Embraer's Book-to-Bill Target Under Threat as Sales Slump

 - July 31, 2012, 3:17 PM
Embraer continues to project E-Jet output for next year will match this year's total of 110. (Photo: Embraer)

While today’s announcement of a firm order for six E190s from Venezuela’s Conviasa Airlines might have helped buoy Embraer’s general outlook, the deal hardly assuaged concerns among financial analysts over an airliner backlog that at the end of the second quarter had shrunk to a six-year low. On March 31 this year it stood at $14.7 billion, and over the course of the second quarter it dropped to 200 airplanes worth $12.9 billion. At its peak, at the end of the third quarter of 2008, it had reached $21.6 billion.

The company nevertheless continues to hold its position on production rates. This year Embraer plans to build 110 E-Jets and, according to CEO Frederico Curado, won’t change that output in 2013 unless anticipated sales through the end of this year fail to materialize.

Speaking during the company’s second-quarter earnings call with investment analysts today, Curado acknowledged, however, that reaching its goal of a 1:1 book-to-bill ratio this year looks more “challenging” than it did three months ago. Still, he said he remains optimistic about the long-term prospects for its airliner business, despite recent economic “headwinds” that resulted in orders for just five E-Jets during the second quarter from China’s Hebei Airlines.

So far this year Embraer has sold 17 E-Jets and renegotiated a contract that resulted in the cancellation of five others. Its backlog of 200 airliners now accounts for less than two years of production at its current pace.