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Embraer Delays E175-E2 Until 2023

By Alicia Arizpe | Wed, 08/05/2020 - 12:48

Brazilian planemaker Embraer reported losses for 2Q20 as it grapples with the effects of the COVID-19 outbreak in the global aviation industry. The company also delayed the launch of its E175-E2 until 2023 due to sharp reduction in demand for air travel.

The COVID-19 outbreak had a severe impact in the entire aerospace supply chain. The two largest planemakers, Boeing and Airbus, reported losses in their commercial aviation programs during 2Q20 as the sharp decrease in demand for air travel led airlines to cancel or defer airplane orders. In its 2Q20 report, the third largest planemaker in the world, Embraer, reports a similar situation for its commercial aviation business unit, which saw losses of US$91.1 million. Moreover, the company faced further credit losses due to COVID-19 amounting to US$16.1 million, which together with other financial hurdles left the company with a net loss of US$198.8 million for the period.

Known mainly for its executive jets, Embraer also had a strong venture in commercial aviation that faced trouble after a partnership with Boeing collapsed earlier this year. This joint venture would have given Boeing 80 percent of Embraer’s commercial aviation unit and allowed the Brazilian planemaker to focus on its business and defense divisions. The US$4.2 billion agreement, penned in February 2019, was seen as a response to Airbus’ earlier acquisition of Bombardier’s C-Series but Boeing backed down from it after both companies failed to meet an April 24 deadline. While at the time Boeing claimed that the Brazilian company failed to meet the necessary conditions to continue, Embraer argued that US company had backed down due to the financial troubles caused by the latter’s crisis concerning the Boeing 737 Max.

The COVID-19 crisis posed a further setback to Embraer’s commercial division, which now announced a delay on its E175-E2 program that would upgrade the first generation of E175 jets, a family of narrow-body, twin-engine aircraft popular in the regional airline segment. Embraer moved the E175-E2 timeline until 2023 but believes that it “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.”

Embraer closed its second quarter with four commercial jets and 13 executive jets deliveries and a US$15.4 billion strong backlog. Deliveries for the period fell year-on-year as the company had paused its commercial aviation division pending Boeing’s now-cancelled acquisition. This pause caused a 61 percent contraction in revenue for a total of US$537.2 million. Embraer aircraft are used in Mexico for regional flights by Aeroméxico, which operates 47 E190 and nine E170.

Alicia Arizpe Alicia Arizpe Senior Writer