Business Context and Reporting Period
This Form 6-K filing by Embraer S.A. covers the period of April 12, 2011. The report details a significant commercial development in the Chinese regional aviation market involving a tripartite agreement between Embraer, CDB Leasing Co., Ltd. (CLC), and China Southern Airlines Co., Ltd.
Key Financial Metrics and Transaction Details
- Confirmed Order: A second batch of 10 EMBRAER 190 aircraft was confirmed by CLC.
- Letter of Intent (LOI): An LOI was signed for a third group of 10 EMBRAER 190 aircraft.
- Total Potential Order Value: If the LOI is confirmed, the total order from CLC will reach 30 aircraft with a list price of US$ 1.25 billion.
- Operational Context: All 30 aircraft will be operated by China Southern Airlines, with deliveries scheduled to begin in the second half of 2011.
- Market Position: This transaction brings the total number of Embraer aircraft in China to nearly 100.
Note: This filing is a notice to the market regarding a specific order and does not contain consolidated revenue, profit, cash flow, margin, debt, or liquidity figures for the company.
Material Changes and Strategic Developments
The filing represents a material expansion of Embraer's presence in China, following an initial agreement for 10 aircraft concluded earlier in 2011. The confirmed second batch and the LOI for a third batch demonstrate strong demand for the EMBRAER 190 in the Chinese regional market, aligning with central government policies to expand regional aviation services.
Management Commentary and Outlook
- Embraer Perspective: Paulo César de Souza e Silva, Executive Vice President of the Airline Market, expressed delight at the incremental orders, viewing them as an endorsement of the aircraft's suitability for the growing Chinese regional market.
- Customer Perspective: CLC Chairman Wang Chong and China Southern Airlines Vice President Xu Jiebo highlighted the proven economics and performance of the EMBRAER 190. The new jets are intended to operate in Xinjiang to boost regional economic development.
- Outlook: The deal strengthens the partnership between Embraer and China Southern, with deliveries expected to commence in the second half of 2011.
Investor Verification Checklist
- Verify the conversion of the Letter of Intent (LOI) for the third batch of 10 aircraft into a firm order.
- Confirm the actual delivery schedule for the 30 aircraft, specifically the start date in the second half of 2011.
- Monitor the impact of this order on Embraer's backlog and future revenue recognition in subsequent quarterly reports.
- Assess the financial health and creditworthiness of CDB Leasing Co., Ltd. as the lessor.