The expectation of an accelerated continuity of Embraer’s recovery, hampered by the appearance at the end of 2021 of the Ômicron variant, is now dealing with the impacts of the war in Ukraine.
According to the company’s CEO, Francisco Gomes Neto, one of the major problems would be global hyperinflation – one of the possible side effects of the conflict -, which may lead to the need to renegotiate contracts with customers to pass on increased costs.
The executive, however, still thinks it’s too early to estimate the extent of the war’s effects.
Read the main excerpts from the interview below:
Do you expect a postponement of the renewal of the fleet by the airlines in a scenario of war, with an increase in fuel?
The increase in fuel and air traffic restrictions should affect long-haul flights more and less domestic ones, and that’s where we are. Despite the risk, we have the most efficient plane in its category. In the cargo market, with the increase in e-commerce, the focus has been on the smaller plane, which transports goods within the country. We are paying with our resources for the development of the freighter jet this year.
Embraer suspended services in Russia. Are the losses significant?
are not significant. The services are aircraft from leasing companies, there are a few executive jets in the region, but we have already scaled it all up, it is not relevant.
Is there a certain apprehension in the market that companies that do not follow the sanctions imposed by the US and Europe on Russia could suffer from the investor’s side for not positioning themselves?
There is this side, but there is another one that is more important in our case, which is export control. (export control)a clause in parts supply contracts that obliges the aircraft manufacturer to comply with the rules established by the country of origin of these components, and this includes US and European Union sanctions against Russia.
The company’s image in the eyes of investors is important, but export control is a matter of compliance with international standards.
Countries have shown a certain willingness to invest more in defense. Does this have a positive impact for Embraer?
Our expectation is that in a war scenario, countries will decide to accelerate investments in defense, and our multi-mission cargo plane is modern, we have been presenting this product in the European, Asian and Middle Eastern markets. We believe that there may be some positive impact for the company.
Do the projections for this year include a possible scenario of global hyperinflation in 2022?
Hyperinflation is not foreseen there, so we have two paths: neutralize this increase or part of it through internal cost reductions, or pass it on to the price. For now, we have a well-controlled situation.
To what extent is it possible to pass on this increase in costs to customers?
Our planes for this year are all sold, and changing contracts is never easy, so we have an initial move to try to offset (inflation) with cost reductions.
But if this increase is beyond reasonable, we will have to open negotiations with clients, which is not easy. In new sales, we will have to take into account the new cost.
In relation to Brazil, how do you see a possible change of government in this election year?
I believe that the company knows and will deal with the changes that come ahead. In a year of war, it is not easy to be optimistic, but Brazil has great potential and will find its way.
Part of the company’s recovery in the pandemic comes from the market’s expectation of Eve. What are the expectations regarding the IPO?
Innovation is part of the company’s DNA, we never stop investing even in the crisis. A good part of our revenue comes from products developed in the last 5 years.
We created Eve (from flying cars) in the middle of the pandemic, we have advanced in its structuring to bring in funds to accelerate the development of the product, we are doing well, we want to list the company in the second quarter of this year.
How is the company’s debt situation?
Our debt structure is well balanced, we were able to buy some 2022 and 2023 bonds with our funds generated last year. We extended the debt profile, which reduced its cost. We are calm about this aspect.
The information is from the newspaper. The State of São Paulo.
Source: CNN Brasil
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