Business Context and Reporting Period
This Form 6-K filing by Embraer S.A. covers the month of May 2015, specifically reporting on a significant commercial agreement announced on May 21, 2015. The document details a finalized contract between Embraer and Azul Linhas Aéreas Brasileiras S.A. regarding the E-Jets E2 family of aircraft.
Key Financial Metrics and Contract Value
The filing does not provide standard financial statements (revenue, profit, cash flow, or margins) for the period. However, it discloses the following contract-specific financial data:
- Contract Value: Estimated at USD 3.2 billion at current list prices, contingent on the conversion of all purchase rights to firm orders.
- Firm Orders: 30 units of the E195-E2 jet.
- Purchase Rights: 20 additional units, bringing the total potential order to 50 aircraft.
- Backlog Impact: The firm orders are scheduled to be included in Embraer's 2015 second-quarter backlog.
Material Changes and Program Status
This agreement represents a material addition to the E-Jets E2 program backlog. Following this order, the E-Jets E2 program stands at:
- Total Firm Orders: 242
- Options and Purchase Rights: 348
The contract converts a Letter of Intent (LOI) previously announced in July 2014 into a firm agreement.
Outlook, Management Commentary, and Risks
Management Commentary: Embraer's President & CEO, Paulo César Silva, characterized the deal as a "show of confidence" in the E-Jets E2 program, noting the company's continued investment in efficiency to meet airline demands. Azul's CEO, David Neeleman, highlighted the E2's fuel burn savings of more than 20% compared to current models as fundamental to maintaining competitive fares.
Delivery Schedule:
- E190-E2: First delivery planned for the first semester of 2018.
- E195-E2: Scheduled to enter service in 2019; first delivery for Azul scheduled for the second quarter of 2020.
- E175-E2: Scheduled to enter service in 2020.
Risks and Contingencies: The filing includes a standard forward-looking statement disclaimer. Actual results may differ substantially from estimates due to risks including general economic, political, and trade conditions in Brazil and global markets, industry trends, investment plans, capacity to deliver on agreed dates, and governmental regulations. The USD 3.2 billion value is contingent on the conversion of purchase rights.
Investor Verification Checklist
- Verify the conversion rate of the 20 purchase rights into firm orders to confirm the actual realized contract value.
- Monitor the 2015 second-quarter earnings report to confirm the inclusion of the 30 firm orders in the official backlog.
- Track the E-Jets E2 certification and delivery timeline, specifically the E190-E2 (2018) and E195-E2 (2019/2020) milestones.
- Assess Azul's financial health and fleet expansion plans to ensure the long-term viability of the order.