Order bonanza lifts Brazilian manufacturer, although continuing difficulties at US Airways take gloss off record quarter
With a launch order for 15 Embraer 175s from Air Canada, a letter of intent from Ecuador's TAME for seven Embraer 170/190s and a likely China Eastern Airlines deal for 10 Harbin Embraer ERJ-145s, the Brazilian manufacturer is ending the year strongly.
But US Airways' continuing difficulties took the gloss off a record third quarter, which saw Embraer's net sales more than double over the same period last year, to $937 million, and net income increase almost fivefold, to $114 million. Higher deliveries - 28 ERJ-145 family aircraft and 13 Embraer 170s - drove the increase. But a rise in inventories and accounts receivable tied to US Airways' bankruptcy pushed the company's net cash down 27% from the previous quarter to $220 million.
Although Embraer 170 deliveries under an 85-aircraft order were suspended when US Airways' filed for Chapter 11 bankruptcy protection in September, Embraer continues to provide temporary financing for seven of the 22 aircraft already delivered.
US Airways is paying the leases on time and is not in default, says Antonio Luiz Pizaroo Manso, Embraer chief financial officer.
In addition, four of the 14 aircraft that were scheduled for delivery to US Airways this quarter have been completed and painted and are being held in inventory pending the outcome of the airline's reorganisation. The aircraft still in production have been redirected to other customers, Manso says.
Despite the new orders booked since the end of the third quarter, Embraer is sticking to its reduced forecast of 145 commercial-aircraft deliveries for this year and next. Delivery of the 15 firm plus 15 option 73-seat Embraer 175s to Air Canada will begin next July, ahead of the November delivery of the first of 45 firm and 45 option Embraer 190s ordered in September.
TAME, meanwhile, plans to acquire two Embraer 170LRs and one Embraer 190, plus four options. Manso also reveals the Brazilian and Chinese presidents, meeting earlier this month, agreed "a good intention" to complete a contract for 10 Harbin Embraer ERJ-145s for China Eastern.
This will provide a lifeline to the Chinese assembly line, which will deliver the last of six aircraft to China Southern in January. The new deals have yet to be added to the manufacturer's backlog, which stood at 146 ERJ-145 family aircraft and 289 Embraer 170/190s.
GRAHAM WARWICK / WASHINGTON DC
Source: Flight International
