“Executive Aviation delivered 27 jets in Q2, compared to 30 aircraft in the same quarter of 2023,” said Antonio Carlos Garcia, the company’s chief financial officer during the earnings call.

Despite the revenue dip, the division’s profitability improved. Gross profit margin increased to 20% from 19.8% in the previous quarter, although gross profit itself fell by 10% sequentially.

More impressively, operating income (EBIT) surged 14% compared to the first quarter, driven by a wider EBIT margin of 11.3%.

“In executive aviation, we continue to capitalise on the good sales momentum in both fleet and retail markets, with solid demand across our product portfolio,” added Francisco Gomes Neto, Embraer chief executive officer. “In executive aviation, we recorded the strongest first semester in terms of revenues and deliveries for the division over the past 10 and 8 years, with $575m and 45 aircraft.”

Aircraft deliveries were up from the first quarter but below the same period in 2023. The company delivered 27 executive jets, comprising 20 light jets and seven mid-size jets. While this represents an increase from the previous quarter, it falls short of the 30 jets delivered in the second quarter of 2023.

The light jet category saw growth, with deliveries of the Phenom 300 up 80% compared to the first quarter. However, deliveries of the Phenom 100 were significantly lower.

In the mid-size segment, deliveries of the three Praetor 500 and four Praetor 600 remained flat compared to the previous quarter but declined from the same period last year.

Overall, the company maintained its 2024 outlook of 125-135 executive jet deliveries.

Embraer order backlog remained unchanged at $4.6bn compared to the first quarter.

Overall, the company’s total backlog for executive, commercial and services segments hit a seven-year high of $21.1bn, up 20% year-over-year.

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The deal, which will improve company’s liquidity position, is an extension of a $650m syndicated credit operation announced in October 2022.

The Brazilian firm obtained a revolving credit facility of $650m in October of 2022, as well as a credit transaction guarantee of $100m by JP Morgan and UK Export Finance to finance suppliers.

“The extension of a significant syndicated credit line reinforces Embraer’s liquidity for the next five years, providing important support for our long-term strategy. Our partnership with strong and marquee financial institutions reinforces Embraer’s credit quality,” highlighted Antonio Carlos Garcia, CFO, Embraer.

The syndication was led by PNC Bank, Crédit Agricole, Citibank, and with the participation BNP Paribas, Mizuho, Bank of America, Sumitomo Mitsui Bank Corporation, Natixis, JP Morgan, MUFG, Santander, Banco do Brasil, Commerzbank, Morgan Stanley, Bradesco, and Goldman Sachs.

The company said the extension of the credit line will be used by Embraer’s subsidiaries in the US and the Netherlands.

Earlier this year, S&P Global Ratings raised Embraer’s rating from “BB+” to “BBB-” and maintained a stable outlook citing the company’s strong cash generation amid higher aircraft deliveries. 

Embraer delivered 27 executive jets in the second quarter of 2024 up from 18 in the first quarter of 2024 but lower than 30 in the same period last year. The company’s backlog stayed flat at $4.6bn in comparison with the first quarter of 2024.

Embraer’s average loan maturity at the end of first quarter of 2024 decreased to 4.4 years compared to 4.6 years in the preceding quarter of last year. The term structure of loans was 96% in long-term contracts and only 4% in short-term ones.

In terms of cost of loans, the company’s cost of USD denominated loans decreased to 6.19% per annum in 1Q24 from 6.33%pa in 4Q23, while the cost of Brazilian real-denominated loans decreased to 6.69% compared to 7.11%, respectively.

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Before my taster session in the simulator, Domenic Di Iorio, global head of Training, captain and instructor Phenom 300 Flight Operations, CAE made the introductions. Installed in February and welcoming its first trainee pilots in March, the full flight simulator is the ninth Phenom 300 installation operated by Embraer and CAE as part of their joint venture Embraer-CAE Training Services (ECTS) launched last year.

The new simulator – Number 9 – is the second in Europe and follows the installation of other Phenom 300 simulators in Dallas, Texas and Las Vegas, Nevada. The Burgess Hill simulator is the second to last in a line of eight full flight simulators at the facility. (Elsewhere in the building is another line of eight simulators dedicated to a range of different aircraft types). There are two Phenom 300 sims in the Burgess Hill facility.

FAA authorisation

The simulator is certified by three authorities: the UK Civil Aviation Authority (CAA), Transport Canada Civil Aviation (TCCA) and European Union Aviation Safety Agency (EASA). Federation Aviation Administration (FAA) authorisation is expected on the Burgess Hill simulator within the next year.

Corporate and owner pilots undertaking initial training on the Phenom 300 will follow an approved training curriculum for issue of a type rating, as required by regulators and operators. Initial training can be from 40 to 100 hours ground training, with a combination of classroom and online training. That’s typically followed by 16 hours as pilot flying (PF) and then 16 hours as pilot not flying (PNF). The Phenom 300 simulator is used for used for both initial and recurrent training.

The flight simulator uses approved aircraft flight data and must meet regulatory requirements with an initial simulator qualification followed by yearly simulator requalification. It’s housed in a fully articulated space accommodating a cockpit, behind which is a flight control consol and additional seating for two trainee pilots.

So how realistic is the simulator? LaRosa who filmed 800 hours of aerial footage for the two-hour movie should know. The aerial sequences were filmed from a converted Phenom 300 camera ship with a gimbal-mounted film camera on the nose and a still camera aft of the cockpit. The aircraft is owned by LaRosa’s friend and business partner Jonathan Spano. (Incidentally, LaRosa is the only non-military pilot to be cleared for a 240-knot (276 mph) flyby over the deck of the Nimitz-class, nuclear-powered super carrier US Theodore Roosevelt, as part of the movie filming).

‘An almost perfect match’

“The Phenom 300 simulator is an almost perfect match for the real aircraft,” LaRosa told CJI. “While the visuals are not perfect, they are amazing. The movement of the simulator is very accurate.”

He’s equally impressed by the Phenom 300 aircraft. “It’s a super capable aircraft – and like any aircraft it’s really all about the training,” adds LaRosa. Powered by two Pratt & Whitney Canada PW535E engines, the Embraer jet is rated for single pilot operations and can carry up to 10 passengers. It has a maximum speed of 533mph and a maximum range (with four passengers) of 2,010 nautical miles. About 700 are in operation worldwide.

Back in the simulator, I’m working hard. LaRosa let me follow him on the controls as we took smoothly off. He then turns the aircraft over to me for some gentle climbing turns to the left before descending to trace the course of a valley floor.

Sitting behind us in the simulator is Di Iorio – a 40-year-plus veteran of CAE with more than 1,000 hours on type in his logbooks. Today, he is playing the role of Air Traffic Control giving us clearances. In addition to his own currency training on the simulator, Di Iorio also acts as both an instructor and examiner on type.

Engine fire

Towards the end of our ‘flight’ back to the ‘airfield’, he slips seamlessly into the role of tormentor-in-chief. Without warning, he randomly announces the discovery of an engine fire in our port engine.

LaRosa immediately takes control and starts the word-perfect emergency engine drills. Right engine shut down and ignite fire extinguisher, single-engine operating speed and configuration together with emergency radio calls before touch down. It all goes flawlessly. But the full flight simulator is so realistic, and I’m so invested in the simulated emergency, I couldn’t dispel that haunting feeling of queasiness.

If you enjoyed reading about this taster flight simulator session, buckle up for a ride in the real Phenom 300 camera ship that LaRosa used to film the aerial sequences in the latest Top Gun movie. Published in Corporate Jet Investor Quarterly, we ride with LaRosa as he recalls how the camera ship was born and the challenges of filming a Boeing F/A-18E/F Super Hornet from a business jet.

The CAE Phenom 300 simulator is located at CAE’s Burgess Hill facility, West Sussex, UK.

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The company’s backlog stayed flat at $4.6bn in comparison with the first quarter of 2024.

In the light jet segment, Embraer delivered 18 Phenom 300s, up 80% from the first quarter and flat compared to same period last year. However, it delivered two Phenom 100.

In the mid-size segment, the company delivered three Praetor 500s and four Praetor 600s – flat on a sequential basis while declining from six and five respectively in second quarter of 2023.

So far, in the first half of 2023, Embraer has delivered 45 executive jets against the annual target of 125-135 deliveries. Jet deliveries are seasonal and usually pick up pace in third quarter with major chunk leaving the manufacturers’ hangars in the fourth quarter of fiscal year.

Overall, the company’s total backlog for executive, commercial and services segments hit a seven-year high of $21.1bn, up 20% year-over-year.

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Embraer first entered into a SAF agreement with Avfuel in July 2021 under which it received one 8,000-gallon truckload of Neste MY SAF per quarter to Sheltair MLB, the FBO that provides storage and handling services for Embraer.  

Under the new agreement, the Avfuel will make weekly SAF deliveries from April onwards. The partnership is expected to result in a total of 240,000 gallons of SAF delivered to Embraer in 2024.

“Embraer’s collaboration with Avfuel and Sheltair marks a pivotal milestone in our journey toward net-zero emission flight operations,” said Michael Amalfitano, president and CEO, Embraer Executive Jets. “Our continued investment in SAF demonstrates our dedication to reducing emissions today and driving the industry closer to the net-zero aviation goal by 2050.”

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Service revenue hit a record high of $81.7m, reflecting a 4% growth. Equipment sales also rose 13% to $22.6m.

“Our first quarter performance was fuelled by advanced equipment revenue, which experienced a rebound from Q4 2023 and record service revenue, driven by a modest price increase and record advanced upgrades,” said Oakleigh Thorne, CEO and board chairman, Gogo Aviation in the earnings call.

Gogo is expanding its reach, with shipments of their AVANCE equipment up 16% year-over-year to 258 units. The total number of ATG aircraft online also grew slightly, reaching 7,136. Engagement with these connected aircraft remained strong, with average monthly revenue per aircraft (ARPU) rising 2% to $3,458.

Impressive financial performance wasn’t limited to the top line. Gogo’s net income surged 49% year-over-year to $30.5m, translating to diluted earnings per share of $0.23.

This strong bottom line led to a healthy cash flow position. Gogo boasted record free cash flow of $32.1m in Q1, a significant jump from the prior year’s $20.0m. The company ended the quarter with a solid cash and cash equivalents position of $152.8m.

Gearing up for their highly anticipated Gogo Galileo launch later this year, the company said it secured a key regulatory win in April 2024. The FCC granted approval for the Gogo Galileo HDX and FDX antenna terminals designed for business aircraft.

Additionally, the company said its Atlas Air Service AG is underway developing the first European Supplemental Type Certification (STC) for the Galileo HDX antenna for the Cessna CJ Series of light jet aircraft and another STC for the Embraer Phenom 300.

“We’re excited about the upcoming launches of Gogo Galileo and Gogo 5G, which will substantially increase our global addressable market and provide our customers with a step-change improvement in speed and performance,” added Thorne. “Additionally, our accelerating conversion of customers from our old Classic products to the AVANCE platform will allow customers to benefit from better LTE performance and provides a simple and cost-effective upgrade path to Galileo and 5G.”

The company also updated on its progress regarding the ongoing share repurchase. In Q1 of 2024, it repurchased 1.1m shares for $10.1m. This buyback activity adds to the over 1.6m shares repurchased in the past two quarters, totalling $15m.

In April 2024, they continued this trend with an additional 1.1m share buyback for $9.3m.

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Topline growth came on the back of record first quarter executive jet deliveries of 18 jets compared to eight in the same period last year.

The company delivered one Phenom 100 and 10 Phenom 300s, while delivering three Praetor 500s and four Praetor 600s in the first quarter of 2024 – most aircraft it has delivered in the first quarter for eight years. In addition to higher deliveries, the company also boasted its executive aviation backlog by $300m to $4.6bn.

Following from better topline, Embraer’s gross margin from the executive aviation segment improved from -0.5% to 21.4% improving the adjusted EBIT margin from -42.9% to 5.0% during the first quarter under review.

Overall, the company’s consolidated revenue in the first quarter of 2024 clocked in at $896.6m an increase of 25% year-over-year. This strong growth came on the back of strong performance in the executive aviation segment.

On the bottom line, the company reported adjusted net loss of $12.8m against $88.9m in the same period last year.

“We currently have concrete sales campaigns for more than 200 aircraft across the world,” said Francisco Gomes Neto, CEO, Embraer in the earnings call. Neto further reaffirmed the 2024 guidance of 72 to 80 commercial and 125 to 135 executive jet deliveries, with total revenue target of $6-8bn.

Beyond the results, Neto further said the company is focused on its existing portfolio with no plans on developing narrowbody as has been speculated for a while now.

“We are now in our harvest season. We don’t have concrete plans to develop or launch a narrowbody or other aircraft in the next few years,” said Neto in the earnings call.

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Not silver but sustainable business aviation dominated the two-day event at the resort amid the tall saguaro cacti. Prickly topics under discussion included the health of the US economy, particularly the impact of high interest rates, the disillusion of some first-time buyers and business aviation under attack.

But there was more gain than pain when it came to the upbeat assessment of the US economy from Gus Faucher, chief economist, PNC Financial Services Group. Without minimising the impact of high interest rates, which could (but not necessarily will) pitch the US economy into recession, Faucher highlighted positive factors likely to lead to steady growth this year and into 2025.

“The US economy is in very good shape right now,” he said. “The economy is 8% larger than it was before the pandemic. Some 22m jobs were lost due to the pandemic but those have been regained and another 8-9m jobs added to where we were before the pandemic.” Strong labour markets underpin consumer spending power, which was driving broad-based economic growth across the US, he added.

Returning rates to 2%

But there are reasons for pessimism. The “inverted yield curve” – meaning short-term interest rates were higher than long-term interest rates – was often associated with recessions. Faucher estimated the likelihood of a US recession at about 35%. However, he felt confident that the Federal Reserve would be successful in returning rates to its goal of 2% from their current level of just over 5%.

“There is likely to be slower growth this year but still growth,” he summarised. “Spending will continue to support growth in 2024, with the Fed cutting rates later this year for technical reasons [partly to cool wage growth] starting in July and in 2025. That will support growth this year and into 2025.”

Interest rates are affecting the decision to buy aircraft but not in the obvious way of affecting decision-making, said Shawn Dinning, senior partner, Dallas Jet International. “I don’t see a situation where a prospective buyer or borrower is looking at rates and saying, ‘I can’t afford this deal’. We are not seeing a delay in decisions to buy. About 70% of our business lately has been cash.”

But interest rates are affecting the core business of his clients – principals and corporations. “We do a lot of multi-family-type real estate companies and two years ago they were printing money, now they went from a nice positive cash flow position to bleeding hundreds of thousands if not millions of dollars because of interest rates,” said Dinning. In some cases, owners need the liquidity on the airplane. “They have to prioritise, so the airplane gets the axe,” he added.

On a more positive note, he said: “Demand continues to surprise me in a good way and it’s keeping up with this increase in inventory in a pretty good way.”

‘More transactions in Q1’

Wayne Starling, executive director of International Aircraft Dealers Association (IADA) agreed. “There were more transactions in the first quarter of this year than there were in the first quarter of last year,” he said, based on his association’s latest report.

But Johnny Foster, president and CEO, OGARAJETS reported growing frustration and disappointment among first-time buyers. Before the pandemic, almost every year consistently, first-time buyers accounted for about 5% of the purchases of aircraft. But that figure rose to 38% of buyers between 2020 and 2022, he said.

They came into the market, often buying legacy aircraft with the promise of bonus depreciation and excessive demand for charter. “Now we are hearing and seeing these first-time buyers are disenfranchised with the model because their aircraft is not flying 600 or 1,000 hours a year [through charter]. It’s flying 100 hours a year,” he said. “And their pilots’ salaries have tripled over the past three years, and they are now being told they have to have three pilots instead of two pilots.”

These frustrations were compounded by their first main maintenance event, which “has caught many by surprise”. The legacy aircraft that cost only $2m or $3m to buy could be facing inspection costs of half a million dollars, said Foster.

‘Full-scale attack’

From disappointment to hostility. Business aviation is under “full-scale attack” and not just in Europe, warned Ed Bolen, president and CEO, National Business Aviation Association. “There is an effort to find ways to disparage our industry which is not consistent with data and our strategy. We see it in a lot of ways,” he said. Examples include the February 21st announcement by the Internal Revenue Service (IRS) that it intended to step up its aircraft owner audits.

Other examples cited were the five-fold increase in fuel tax over five years and the plan for longer depreciation periods. Combating these and other threats would rely on a coordinated industry response and lobbying policy-maker, he said. Not least via the NBAA’s Climbing.Fast campaign.

Speaking to CJI after his presentation, Bolen set out his goals for the end of the decade. “By 2030, we will be ready to answer the SAF Challenge of 3bn gallons produced in the US,” he said. “We would like to see operators continue to look for ways to operate even more sustainably.” That means looking at good quality offset programmes and book-and-claim options. “And we are working hard to introduce advanced air mobility and hybrid solutions and the effectiveness of our air traffic integration.”

Despite challenges facing business aviation – not least high interest rates, supply chain difficulties and the shortage of pilots, airframe and powerplant technicians – the industry can look forward to a bright future as wealth generation and transfer continue to fuel demand, according to speakers.

Stephen Friedrich, chief commercial officer, Embraer summed up the reasons for optimism: “Over the next 20 years, we are going to see a $73trn wealth transfer from Boomers to Generation X and Millennials – and that is only just beginning. This is in addition to [aircraft] purchases by corporate flight departments and private individuals.”

Back in the 19th century the silver boom soon turned to bust, with fire consuming the mining town of Quijotoa in 1889. Attendees at the NAFA conference heard strong reasons to believe in a much more sustainable (and profitable) future for business aviation.

Prickly saguero cacti surrounded the conference venue. Inside, delegates discussed thorny topics such as the impact of high interest rates.

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The manufacturer says it is planning to deliver between 125 and 135 jets in 2024. This would be up by 10 or 20 aircraft on 2023.

The company delivered one Phenom 100 and 10 Phenom 300s in the first quarter of 2024. In the same quarter of 2023 it delivered two Phenom 100s and four Phenom 300s.

READ: Embraer Executive Jet deliveries jump 13% in 2023 

In the first three months of 2024 it delivered three Praetor 500s and four Praetor 600s. The company only delivered two Praetor 600s in the same period of 2023.

This is the most aircraft it has delivered in the first quarter for eight years.

Embraer has traditionally delivered a large proportion of aircraft in the fourth quarter. In the first quarter of 2023 it shipped eight business jets, in the second 30 and the third 28 aircraft. In the last three months of the year it delivered 40% of the year’s total with 49 jets. The manufacturer says it is now working on a Production Levelling Plan to have a stable production pace throughout the year.

The manufacturer shipped 115 executive jets in 2023 – up 13 from 102. This consisted of 63 Phenom 300s, 11 Phenom 100s, 20 Praetor 500s and 21 Praetor 600s.

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Of the total 115 executive aircraft delivered in the previous year, 74 were light jets whereas the remaining 41 were medium jets.

Higher volumes translated into 13%YoY growth in Embraer’s revenues from executive aviation, reaching $1.4bn. However, the segment’s gross margin dropped from 23.4% to 19.4%YoY owing to product mix (proportionally more medium rather than light jets) and one-time tax benefits.

The Brazilian multinational aerospace company said the positive performance comes amidst ongoing supply chain issues impacting the aviation industry. The company also reported a strong backlog for executive jets, exceeding $4.3bn, reflecting sustained demand across its product portfolio. Moreover, the executive aviation segment ended the year with a book-to-bill in excess of 1.3:1. 

Embraer’s Phenom 300 remained the most delivered light jet for the 12th consecutive year and the most delivered twin-jet for the fourth year running. This highlights the continued popularity of this light jet model in the executive aviation market.

The company said that its positive sales momentum to strong customer acceptance in both retail and fleet markets.

Embraer provided a glimpse into the future of its executive jet business with the announcement of the first Praetor 600 delivery to South Korea’s Flight Inspection Services Center. This variant of the Praetor jet is equipped for a wide range of flight inspection tasks, showcasing the adaptability of Embraer’s executive jets beyond traditional passenger transport.

While Embraer’s executive jet business is experiencing a positive trend, supply chain disruptions continue to pose a challenge. The company said that it is working to mitigate these issues and ensure timely deliveries to customers.

Meanwhile, Embraer reported total revenue of $5.3bn for 2023, reflecting a 16% increase year-over-year. Each of the company’s four business units contributed to this growth.

Defense & Security saw the highest increase at 25%, bringing in $516m. Commercial Aviation followed closely with a 20% rise in revenue, totalling $1.85bn. Rounding out the revenue figures, Services & Support achieved $1.42bn, reflecting a 12% growth.

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