What Comes Next For Embraer?

After Boeing and Embraer announced the end of their joint venture plans to cooperate on commercial aircraft yesterday,…

What Comes Next For Embraer?

After Boeing and Embraer announced the end of their joint venture plans to cooperate on commercial aircraft yesterday, it was clear that Embraer felt it was wronged. Although indicating that it would seek damages, the Brazilian aircraft manufacturer was keen to partner with the American giant to sell its E2 jets as the A220 gains in popularity.

The question now is what comes next for the aircraft manufacturer. Photo: Getty Images.

The end of the deal

Embraer claims that Boeing wrongfully terminated the joint venture agreement to get out of its financial obligations with the deal. These obligations have their origins from before the MAX crisis and current global downturn. However, Boeing says that Embraer did not meet some of the conditions leading to termination. Neither party offered more details, but Embraer is claiming for damages– most likely in the form of monetary compensation.

Boeing-Embraer Getty
The end of this agreement has left some bad blood between the two manufacturers. Photo: Getty Images.

The E2 is not selling well

At the end of 2019, an Embraer report showed that the E2 family had not sold well. The larger E195-E2 had 165 firm orders with 47 options and seven deliveries. Meanwhile, the E190-E2 had 27 firm orders with 61 options and 11 deliveries. This left Embraer with a backlog of 192 E2 regional aircraft at the start of 2020 compared to the 185 order backlog of E175s and E190s. However, there were some orders not logged in that report– such as KLM Cityhopper’s E2 jet orders. This would increase the backlog slightly.

KLM E2
KLM has E2 jets on order for regional operations. Photo: KLM

Meanwhile, per the latest Airbus report, there were 94 A220-100s and 548 A220-300s on order. Both the E2 and A220 compete in the 100-130-seat market, which presents a significant problem for Embraer. There are over four times as many orders for A220s than E2s.

This is one reason why Embraer was looking forward to cooperating with Boeing. Boeing has more relations with existing customers and could lean on them to order E2 jets and take a slice of the profit. This would benefit Embraer greatly.

Azul airline Embraer E195E1 Getty Images
Brazilian carrier, Azul, is a major Embraer customer. Photo: Getty Images

If sales do not improve, we think a major overhaul of Embraer’s management team could be in the books to give the manufacturer some new visions and structures to help promote the lagging E2 sales.

Could Embraer develop a new turboprop?

Previously, Embraer and Boeing appeared to be studying a new turboprop aircraft. A new turboprop would have made a splash in the market and could replace some aging planes.

Embraer could still go ahead with the design. The manufacturer does have a history with turboprops with both the EMB 110 and EMB 120 Brasilia. However, both of those jets were designed, built, and sold in the 20th-century. A revamped version of those planes likely wouldn’t sell well. Instead, Embraer would have to develop a brand new turboprop. Of course, this is easier said than done and would require a huge investment.

Flybe
Embraer could launch a new turboprop. Photo: Getty Images

Nevertheless, a new endeavor like this could be the way to go if the company wants to keep itself known in the passenger aircraft market. Embraer’s specialty is regional jets. Therefore, a new turboprop would add to its portfolio and support the company’s place in regional jet manufacturing.

A shift to defense and private jets

Two other big arms for Embraer are defense aircraft and private business jets. If the E2 continues with flat sales and a new turboprop design proves unfeasible, then Embraer’s team will likely shift its focus to its defense and private jet divisions and seek to maintain profits.

Embraer defense jet
Embraer could pivot to focus on defense contracts. Photo: Embraer

Defense contracts can be lucrative for aircraft manufacturers. A major customer for Embraer is the Brazilian Air Force. Working directly with the Brazilian government, Embraer could move forth with new defense aircraft designs with guaranteed orders from the government.

Overall

Embraer’s E2 jets are not selling well, and it does not appear that sales will improve any time soon. Moving forward, Embraer has several paths it can take. But, for now, the manufacturer must secure cash flow and design a product that will see guaranteed sales and long-lasting appeal.

What do you think Embraer should do next? Let us know in the comments!

Source : Simple Flying More   

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Air New Zealand Turns 80 Years Old- Where Is The Airline Now?

A birthday slipped by largely unnoticed and unmarked yesterday. Air New Zealand turned 80. The airline was founded…

Air New Zealand Turns 80 Years Old- Where Is The Airline Now?

A birthday slipped by largely unnoticed and unmarked yesterday. Air New Zealand turned 80. The airline was founded on 26 April 1940. It wasn’t called Air New Zealand back then. Instead, the airline was known as Tasman Empire Airways Limited (TEAL). The end of the line carrier has come a long way since. But it’s unlikely there was a big birthday bash in Auckland over the weekend. These are tough times for Air New Zealand as it battles the viral headwinds of 2020.

Air New Zealand turned 80 at the weekend. Photo: Getty Images.

A birthday the airline won’t forget – for all the wrong reasons

The airline’s 80th birthday will be remembered as a time of turbulent and unscheduled change. At home, the airline commands an 80% plus market share on domestic routes. Abroad, Air New Zealand has built a reputation for innovative products like the SkyCouch, interesting routes, and a great soft product. The airline’s profitability did drop 31% in 2019, prompting a cost and efficiency review, but overall it has been a sunny decade for the Auckland based airline.

But things are suddenly very different. As Air New Zealand turns 80, where is the airline now?

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2020 will go down in history as one of Air New Zealand’s toughest years. Photo: Getty Images.

In March, as the full impact of the pandemic became apparent and New Zealand closed its borders to almost all travelers, Air New Zealand began to reduce capacity by 85%. Flights to Chicago, San Francisco, Houston, Buenos Aires, Vancouver, Tokyo Narita, Honolulu, Denpasar, and Taipei were all suspended. Domestic and Trans-Tasman flying was trimmed to the bone.

At the same time, Air New Zealand suspended its 2020 earnings forecast. The start of the groundbreaking nonstop flights between Auckland and New York has been pushed back to late 2021. It’s a pretty grim background for an 80th birthday.

Cutting ties with the mother country

Slipping under the radar were two further announcements by Air New Zealand last week. Simple Flying has reported on the airline’s decision to end its fifth freedom flight between Los Angeles and London. Flights were meant to wrap up in October. The current upheaval first saw those flights suspended. There was some hope travelers would get one last chance to have a few glasses of New Zealand Sauv Blanc on an Air New Zealand Boeing 777 as it soared over the chilly fringes of North America. Alas, Air New Zealand has confirmed the service to London will not be returning.

Air-New-Zealand-eighty
London has hosted many Air New Zealand flights over the years but those days are at an end. Photo: Clipperartic via Wikimedia Commons.

Disregarding the economics, the end of the London link is loaded with symbolism. New Zealand is a member of the Commonwealth, and Elizabeth II is New Zealand’s Head of State. Now, neither Air New Zealand or British Airways fly between the two countries.  For much of Air New Zealand’s 80 years, such insouciance towards the old mother country would have been unthinkable.

The decision to drop London reflects Air New Zealand’s pivot towards a Pacific rim focus; Australia, South East Asia, North Asia, and North America. It’s a strategy that has paid dividends for the airline. It has opened some interesting new paths into North America, including direct services between Auckland and Chicago and Auckland and Houston. The airline has long-established toeholds in Vancouver, Honolulu, Los Angeles, and San Francisco.

The end of flights to Buenos Aires leaves a hole in Air New’s Zealand’s Pacific network

In tandem with ruling out resuming the London flights, Air New Zealand also announced it is permanently withdrawing from the Auckland – Buenos Aires route. Air New Zealand Chief Networks, Strategy and Alliances Officer Nick Judd said;

“Argentina has been challenging before the pandemic, and we don’t expect this market to recover quickly.”

Air-New-Zealand-eighty
Air New Zealand is ending flights to South America. Photo: Bahnfrend via Wikimedia Commons.

It’s a sad decision on a couple of levels. It leaves a big hole in Air New Zealand’s Pacific rim strategy with the airline no longer flying to South America. The flight was also the only direct link out of Buenos Aires into Oceania. The decision to exit the route adds to the lack of east-west transoceanic flights in the southern hemisphere.

Air New Zealand says it will be a smaller airline in the post-pandemic era – smaller, leaner, more efficient. It’s not alone there. Slimmed to the bone and with support, Air New Zealand will get through 2020. Maybe when the airline turns 90, they’ll look back and shake their heads at their 80th birthday from hell. Whatever happens, it can only go uphill from here.

Source : Simple Flying More   

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