Covid-19 opens window for Embraer and customers probe anticipate delivery of jets

Not everything involving covid-19 is bad for Embraer. The company, which is racing against time to adjust its operations after the failure of the boeing deal, found the pandemic a window of opportunity.
The evaluation of the company's executives, in line with the analysis of experts, is that the pandemic has strengthened in the market the space for smaller aircraft, a segment in which the Brazilian has a strong global presence.
According to Ricardo Carvalhal, Director of Sales Engineering at Embraer's executive jets division, customers are even probing the company to anticipate deliveries. "Our customers remain committed. Some are consulting us to receive their planes before the deadline. We had no cancellations in the executive jet sector, just a few postponements," Carvalhal said.
Embraer executives participated in a panel on the Brazilian company at the Farnborough Aeronautical Show. Traditionally in the UK industry, the event is being played online because of covid-19.
With demand for international flights close to 2% of what it was before the pandemic, manufacturers such as Boeing and Airbus face a severe crisis. Embraer, however, was able to find a space in the market, according to the head of marketing and strategy of the company's commercial division, Rodrigo Silva and Souza.
In the presentation, Souza pointed out that smaller jets were more resilient in the United States during the crisis. "This also happened after the financial crisis. We see that the segment of smaller aircraft is more used and has more consistent recovery," he said.
The recovery of the air sector after the pandemic began to occur in regional transport, especially in Europe and China, with the decline of the curve of new cases of coronavirus.
Souza argued that the regionalization of air transport will be an important trend for the coming years. "A more connected domestic market tends to emerge after the crisis. We see a drop in airline growth levels. With the industry becoming smaller, companies will have to seek to gain market share and become more efficient," he said.
Souza brought E-Jets numbers in some companies during the crisis. KLM, for example, used 80% of its E-Jets at the end of April 2020 versus 14% of Boeing 737-NG. In June, the percentage of use of embraer's model was 98% against 29% of 737. At Japan Airlines, the scenario is similar, with E-Jets using 97% in April and 71% of 737-NG, going to 100% and 81%, respectively, in June.
"The impact on E-Jet is much smaller. These figures suggest to us that smaller planes will be considered key to any crisis that reaches the sector. We know that we are in a cyclical sector and soon we will see other crises. We hope not so serious," he said.
Optimism, however, does not take away the warning signal. Embraer ended the second quarter with the delivery of 17 jets, four commercial and 13 executives (9 light and 4 large). The portfolio of firm orders to be delivered (backlog) at the end of June totaled US$ 15.4 billion. On Monday, 20, the company attributed the lowest delivery of commercial aircraft and executive jets in the second quarter to the pandemic. In the same period last year, the company announced 51 jets and backlog of US$ 16.9 billion.
According to data from the International Air Transport Agency (Iata), the crisis is still serious. Industry demand (measured in revenue per passenger/km, or RPK) fell 91.3% in May compared to the same period last year. In April, however, the drop had been even higher, 94% compared to the previous year.
Segregating only the domestic market, demand fell 79.2% in May compared to the previous year. In April, the annual decline was 86.2%. The number reinforces the signalation of the resumption of the sector via the domestic market.
With international demand on the ground, the giants had to move. Also at the event, Airbus President Guillaume Faury designed a difficult scenario for defining investments. On the one hand, according to the executive, there is a signal of need for smaller contributions because of the serious impact of covid-19 on commercial aviation. On the other hand, the segment has been heavily pressured to pollute less, something that requires robust input in technology to achieve the zero carbon emission target by 2050.
According to the executive, Airbus can not just expect the scenario to improve. "We have to make the right decisions to adapt the company to this new scenario," he said. According to Guillaume Faury, the company will have to absorb the impact of the pandemic in the short term to reach a point of stability again. The mission, however, will not be easy and Faury said the group may even have to go back a decade in terms of size to get through the crisis.
On another panel, Boeing Vice President Mike Delaney came out in defense of the airline industry and called for more attention from governments around the world. "Legislators need to understand that airplanes do not transmit diseases," he said, citing aircraft safety tools that make them a safe means of transportation during the pandemic. The speech comes on the heels of severe air traffic restrictions in several countries.
The farnborough aeronautical show schedule runs until the 23rd. One of the lectures on the event schedule is that of the new president of Embraer's commercial division, Arjan Meijer, who took office in June. The market is waiting for clues about what the future of the airline's commercial sector will look like after the failure of the deal between the Brazilian company and Boeing. The panel with the executive is scheduled for the 22nd, at 12:00 p.m., Brasilia time.