the second quarter of 2024.
The skies of São Paulo
Private aviation has grown in recent years, attracting those who prefer to pay for exclusivity, flexibility, and status, rather than be one of a large number of passengers taking fixed schedule flights.
A visitor exits an Embraer E2 Profit Hunter E195-E2 during the Farnborough International Air Show near London on July 23, 2024.
It has now sold 1,000 executive jets in 70+ countries. Social, economic, security, and fashion factors have driven the trend.
When sports stars, film stars, artists, corporate titans, and royals are seen boarding or disembarking from private jets, others want to do the same. Celebrities form one revenue stream, corporate and government clients form another.
In a way, Embraer is emblematic of Brazil's rise from poverty and its development into a major industrial nation within the BRICS bloc and the G20. A fast-growing economy, it is now the ninth largest in the world, overtaking Canada.
In the second quarter of 2024, Embraer reported orders worth $11.3bn, a 170% increase over the first quarter of 2024. Last month, it announced a further order with the Netherlands and Austria for nine low emission aircraft.
According to Bloomberg, its focus on smaller and mid-size craft "has allowed the company to withstand, survive, and even thrive in the competitive market, despite the crises that have rocked the aviation industry".
Competitors are keeping pace, including China's Comac with its C919 aircraft, and Russia's Irkut Group, but so far Embraer appears to have maintained its competitive edge.
Portugal and Morocco
Embraer already has operations in Portugal and is considering strengthening its industrial and technical partnership with Morocco, exploring opportunities for cooperation in civil and military aviation industries.
According to the Arabian Defence website, this includes "seeking local partners and developing joint projects that could contribute to strengthening the civil and military industrial and technological infrastructure".
In the second quarter of 2024, Embraer reported orders worth $11.3bn, a 170% increase over the first quarter of 2024
A Brazilian military transport aircraft, the model KC-390, landed at a military airbase in Morocco's capital Rabat a few weeks ago. It will be used for technical trials and demonstrations to potential customers.
At the end of April, Brazil's Foreign Relations Committee approved a "military and defence cooperation" agreement with Morocco, which includes the transfer of technology.
According to local media sources, "the supply of Brazilian aircraft to Royal Air Maroc is a step towards broader cooperation in the aviation industry between the two countries".
A hangar of the Brazilian aircraft manufacturer Embraer showing an E195-E2 jet under construction north of Sao Paulo, on May 30, 2022.
Last year, Morocco exported more than $2bn worth of aircraft parts and aims to attract more manufacturers, while Embraer is looking to expand into the Middle East and North Africa, with manufacturing units in Portugal and Morocco to produce mid-size jets.
Brazil has welcomed the idea of a South Atlantic Alliance, proposed by Rabat, to promote economic integration and development in a vast market where traditional and emerging powers compete.
Challenged giants
The Boeing-Airbus duopoly has had significant problems with sourcing and supply chains, so for now Embraer remains committed to mid-size jets.
The Wall Street Journal reported that the American and European firms had "some planes needing internal parts, while others need engines that have not been delivered from factories on other continents".
Boeing, which employs 170,000 people around the world, has also had to manage the fallout from safety fears over some of its planes after a panel blew off a 737 Max, its short-haul aircraft, in January.
Kelly Ortberg, from aircraft electronics supplier Rockwell Collins, took over as Boeing's new boss earlier this month, with a mission to save it, after second-quarter losses of $1.44bn. Deliveries are late and revenue is down 15% to less than $17bn.
Middle East market
Several airlines are now looking to diversify their orders to avoid late delivery. Royal Air Maroc wants to buy 200 new aircraft in preparation for the 2030 World Cup, most of them from Boeing, but it is now considering options from Airbus and Embraer to make up for any shortfall in Boeing deliveries.
Kelly Ortberg took over as Boeing's new boss earlier this month with a mission to save it, after second-quarter losses of $1.44bn
Airbus also has problems, with net profits down 46% to €825mn in the first half of the year, but the company expects to deliver 770 commercial aircraft by the end of 2024, and is now in talks with Saudi Arabia's Public Investment Fund (PIF) over a new order.
Embraer's Praetor jet
PIF wants to buy Boeing 777 and Airbus 350 jets for a new cargo airline, Bloomberg News reported this week, adding that the cargo-hauling operation would serve the startup Riyadh Air and the national flag-carrier, Saudia.
On the sidelines of the Farnborough Airshow in the UK, Saudi Arabia's NAS placed an order with Airbus for 160 commercial aircraft, including 30 A330 neo and 130 A320s.
Arab countries have become significant partners in the global aviation sector, as the industry's order map changes. Embraer will be keen to secure its share of this new business for smaller jets to provide more flexible ways of flying.
