Embraer has warned of lower profit margins and delivery rates in its commercial airliner business for next year, when it begins the process of integrating production of the E190-E2 into its current E-Jet line. Speaking during the company’s May 2 first quarter earnings call with securities analysts, Embraer CEO Paulo Cesar Silva expressed caution in his 2018 outlook, suggesting financial uncertainties associated with the shift from producing conventional E-Jets to the new E2s.
“So we still have to wait a little bit more in terms of our projected deliveries. However in terms of margins, I think we should expect lower margins in Commercial Aviation in ’18 versus 2017, which is still a very good margin.”
Silva added that margins should rebound in 2019, after the company resolves any inefficiencies associated with the transition from the E1 to E2.
During the first quarter of this year Embraer delivered 18 E-Jets and continues to forecast between 97 and 102 total deliveries for the year. Silva cited “good activity” in the U.S. and globally in terms of the current E175 but said that next year carries “uncertainties.”
In terms of the program’s production plan, Embraer has taken what Commercial Aircraft COO Luis Carlos Affonso characterized as a conservative approach, first building E1s on the so-called hybrid production line to limit risk of introducing the E2s onto a newly reconfigured workstation arrangement. The company plans to start assembling the first production E190-E2 some time during the second half of this year. Although Affonso said the company has decided how many production airplanes it plans to build during the first year, he chose not to reveal the rate, saying only that, again, Embraer will not risk a too ambitious approach.
