Embraer Executive Jets Notes Strong Backlog As EBACE Opens
Embraer Executive Jets has received a boost in orders from first-time buyers, which make up 38% of Embraer’s order backlog for business jets.
The market is stronger than ever, Michael Amalfitano, Embraer Executive Jets CEO, said in a pre-EBACE briefing with The Weekly of Business Aviation.
“So we’re pretty excited to see this base of the marketplace growing,” Amalfitano says. “If I was to sum up the marketplace, it’s robust; it’s resilient. It’s clearly a market that’s emphasizing the things that are important to these first-time buyers in health, safety, privacy and being able to go where they want to go versus the travel bans of commercial travel being a little bit more restricted as we go through these past couple of years.”
Embraer is returning to the European Business Aviation Conference & Exhibition with its Phenom 300E light jet and the Praetor 600 super midsize jet on static display.
“We’re seeing not only the benefit that Flexjet brings to the fractional marketplace, but we’re getting a lot of traction, clearly more so domestically so far, but we’ll see Europe follow in terms of corporate flight departments in terms of its international expansion,” Amalfitano says. “So, we’re very excited to have the 300E and the Praetor 600 on display.”
For Embraer buyers, technology and sustainability are exciting developments, he says.
“The things that our planes have in terms of leading-edge technologies and advancements has been a big part of why they have gravitated to our products,” Amalfitano says. “As you know, the market seems to be strongest at its base right now. Whether it’s something as small as the Vision Jet that Cirrus makes all the way through our Praetor 600 up to the super midsize [jets], those segments are very strong driven by the fact that you can’t find a used airplane.”
The percentage of pre-owned fleet for sale on the market is in the single digits, which has helped new aircraft, he says.
Embraer has a strong backlog, Amalfitano notes. The company is selling aircraft for delivery into the third quarter of 2024 across its product lines.
“The strength of the backlogs obviously for across all the [aircraft] families have really gravitated to these customers who say, ‘I want the best aircraft that I can find from the marketplace that gives me the bespoke travel solutions I want to travel mobility, [and the] security and health and safety for my business and family.’ So, we’re getting a big lift off of that.”
Embraer continues its guidance to deliver from 100 and 110 aircraft in 2022, he says. The variance in the forecast is driven by the supply chain. (In 2021, the company delivered 93 business jets, according to General Aviation Manufacturers Association data.)
“You’re trying to create balance in terms of making sure your supply chain can keep up with the demand, because it’s off the charts across all four products―from entry level, light, mid and super-mid,” Amalfitano says.
A frequent question is whether first-time buyers will return to charter and to the commercial airlines, he says.
“We would say no in our case,” Amalfitano says. “We’re seeing that these buyers could always buy an airplane. They always had the wealth to buy their own jet. They may have charter; they may have been in turboprops or helicopter or pistons. They had some interest in activity in aviation and with their wealth they could buy and operate an aircraft, but they never had a reason to do it.”
Now, health and safety issues, sustainability and technology advances are convincing them to buy to protect their company, their employees and families, he says.
New buyers and longer lead times have brought a change in its sales approach.
“We’ve been very active,” Amalfitano says. “We have a greater than 80% stickiness with customers. So, we do a lot of engagement, a lot of collaborative learning in terms of education in that regards, whether that be configurators so they can see and feel and understand their aircraft.”
That is important because new buyers want to receive delivery of their aircraft quickly.
“And with the backlogs, they have to wait,” he says. “So, what are you doing to keep them interested in your brand, educating them about your family, your products―what you can do to support them in terms of service.”
Embraer introduces buyers early to its customer service and support.
“Pretty exciting stuff,” Amalfitano says. “We’re riding the wave like you’d expect us to as an OEM in terms of the strength of the marketplace.”
In response, Embraer is raising production rates, “but you have to be smart about balancing the demand, which is at a peak, with the supply chain, and logistics are at a trough,” he says. “If you’re not smart about how you manage your production rate growth, then you could find yourself in a tough sport with those customers. So, we’re being very smart about how we grow.”
Embraer is closely managing its suppliers, sub-tier suppliers, plant and assembly line. It has employees on the plant floor to make sure aircraft in production are meeting timelines.
“We don’t want to get over our skis just because of the exuberance in the marketplace today,” Amalfitano says. “We want to manage that so we can have pricing discipline, and we can have quality and safety discipline that is critical to the industry.”
In terms of the Russian market and its sanctions, Embraer does not have Russian exposure in its business aviation segment, Amalfitano says, and it has limited exposure as a company.
“You see a little bit of impact, obviously, more logistically because you have to take care of service and parts .... But there’s nothing in terms of customer exposure.”
Overall, Embraer customers are not speculative buyers and are not concerned about the impact of the Russian invasion of Ukraine, inflation and the stock market, he says.
“They’re managing through that,” Amalfitano says. “I think middle America is more impacted by some of the news that we see .... They [Buyers] can sustain a lot of the noise that we see, so I don’t see any real risk as we move forward.”