Embraer’s C-390 Braces for Additional Cuts

 

KC-390 Flight Demonstration at Paris Air Show 2019. Image

After being pummeled in 2020 by the pandemic, Embraer began to bounce back in 2021. For 2021, Embraer reported sales of $4.2 billion, up 11 percent from the $3.8 billion reported in 2020.  The company posted a loss of $44 million, compared to a loss of $732 million in 2020.  The improved results were thanks to a burgeoning recovery in the company’s business jet operations.

However, in the defense market, the effects of the pandemic are still being felt, most notably on the firm’s flagship C-390 Millennium transport program.  In February 2022, the Brazilian Air Force reached an agreement with Embraer to reduce the size of the service’s C-390 order to 22 aircraft, including the four aircraft already delivered. The Air Force had ordered a total of 28 C-390s in 2014. However, the service began negotiations with Embraer in April 2021 aimed at reducing the order to 15 units, citing budgetary restrictions that were exacerbated by the COVID-19 pandemic and related economic difficulties. A compromise was reached for 22 units, with deliveries stretched to 2034 to minimize the impact on the Air Force’s budget.  However, according to a May 2022 report on Aviacionline, further cuts could be on the horizon, as the Brazilian Air Force is again looking to cut the total to 15 units.   Despite the blow on the home market, Embraer also holds letters of intent for 32 C-390s from other customers and is in the process of converting them to firm orders.

One reason for the cuts is that the Brazilian Air Force wants to prioritize its F-39 fighter procurement. Fortunately, Embraer also has a key role in this effort. Under the manufacturing plan for Saab’s Gripen NG – named the F‑39 in Brazil – Embraer received a significant technology transfer package from Saab.  The company is actively involved in finalizing the single-seat F-39 aircraft’s design and will develop with Saab the two-seat F-39 variant in Brazil.  A production line has been established at Embraer’s Gavião Peixoto industrial facility.  Deliveries of the 36 Brazilian Air Force Gripen NGs are underway and are scheduled for completion in 2024, though this will likely be stretched.  Saab is producing the first 13 aircraft. Embraer is assembling the Air Force’s next eight aircraft in Brazil, though Saab still performs some initial production work on these aircraft. The remaining 15 Brazilian Gripens are to be wholly manufactured by Embraer. In April 2022, four more aircraft were added to the order, expanding the fleet to 40 aircraft.  At the same time, it was reported that the country is mulling another large order of 30 more aircraft.

Longer term, the company expects that the current war in Ukraine will spur interest in defense products such as the C-390 and A-29 Super Tucano.  As many nations re-evaluate their defense needs in the wake of the conflict, the longer-term outlook for products such as this should grow.

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About Richard Pettibone

A military history enthusiast, Richard began at Forecast International as editor of the World Weapons Weekly newsletter, eventually moving to the company's premier newsletter service, World Aerospace & Defense Intelligence (WADI). Richard is the current editor of the Defense & Aerospace Companies, Volume I (North America) and Volume II (International) services. The two books provide detailed analyses of major aerospace and defense contractors. As a contributor to Aviation Week & Space Technology's 2005 and 2006 Aerospace Source Book, he authored the Prime Contractor & Major Manufacturer profiles. Find out more at www.forecastinternational.com

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