Embraer counting on regional jet order
Oct. 25, 2012, Sao Paulo, Bra. - Brazilian planemaker Embraer , whose backlog has fallen to a six-year low, is counting on a regional jet order in the coming months to maintain production levels in 2013 steady with this year, executives said on Wednesday
October 25, 2012 By Rueters Brad Haynes and Cesar Bianconi
"We're still shooting for stable production of E-Jets next year," Chief Executive Frederico Curado said on a call with analysts, although he said not all of Embraer's commercial jet capacity for next year has been earmarked for clients. Embraer is the world's third-largest commercial planemaker.
"We do have open slots for the back end of next year, so those orders have to materialize in the next six months or so," Curado said.
He said a rush of executive jet deliveries to end the year would help the planemaker hit its full-year revenue targets. The weak demand and canceled orders that have drained the company's order backlog have led analysts to warn Embraer may have to cut back the pace of production next year.
Delta Air Lines is the U.S. carrier most likely to provide relief with a major regional jet order this year, Curado said. Delta executives confirmed on Wednesday that they were planning to decide by the end of this year on bids from Embraer and Canadian rival Bombardier to replace their 50-seat fleet with larger regional jets.
That order and other prospects among U.S. airlines have become increasingly crucial for Embraer as a fragile global economy weighs on European airlines and business jet demand.
"The risk is a little bit of downside from our production level this year," said Curado.
Embraer shares fell 1.4 percent in Sao Paulo trading after the conference call to discuss quarterlyearnings.
After years of diversifying its business away from the North American market, major sales campaigns and struggling carriers in the United States are once again defining Embraer's fate.
Embraer missed estimates for its quarterly profit on Tuesday as it helped to restructure aircraft financing for U.S. regional carrier Chautauqua Airlines, a subsidiary of Republic Airways Holdings.
The company's net cash position also shrank in the quarter as American Airlines and its parent company, AMR Corp , renegotiated the leases on its fleet of regional jets. Embraer had made provisions for the expense in the fourth quarter.
Chief Financial Officer Jose Antonio Filippo said Embraer has about $600 million in financial guarantees to such clients off its balance sheet, but the company did not expect such obligations to impact results in coming quarters.
"We don't see this as something that would be showing up in other situations," Filippo told reporters on a separate conference call.