May 12, 2020 / 11:27 AM / 23 days ago

Embraer blames failed Boeing deal for sharp drop in commercial jet deliveries

SAO PAULO (Reuters) - Planemaker Embraer (EMBR3.SA) said Tuesday that its commercial jet deliveries slumped by more than half during the first three months of 2020 compared to a year ago, blaming the drop on preparations for its failed deal with Boeing Co (BA.N).

FILE PHOTO: The logo of Brazilian planemaker Embraer SA is seen at the company's headquarters in Sao Jose dos Campos, Brazil February 28, 2018. REUTERS/Roosevelt Cassio

Embraer did not mention coronavirus as a factor.

Embraer had hoped Boeing’s planned takeover of its commercial plane division would bring much-needed marketing power to its midsize E2 jets, which have been praised for their fuel efficiency but have lagged in sales. But Boeing pulled out of the deal last month under disputed circumstances.

The numbers are the first glimpse into what is at stake for the world’s No. 3 planemaker as it confronts an unclear future without Boeing. Analysts fear it will struggle to compete with the ever strengthening Boeing-Airbus duopoly.

The results appear to include some order cancellations, something all planemakers have been contending with since the coronavirus pandemic brought the air travel industry to a complete halt starting in the last two weeks of March.

Firm orders for Embraer’s top selling plane - the E175, which seats up to 90 people - fell by 15 jets, not counting the planes that were delivered in the period. Including more flexible so-called “options,” which also fell by 15 jets.

Overall, the order pipeline for the jet stands at 456.

Orders for Embraer’s other commercial plane models remained the same.

Embraer had no immediate comment on the apparent cancellations.

Embraer’s numbers were low even considering it was the first quarter, usually the slowest of the year. In a securities filing. The company delivered 11 commercial jets in 2019 and 14 in 2018.

It said deliveries had been “negatively impacted” by the conclusion of the carve-out process in January to have everything ready for Boeing to close the purchase.

Embraer in January sent its workers home for two weeks and suspended production to prepare for the Boeing takeover.

The company said its backlog, a gauge of future revenue, stood at $15.9 billion, compared with $16.8 billion three months ago.

Executive jets also fell slightly to 9 deliveries from 11 a year ago.

Reporting by Marcelo Rochabrun; Editing by Bernadette Baum and Nick Zieminski

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