Following Solid 2013, Embraer’s Curado Shuns Complacency

 - February 26, 2014, 1:17 PM
Embraer CEO Frederico Curado (Photo: Embraer)

Embraer’s three-quarter share of the U.S. regional jet market last year might have looked impressive to investors and analysts, but judging by some of the commentary during the company’s quarterly earnings briefing on Wednesday, it apparently didn’t satisfy CEO Frederico Curado.

“We cannot rule Bombardier out of the game,” said Curado. “They are there; they are a strong company…Instead of celebrating that we got three quarters of the market, [we should consider] we lost a quarter of the market to them.”

By the end of the year, Embraer had collected firm orders for 349 new E-Jets worldwide, including 200 for the new E2 model, the re-engined version of the airplane expected to reach the market in 2018. The performance increased total sales of the E-Jet to some 1,400 since its launch order in 1999 and helped boost Embraer’s total backlog by 46 percent to $18.2 billion—its highest level in five years.

Curado, however, made sure not to show any sign of complacency, even while expressing a level of skepticism in the ability of the competition to meaningfully erode Embraer’s share of the market.

“We have to watch how the Russian Superjet performs outside the Russian environment,” cautioned Curado. “We have to follow the operation in Mexico to see how they’re really prepared to face a tough airline environment of high frequency, high dispatch reliability…So we feel good about the [current] E190’s ability to compete against the Superjet and we feel really good about the E2’s ability to compete against it…same thing with the Chinese…We respectfully believe they will have some difficulty selling the [ARJ-21] abroad in large quantities.”

Curado appeared to hold more regard for competition potentially posed by the Mitsubishi MRJ, although, again, not without a proviso. “On paper the airplane is more in line with our 175 enhanced and our 175 E2,” he conceded. “But with the new delay they announced last year, they will not come into the market until 2017. So the big advantage that they would have had, which is early access to the market, is pretty much gone.”

In response to a question about the production transition from the current E-Jets to the E2s, Curado alluded to “a second wave” of orders resulting from option conversions by U.S. airlines in 2016 and 2017. This year planning to deliver between 92 and 97 E-Jets, compared with 90 last year, Embraer projects “at least” a book-to-bill ratio of 1:1 in 2014, said Curado, and a similar performance next year.