Embraer will need state help to survive COVID-19 crisis

Following the recent news that Embraer is reportedly seeking US$600m in credit line to public and private financers;

Nicolas Jouan, Aerospace and Defense Analyst at GlobalData, a leading data and analytics company, offers his view on the situation:

“This decision is not a surprise for a company currently struggling with the collapse of air travel and reducing demand for its main products: regional and private jets. The COVID-19 outbreak instantly froze the commercial aircraft industry earlier this year as airlines suddenly saw demand for international travel wiped out.

“Embraer already had to deal with the breaking of two joint ventures with Boeing, a decision taken by the American plane maker last April and currently challenged by Embraer for alleged wrongdoings. This partnership concerned commercial aircrafts among other things, and the precipitation with which Boeing decided to terminate the partnership suggests that no recovery should be expected for the regional jet industry for at least a few years. This was followed by Mitsubishi’s decision to shelve its own regional jet program last month in light of the COVID-19 outbreak.

“An argument could be made in favor of regional jets in the medium term. As air travel will slowly resume after the pandemic, it is likely that social distancing measures and changing consumer behavior will open an era favoring smaller planes and private jets, which would in turn boost Embraer. However, even more likely is the general contraction of the air travel industry, which is expected to show hundreds of billions in losses this year and will force airlines and leasing companies to slim down their fleets. In this context, Embraer should expect as much headwinds as Boeing or Airbus.”

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