Embraer aims to invest R$20 billion in Brazil by 2030 to enhance aircraft production and develop new models. CEO Francisco Gomes Neto and CFO Antonio Carlos Garcia announced this plan, highlighting a strong backlog and anticipated growth in commercial aviation. The investment will also focus on eVTOL technology. Recent financing agreements and increased demand for smaller jets are set to support the company’s growth despite the challenges faced in recent years.
Embraer, the Brazilian aircraft manufacturer, has announced a significant investment plan of R$20 billion in Brazil by 2030. This strategic move aims to enhance aircraft production capabilities and initiate the development of new aircraft models. CFO Antonio Carlos Garcia emphasized the positive performance across all units, forecasting a growth trajectory in commercial aviation through 2027.
The company’s growth ambitions were also supported by CEO Francisco Gomes Neto during an event in Brasília, which was attended by President Lula. The investment will extend beyond traditional aviation to include emerging technologies like electric vertical takeoff and landing vehicles (eVTOLs) developed by Embraer’s subsidiary, Eve.
Additionally, Embraer signed financing agreements, including R$2.1 billion from the Brazilian Development Bank for up to 16 aircraft sales to Republic Airways, and R$331 million from FINEP for innovation projects. These commitments reflect the company’s anticipation of robust demand in the coming years despite challenges posed by the pandemic and previous setbacks with Boeing.
Over the past five years, the airline industry faced significant turbulence, particularly due to the pandemic’s drastic impact on air traffic. Embraer’s stalled merger negotiations with Boeing further influenced its market position, leading to a turbulent conclusion of the partnership with Boeing compensating Embraer with $150 million.
In light of these setbacks, Embraer has seen a shift in demand toward smaller aircraft, leading to a more than 220% increase in share value over the past five years. The company’s backlog also surged from $14 billion in 2020 to an all-time high of $26 billion at year-end 2021, indicating strong market confidence in Embraer’s offerings.
The executive aviation sector supported growth during the pandemic, with Embraer securing a deal worth $7 billion for 182 executive jets with Flexjet, demonstrating the demand for its Praetor and Phenom models. The company faces challenges in meeting supply chain demands, but improvements are expected moving forward.
Commercial aviation is anticipated to face hurdles in 2024 due to persistent part shortages, particularly impacting aircraft like the E2, which is currently constrained by a lack of Pratt & Whitney engines. However, Embraer secured a significant order from American Airlines for 133 E175 jets, which further solidifies its market position.
In executive aviation, Embraer recorded a 14% increase in commercial deliveries and a 13% increase in executive deliveries year-over-year by the end of 2024. Furthermore, a recent $650 million bond issuance will extend the company’s average debt maturity, positioning Embraer favorably within the global aviation landscape.
Achieving an investment grade status last year has bolstered Embraer’s financial stability, having only a few Brazilian counterparts in this elite classification. The company last issued a 10-year bond in 2017, which now reflects a positive reception from the market, demonstrating growing investor confidence in Embraer’s ability to manage risk effectively.
Currently, Embraer’s risk premium is nearly aligned with those of global aviation companies, indicating a positive shift in its financial standing as the industry landscape evolves, paving the way for continued growth and investment in the future.
Embraer plans to make a substantial R$20 billion investment in Brazil by 2030 to enhance production capabilities and innovate new aircraft types. Despite previous challenges, including the pandemic and a canceled merger with Boeing, Embraer has witnessed significant market recovery, leading to a surge in share value and a record backlog. Additionally, agreements with key banking institutions bolster the firm’s financial outlook, allowing it to compete effectively in the evolving aviation sector.
Original Source: valorinternational.globo.com
