The failed deal with Boeing and the covid-19 pandemic are making life difficult for the aircraft manufacturer. Embraer negotiates for financial aid and sets operational priorities.
The cancellation of the deal came at a really unfortunate time for Embraer. In the middle of the corona crisis, Boeing cancelled the takeover contract for the Brazilian aircraft manufacturer’s passenger airline division about a week ago. This means that Embraer will lose 4.2 billion dollars at the very moment when liquidity is more important than ever.
In order for Embraer to survive the current crisis, the company is negotiating with the Brazilian development bank BNDES for aid, according to local media. According to the media, the state-owned bank, which is already a minority shareholder in the aircraft manufacturer, could increase its stake. Another option is loans. There is speculation that the amount of the loans could be between 900 million and 1.4 billion euros. Embraer CEO Francisco Gomes Neto said last week that the bank had reserves of some 900 million euros for 2020.
Turboprop at least postponed
Meanwhile, Embraer is also working operationally on new future planning. John Slattery, head of the passenger airline division spun off in the deal with Boeing, said in an online conference according to Aviation Week magazine that they are not looking for a new partner. They are reversing the work on the separation in order to be able to use synergies with their own defence and business jet divisions again. For example, IT systems, facilities, access systems and personnel have already been split up.
Slattery made it clear that the development of a new turboprop aircraft is not an issue at present. «I’m not saying we won’t build it,» he said. But in the current situation one has to be pragmatic and therefore he does not see this project on the horizon. Slattery explained that Embraer is currently spending big money, but in March he took out a loan of the equivalent of 550 million euros.
Embraer builds both generations
Slattery expects that aviation will take three to five years to recover from the corona crisis. However, short routes and the corresponding aircraft would probably recover faster than long-haul. Aircraft with 75 to 100 seats, such as Embraer’s own E175 and E190 models, therefore have an advantage, according to the Embraer manager.
The company is prepared to produce both the new generation E2 jets and the previous generation. «Whatever the market wants, we will build the aircraft,» said Slattery. For example, the conventional Embraer E175 could last longer in the U.S. because the new E175-E2 has not yet met the certified dimensions. Currently, the company is ruthlessly focusing on liquidity, said Embraer’s passenger airline boss. «Sell more E1, sell more E2 and make money for the company. That is my focus.»