Embraer Aims To Strengthen International Footprint As It Grows

Embraer CEO Francisco Gomes Neto arranged time for an Aviation Week interview on the sidelines of the International Air Transport Association Annual General Assembly in New Delhi. He brought team members Arjen Meijer, CEO of Embraer Commercial Aviation, and Raul Villaron, head of Embraer’s Asia-Pacific business, to the meeting with Executive Editor for Commercial Aviation Jens Flottau.

AW&ST: We are doing this interview in India, one of the markets on which you are putting a lot of hopes. What are your concrete plans? Gomes Neto: We just opened a subsidiary. We will have government relations, communications, procurement, engineering, sales and marketing for defense and commercial as well. We have 50 aircraft operating in India. In defense, we are participating in the MTA [Medium Transport Aircraft] program, which is an opportunity for between 40 and 80 [C-390] aircraft. We are really working very hard on that program. We also expect to increase our business and commercial jet sales. In the short term, the opportunities are in defense, but we also see them in commercial and business jets. We believe it will be a good market for our eVTOLs [electric vertical-takeoff-and-landing aircraft].

Isn’t a lot of the opportunity gone in commercial, given that IndiGo and Air India are going into a lot of secondary markets with narrowbodies? Villaron: Traditionally, the market was always addressed by large narrowbodies and turboprops. IndiGo is a good case. It is now growing more into [Airbus] A321s, which increases the gap to the turboprops. There was always a gap for something in the middle that could reach longer distances. It was difficult for Embraer to penetrate that market over the years because we did not have a product that delivered the seat cost needed for India. Here, the yields are very low, so to really enter the market you need the right product. While the E1 [series] really had good trip costs, it did not deliver the seat costs. Now we have the E2. We see an opportunity for around 300 aircraft. We just need someone to grab it, and we are talking to the different airlines.

Strategically, you seem to target establishing another big base outside of Brazil. Gomes Neto: Absolutely. Our aircraft already are very international. Our commercial jets are assembled in Brazil, but we buy the wings in Portugal, we buy parts in Poland, a lot of equipment in the U.S. The same for the C-390. But yes, with the opportunities ahead, we need to expand our production capacity, and we want to connect that with new business opportunities.

Poland is a good example. We are talking to them in terms of partnerships. If we win business there in commercial and defense, we can do a lot more things with them. We can use Poland as a hub to increase production of the C-390 and the E2 to supply the European market.

India is another example. As part of the MTA requirement, we need to make at least 50% locally, and we are now working on that plan.

But how many of these projects can you do in parallel? Gomes Neto: For assembly, we won’t have many facilities, and it all depends on the volume. We have to invest more in production, and we don’t want to do that in Brazil. We want to connect that investment with strategic partnerships.

Do you see any weakening of demand because of the slowdown in the world economy? Meijer: We don’t see that yet. Globally, there is still more demand. Airlines are getting more concerned about their available capacity between now and the early 2030s, and where that will come from. The Embraer segment is actually protected even in downturns.

Villaron: There is a fundamental change in the market, which is inflation, and that has a huge impact on low-cost carriers. The paradigm of [having a single type] fleet for [low-cost carriers] is being challenged. How can they make money and grow if a huge part of the market is being eaten up by inflation? A flexible fleet brings a lot of value. We are seeing a segment open up for our aircraft that we have never really been able to penetrate.

Meijer: In the past, the thinking was a lot about complexity, but now people see that 25% lower trip costs give you a lot of operational benefits and yield upside.

And risks are spread with more than one type. Meijer: The point you are making, we hear that from more and more CEOs. Ten years ago, it was all about simplicity and cost. Now it is about putting your eggs in different baskets and resilience against potential risks.

How deep is the impact of the Azul bankruptcy on Embraer? They have 52 more E2s on order. Meijer: This is very fresh. They have been very vocal about new technology and the E2 being the backbone of their fleet. We have to wait to see what the impact is going to be. We have aircraft going directly to Azul, but we also have a delivery stream through the leasing arm. The direct orders are further out, we may have to slide a little bit, but they have time to get through Chapter 11 before we have that discussion.

Is the supply chain still such a big worry or is it getting better? Gomes Neto: We do see improvements. Our first-quarter deliveries were almost 30% higher than last year, more concentrated on business jets. It shows that we are getting parts that we need earlier. We are implementing an initiative we call production leveling, and we could see the first results in the first quarter. We are still struggling with some parts and a few suppliers, but we expect to have a strong second and third quarter and not such a high concentration in the fourth quarter. And next year, we expect to see the first quarter already stronger, with more linearity.

How do you view the impact of tariffs? Gomes Neto: This tariff issue is bringing complexity and costs. The aviation industry has not been used to this in 45 years. We now have to calculate, understand the rules and how they work, how we can mitigate the tariffs. We have people working on that, and I’m sure our suppliers are doing the same. We see some impact for this year, but believe we can mitigate it.

Embraer has always been more cautious with regard to hydrogen and electric propulsion. Seeing the delays that have been announced, do you feel your schedule is still right? Gomes Neto: At Embraer, we are focusing a lot on electric propulsion and eVTOLs. We have almost 1,000 people working on that project. We expect to enter into service at the end of 2027. The next step could be hybrid-electric. Hydrogen is more into the future. We are working to certify 100% of our products for SAF [sustainable aviation fuel] for 2030.

Meijer: We have talked about Energia, [the company’s project to explore sustainable designs to carry up to 50 passengers] and at some point people were seeing Embraer as being a little bit conservative on the timeline. I think now we may be a little bit too progressive. I like the Embraer statement that we have been sharing with the market, which is that the mission drives the architecture. We keep our work on Energia going, and it is taking longer than everyone was hoping five years ago.

Gomes Neto: The strongest focus is on the eVTOLs.

A while ago, you said you could decide on a new commercial, defense or business jet project in 2026. Today, you are not saying that anymore. What happened? Gomes Neto: Our main focus now is to sell the products that we have. But we are studying what could be the next step for Embraer. The teams are making studies—the marketing team, the engineering team—on executive jets, commercial jets and military variants. We try to understand technology development. We invest a lot in fuselage and cockpit technology and so on, to be prepared to decide which way to go.

Meijer: There are a lot of variables to be looked at. You picked it up well that we mentioned 2026, but we need a bit more time. We really believe there is a huge opportunity and shifting momentum on the E2. Historically, we have had several challenges with the Boeing merger and then COVID-19. The commercial aviation market is now seeing what the E2 can contribute.

Gomes Neto: We had a fantastic 2024: [earnings before interest and taxes] above $700 million. We are rated at investment grade by the three agencies, our net debt is close to zero, and we generated $600 million in cash. Financially speaking, we are stronger than ever. We have a plan for the next years. We are focusing a lot on efficiency, so profitability should improve, and we should create more cash with the products that we have. In parallel with these studies, we are ensuring that we have more financial muscle.

Is there a new timeline? Gomes Neto: We don’t have a timeline defined because it will not only depend on us, but also on technology development. We don’t want to go with a product that will become obsolete in 10 years. Our situation is not different from that of the other manufacturers.

What technologies do you mean? Gomes Neto: Engines are one of them. In the case of executive jets, which we are studying as well, it is not only the engines. We need a product that is faster and more comfortable.

You are studying a variety of new defense products. Has any one become more concrete? Gomes Neto: We recently signed the partnership with the Portuguese and Brazilian air forces for a new variant of the KC-390. We are also working on a midlife upgrade of the Super Tucano for the Brazilian Air Force. We continue to sell the C-390. The product is new. It is getting traction in many different countries—Europe, Asia, India, U.S. It is a big opportunity for Embraer to grow in that segment.

Do you really believe you can sell it in the U.S.? Gomes Neto: Yes, we do. We know it is difficult, but we had a really nice and interesting tour there—Las Vegas; Tampa, [Florida]; Washington. We have increased our workforce in the country, and that it is a product that will be assembled in the U.S. We really believe that this product will revolutionize the productivity of the U.S. Air Force, starting with the tanker, but also for other missions.

Are you comfortable with really only having two products in the defense business? Gomes Neto: We have more products. In India, all the air traffic management was supplied by Embraer. Implementation happened in 2019. In Brazil, the same. Its Army surveillance system is also provided by Embraer. We are supplying the system that controls the platforms of the Brazilian Navy frigates. We have other products in defense; they are not as big as the KC-390.

Are your hopes to sell the C-390 to Saudi Arabia still alive? Gomes Neto: Yes, we are still working with them, with Saudi Arabia and many other countries. The decision will not come quickly, but we are in contact with them.

For all of these new projects, you would need partners, be it defense or commercial. Gomes Neto: Absolutely. We have what we call the One Embraer approach, which is interesting for some countries because they can connect business opportunities with development of the local aerospace industry.