Embraer S.A. (ERJ), the Brazilian aerospace company, has reported a robust performance in the first quarter, marked by a significant increase in executive jet deliveries and the securing of its first firm orders from NetJets, a notable milestone for the company. The firm orders from NetJets include rights for 250 aircraft over a 14-year span, with deliveries commencing in 2025.
Embraer's Defense & Security division has also made strides, notably by hosting the inaugural Embraer Defense Day in the U.S. and signing a Memorandum of Understanding (MoU) with Mahindra to sell the C-390 Millennium to the Indian Air Force. Revenue in the Services & Support division grew by 12% year-over-year, and the EVE Urban Air Mobility business is progressing toward key achievements in 2024.
Embraer's Q1 operational performance showed improved margins and cash consumption, with expectations of continued supply chain improvements throughout the year. Despite facing some component-specific challenges, the company has a strong backlog valued at $21.1 billion and has successfully reduced its gross and net debt, maintaining a solid liquidity position. The arbitration with Boeing (NYSE:BA) is anticipated to conclude in the first half of 2024.
Key Takeaways
- Executive jet deliveries increased by 125% year-over-year.
- NetJets placed firm orders for 250 aircraft, deliveries starting in 2025.
- Defense & Security hosted Embraer Defense Day and signed MoU with Mahindra for C-390 Millennium sales to India.
- Services & Support division reported a 12% revenue increase from the previous year.
- EVE Urban Air Mobility business is nearing significant milestones, with 90% of component suppliers chosen.
- Q1 operational performance improved with higher margins and better cash consumption.
- Total backlog reached $21.1 billion, with strong performance in Commercial and Executive Aviation.
- Gross and net debt reduced; liquidity position remains strong.
- Arbitration with Boeing expected to conclude in the first half of 2024.
Company Outlook
- Continued improvements in supply chain expected, though challenges with specific components persist.
- Arbitration with Boeing to conclude in the first half of 2024.
Bearish Highlights
- Specific components continue to challenge production and delivery schedules.
- No plans to develop or launch new aircraft in the near future.
Bullish Highlights
- Strong order backlog in both Commercial and Executive Aviation.
- Optimism about sales in defense and executive aviation.
- Positive outlook for Commercial Aviation division with potential for improved margins.
- E2 aircraft seen as a competitive option in the small narrow-body segment.
- Plans for unit growth and production expansion in the medium-term.
Misses
- No updates on the conversion of E1 jets in China.
Q&A highlights
- CEO Francisco Gomes Neto discussed sales campaigns for E1 and E2 aircraft, with over 200 potential sales across various regions.
- E2 aircraft production availability from 2026 allows airlines to add capacity sooner.
- Large order of 90 E175s from American Airlines (NASDAQ:AAL), with continued opportunities in the US market.
- E2s flying with Porter Airlines in the US; ongoing conversations with potential US customers.
- Full flight simulator inaugurated in Singapore; sales campaigns ongoing in Asian countries.
- Final phase of arbitration with Boeing, with a decision expected in the first half of 2024.
InvestingPro Insights
Embraer S.A. (ERJ) has demonstrated a solid financial and operational performance as of Q1 2023, with the company's strategic moves in executive jet deliveries and defense contracts reflecting positively on its market positioning. Here are some InvestingPro Insights that underscore the company's current financial health and market sentiment:
- The company's market capitalization stands at $4.87 billion, indicating a robust valuation in the Aerospace & Defense industry.
- Embraer's Price to Earnings (P/E) ratio, adjusted for the last twelve months as of Q4 2023, is 27.83, which, when compared to its near-term earnings growth, suggests the stock might be trading at a low P/E ratio.
- An impressive one-year price total return of 103.92% reflects a strong return over the last year, highlighting investor confidence and market performance.
InvestingPro Tips highlight Embraer's status as a prominent player in its sector and its high shareholder yield. Additionally, analysts predict the company will be profitable this year, which aligns with the positive trends seen in the company's recent performance.
For readers looking to dive deeper into Embraer's financial metrics and gain further insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/ERJ. Using the coupon code PRONEWS24, readers can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, accessing a wealth of information including 11 more InvestingPro Tips that provide a comprehensive understanding of Embraer's financial health and market prospects.
Full transcript - Embraer SA (NYSE:ERJ) Q1 2024:
Operator: [Technical Difficulty] quarter-over-quarter and a strong 2:1 book-to-bill for the quarter. We recorded our first set of firm orders from NetJets, with deliveries will begin in 2025. In total, NetJets has purchased rights for 250 aircraft over the next 14 years. In Defense & Security, we hosted the first Embraer Defense Day in the U.S. with C-390 Millennium and the A-29 Super Tucano. The event included a diverse guest list of government authorities, military officials, prospects and partners. In early 2024, Embraer in Mahindra sign MoU to jointly pursue the sale of the C-390 Millennium to the Indian Air Force. The first Hungarian C-390 successfully completed its maiden flight. The aircraft continues to receive international recognition on the back of its remarkable operational performance and capabilities. We should note the division reported lower year-over-year revenues because of supply chain delays and business seasonality. In Services & Support, revenue grew 12% compared to the same period last year with solid double-digit profitability. The business reality backlog maintains the historical $3.1 billion record reached in Q4 2023 with a 10% plus EBIT margin. Another important step for our Services division was the induction of the first product GTF 1100 engine in OGMA. Our MRO in Portugal, the ramp up should last four years and we expect revenues to reach closer to $500 million in 2028. Last but not least, EVE, our EVE business is on track to achieve important milestones in 2024. We have already selected now more than 90% of its component suppliers and we successfully concluded a Urban Air Traffic Management trial. The company is on track to accomplish the next development test, first prototype assembly conclusion, initial test and the definition of certification basis. We also began the definition of our EVE found factory configuration. All-in, we estimate EVE should have a total cash consumption between $130 million and $170 million in 2024. I will now hand it over to Antonio, our CFO, to give you further details about the financial results, and then I will be back with closing remarks.
Antonio Carlos Garcia: Thank you, Francisco. Good morning, and good afternoon to everyone. I would like to highlight our operational performance in Q1 despite the historical seasonality. Total deliveries revenue margins were higher than the same period in 2023 and the company's cash consumption was better than a year ago. Our focus in Q1 was on business and financial efficiency. We want to lay down an important stepping stone to put us in a comfortable position to achieve our full year guidance, even with the ongoing supply chain constraints we continue to deal with. Let's now move to Slide 9 in the presentation. Deliveries, Executive Aviation delivered 18 jets in Q1 for an increase of 125% versus a year ago and the highest Q1 level of the last eight years. The light jet segment was 83% higher year-over-year with 11 Phenom delivered, while the medium jets won more than triple during the period with seven freighters delivered. Meanwhile, Commercial Aviation deliveries were flat at seven aircrafts in Q1 compared to the same quarter of 2023 with four E1s and three E2 aircrafts. In Defense, we should note there were no C-390 delivers in the first quarter of 2024 and 2023. We continue to work steadfastly to accomplish our production plan and reach the milestones in our Defense & Security programs, which includes forcing C-390 Millennium deliveries scheduled for the year. It is important to mention the company has developed and is currently implemented a production leveling plan to mitigate business as amended. The plan should help the company to deliver less volatile financial results throughout the year in the near to mid-term future. Slide 10, please. The company registered a strong total backlog of $21.1 billion at the end of Q1 for an increase of 13% quarter-over-quarter and the highest number recorded over the past seven years. Looking forward, our current backlog is accretive to our financial projections. The backlog for Commercial Aviation reached more than 308 aircraft in Q1 and it is valued at $11.1 billion or $2.3 billion higher than the last quarter. Meanwhile, Executive Aviation ended with a solid $4.6 billion backlog or 7% higher quarter-over-quarter, helped by the inclusion of the first Praetor 500 firm orders for NetJets. We should note NetJets has ordered 246 options not included in the current backlog. The backlog for Service & Support is finished stable at $3.1 billion in Q1, while for Defense & Security, it decreased marginally by 4% quarter-over-quarter to $2.4 billion. Again, we should there are 11 C-390 aircrafts in three tender offers, one whose contract haven't been signed yet as those included in our backlog. Moving on to revenues, our top-line reached almost $900 million in Q1 or $180 million year-over-year for a 25% growth rate. If you look at the right chart, Service & Support represented around 41% revenue in Q1, followed by Executive close to 27%, Commercial Aviation from 22% and Defense at around 9%. Next slide, we generated $47 million in adjusted EBITDA in Q1 with a 5.2% margin driven by higher aircraft delivery compared to the same period last year and better consolidated gross margin. Meanwhile, adjusted EBIT was $7 million for an adjusted EBIT margin of 0.8%. Reported EBIT for the quarter was negative for $1 million for a negative 0.4% margin. Both figures were better than the first quarter 2023 supported by our volumes better mix especially in Executive and Service & Support. Look at the right chart; we can see Executive Aviation and Service & Support generated positive EBIT during the quarter, while Commercial and the first presented negative results because of limited volume, supply chain delays and more aircrafts in the early stage of assembly. Slide 12, please. In Q1, if we exclude EVE, we had an adjusted free cash flow consumption of $346 million or $53 million better in Q1 2023 driven by customer advanced payments. The Q1 cash consumption is basically due to the increase in inventories should support higher deliveries in the upcoming quarters. This cash should be reverted as more deliveries take place throughout the year and we have firm or $220 million or higher guidance for the cash generation 2024. Moving to investment and again without EVE $47 million were allocated to research and development, $28 million to CapEx and a net of $15 million to the POOL program in Q1 for a $90 million total compared to $82 million a year ago. We highlight our capital allocation continues to be focused on segments with higher returns, which projects such as expansion of our production capacity and Executive Aviation and Service & Support. Our adjusted net income was negative $13 million for the quarter on a negative 1.4% adjusted margin. Historically, the first quarter of the year is the weakest because of the business seasonality. The positive reported net income is driven by the mark-to-market valuation of the EVE awards around $30 million. Next slide, going to our liability management plan, in first quarter 2024, we reduced our gross debt without issue by $276 million only during the quarter and by a more sizable $754 million versus a year ago to a total of $2.6 billion. In addition, our net debt declined by $384 million year-over-year to a total of $1 billion in first quarter 2024. However, on a sequential basis, our net debt EBITDA deleverage ratio increased 0.4x to 1.8x as shown in the top right corner. This variance is explained by the seasonality of the business. Our almost $2.4 billion liquidity position allowed us to cover our debt obligation beyond 2030 and leave us in a very comfortable position. With that, I conclude my presentation and hand it back to Francisco for his final remarks. Thank you very much.
Francisco Gomes Neto: Thank you, Antonio. The Q1 2024 was another step in the right direction, supported by both external factors like some marginal improvements in our supply chain and internal ones like our production leveling initiatives. Speaking of production leveling, we recently hosted a conference with our main suppliers to strengthen our partnership and operational plans for 2024 and years ahead. We remain optimistic that supply chain disruption should continue to diminish and improve our ability to deliver more aircraft in the next few years. To finish, I would like to thank you all again for your interest and confidence in our company and a very special shootout to our friends in Dallas. We are very grateful for their partnership and trust. We continue to focus on operational and business decisions in 2024, having a foundation of our culture, safety first and quality always. Let's now move to the Q&A session of the call.
Operator: We will now start the question-and-answer session. [Operator Instructions]. The first question comes from Cai von Rumohr with TD Cowen. Please go ahead.
Francisco Gomes Neto: Hello, Cai.
Gabriel Rezende: Hi, good morning. It's Gabriel Rezende with Itau actually. So one question from our side here. You have just comment regarding the supply chain issues in the defense business, and they're expecting these issues to improve along the year. But I was just wondering whether the supply issues that impacted the defense business, the specific components that impact your performance division have some overlap with the commercial division as well. So if you could provide a little bit more detail on that, it would be great. Thank you.
Francisco Gomes Neto: Hi Gabriel, Francisco speaking here. Yes. I mean, as I said, we see improvements in the supply chain from -- we saw from 2022 to 2023 -- 2023 to 2024, but it's still with challenges in specific components that some are limiting our production in the year and also because of the delays, they are delivering the parts, but not on time to help us with the production. And then we have to make adjustments in our production schedule. It affects our productivity and in some cases, we can risk deliveries as well. But we made our plan for this year based on the plans that we discussed a lot with the suppliers. So again, we are confident that in delivery, the aircraft we announced in the guidance in this year for all the aircraft.
Antonio Carlos Garcia: And since it's just to complete, Gabriel, for the defense especially, there is, I would say, most of overlap in regards to the specific parts for the C-390, there are different parts or in some cases, suppliers, and we just have, I would say, a concentration in Q1 with less receiving parts for defense. And also the mix of contracts will cause less revenue and impact our margins, especially in Q1, but there is nothing that concerns us for this fiscal year.
Operator: Thank you. The next question comes from Myles Walton with Wolfe. Please go ahead.
Myles Walton: Thanks. Good morning. Francisco, could you elaborate a little bit on the sale campaigns for the 200 aircraft you mentioned both E1a and E2s. And I guess a couple of questions, if you could give us some color on one is the geographic dispersion of those campaigns and the other is in the case of the E2s. Are these customers looking to fulfill capacity needs that aren't being satisfied by Boeing and Airbus, do you see that sort of opening emerging, or are these more an expansion of customers that you would have otherwise anticipated even if Boeing and Airbus had capacity? Thanks.
Francisco Gomes Neto: Thanks, Myles, for the questions. We had campaigns in all the regions to be clear with you. I mean, all the regions, South America, North America, Europe, and Asia-Pacific, good opportunities. I can't disclose you details of ongoing campaigns, but as I said, it's more than 200 potential sales. And this is a combination of different factors amid E2, as we have said, it's a perfect solution to complement the operations of bigger narrow-body. So we see now today is the first flight of our customers' goods in Singapore that they are going to use the E2s to open your routes and to increase the frequency of flights. And we see that in different regions as well. So again, we are very -- it's not easy, but we are very optimistic with potential sales of E2s in 2024. What else Myles, you wanted please, could you repeat?
Myles Walton: Francisco, just more, are you seeing these campaigns build demand because of the lack of supply offered by Boeing and Airbus, or is that not a major factor in how these campaigns are playing out?
Francisco Gomes Neto: Okay. Again, as I said, it's a combination of factors. And for sure, I mean, the fact that we have, I mean, production was available already from 2026 onwards. This can help the airlines to add capacity sooner to their fleets.
Myles Walton: Yes, that's where I was going. It's surprising you still have that availability given the absence of supply over barrels. Just one quick follow-up, if I could, the arbitration timing with Boeing, is that still on track for this quarter? Thanks so much.
Francisco Gomes Neto: Thank you, Myles. Yes, we expect this to end in the first half of this year. So we should be close, but it's not in our hands. It's a decision of the tribunal in New York, but we expect this to end no later than the middle of this year.
Operator: Thank you. The next question comes from Cai von Rumohr with TD Cowen. Please go ahead. Cai, your microphone seems to be on mute. If you could please unmute on your end. The next question comes from Ron Epstein with Bank of America (NYSE:BAC). Please go ahead.
Ron Epstein: Hey, good morning, everyone.
Francisco Gomes Neto: Good morning, Ron.
Ron Epstein: A couple quick questions. Can you talk a little bit more just about supply chain in general and where you are seeing constraints still both on commercial and in defense?
Francisco Gomes Neto: Well, Ron, as we said before, we see improvements in average in our supply chain, but we still have some challenges in, with specific products in terms of volume and also the on-time delivery. We have a lot of suppliers improving, but still suppliers with difficults to deliver the parts we need on-time. And this, again, this brings to us more difficult in our production. As you know, we are working this production leveling initiative that we want to better distribute the production and deliveries throughout the year. So we will still have difficults in 2024 and we expect, but again, in line with our plans to deliver the guidance, and we expect even more improvements in 2025 in years ahead from our supply chain for both sides, commercial and defense.
Ron Epstein: Got it. Got it. And then maybe one more follow-on if I can just. Can you guys speak broadly to how you're thinking about product development and new products?
Francisco Gomes Neto: Sure. Well, I mean, we -- Ron, we fully understand all the excitement caused by recent media speculations. I mean, it's -- it highlights the level -- the high-level of market confidence in our company, right, because of the achievements driven by engineering excellence, and our enterprise, efficiency and our customer centric philosophy. And we're -- of course; we are always looking at future options in our business. But however, as I said before, we have -- we are now in our harvest season. So we are focusing on selling and on delivering the current existing portfolio of products that is very modern and competitive. So we don't have concrete plans to develop or launch an aerobody or other aircraft in the next few years.
Operator: Thank you. The next question comes from Victor Mizusaki with Bradesco BBI. Please go ahead.
Victor Mizusaki: Hi, I have two questions here. The first one, apparently some guys from Mahindra were visiting in Brazil. So I don't know if you can give us some updates on the negotiations. And second, when we take a look on the press release, there's a comment about provisions for bad debt in Service & Support. So maybe you can comment a little bit if it's a kind of specific situation or there's something more to come that's looking forward. Thank you.
Francisco Gomes Neto: All right. Victor, I'll start with the question one and then Antonio will help us with the question two. Yes, we did have a very exciting visit last week to our facilities in Brazil of the Mahindra CEO and three other members of his team, where we had opportunity to better know each other and talk about the next steps on this MP process in Egypt to sell from 40 to -- up to 80 C-390 to the India Air Force. So we believe we have a good partnership with them and we do our best to convince the customer that our products is the best one for the India Air Force. Antonio, you can help us with the second.
Antonio Carlos Garcia: Yes. Good morning, Victor. So very simple here. We just built up $3 million which you want for the bad debt provisions. Just Q1 was a little a bit higher concentration overdue payments. And it's not one specific customer is a bunch of customers who just apply the accounting methodology. I do not see it being trained for the future, but probably half of it is going to be revert next quarter [indiscernible] right now.
Operator: The next question comes from Marcelo Motta with J.P. Morgan. Please go ahead.
Marcelo Motta: Hi everyone, thanks for getting the question, is regarding the defense. I mean, do you guys have any updates regarding the conversion of the orders from Netherlands, Austria, Czech Republic? I mean, you guys also mentioned on the deliveries and backlog report from the first quarter, that there are ongoing orders from EMEA, Asia-Pacific that are not incorporated to backlog yet. Could you please give us more color on maybe the size, potential size of this orders and/or maybe expectations for the sense backlog for the coming quarters or year-end. Thank you very much.
Francisco Gomes Neto: Hi Marcelo, thanks for the question. Yes, we do have a high expectation to sign important contracts in defense this year. You know already that we have been selected in the past two years. We expect to sign during this year and in parallel, we are working in the -- in all the new campaigns either for the A-29 Super Tucanos and the C-390. We also expect 2024 to be a good year in terms of sales, not only in commercial, but in these games as well. And taking the opportunity as Executive Aviation, we keep a very good momentum in sales as well. So again this year, we are very optimistic in terms of sales in all of our business.
Operator: The next question comes from Stephen Trent. Please go ahead. Mr. Trent, your microphone seems to be muted.
Stephen Trent: Hello, I'm sorry. Can you hear me?
Francisco Gomes Neto: Yes. Yes, we can hear.
Stephen Trent: Hi, good morning, everybody. I'm sorry about that, and thank you for taking my question. I also had a sort of a follow-up on the defense side. I know that Brazil's Air Force and Sweden have a solid relationship with the Gripen fighter and other cooperation. And I was wondering if you might just give us some high level color about how Embraer might be working with Gripen and what opportunities you could see from the new technology. Thank you.
Francisco Gomes Neto: Thank you, Stephen, for the question. Well, we do have a partnership with Saab to help them to sell Gripen not only Brazil, but outside Brazil, and then they do help us to sell the C-390. So we have been working together. And Sweden is one of our potential markets that we have been working on. So -- but we don't have any other information than that. In regard to sales of Gripen, this is better you ask Saab directly.
Stephen Trent: Great. Appreciate that. And just a quick follow-up. Any high level of color, how you guys are feeling about your supply of engineers in terms of hiring and retaining those people. Thank you.
Francisco Gomes Neto: Thank you again, Steve. Again, we have been working very hard on those topics. That is the talent retention is one of the main focus of Embraer, not only engineering, but in the entire company. And again, we have a lot of new programs for engineers working on in the future. We have improved our communication process. We have a lot of things to help us to retain our talents within the company. I don't know, Andreza, our VP, HR would like to add some other information on that because we have been personally involved in this topic.
Andreza de Souza Alberto: Hello, everybody. Good morning. Thanks, Francisco. As I said, we're working very hard on that. We have a lot of initiatives, especially internally by means of culture, the future of work, things that make our engineers, and not only engineers, our employees consider to keep an Embraer. And we also have been granted as a great place to work. And this also helps to retain our employees. Thanks for the question, Steve.
Operator: Thank you. The next question comes from Lucas Barbosa with Santander (BME:SAN). Please go ahead.
Lucas Barbosa: Good morning, Francisco, Antonio. Thanks for taking my questions and congratulations to the results. So my question is looking a little bit longer-term at the Commercial Aviation division, Embraer has deliveries to be done with better pricing conditions in the future, a higher mix of E1s given the AA, American Airlines order, and a cost structure that is leaner than in several past years. So my question is, with all of those positive drivers, where can Commercial Aviation margins stabilize that in the future? Thank you very much.
Guilherme Paiva: Lucas, good morning, and thanks for the question. This is Guilherme. So, look, the points you mentioned are all correct. We don't provide official guidance for individual divisions of the company. But if you look in the past, Commercial Aviation was able to sustain margins in the double-digit territory in the mid-teens. Helpfully, very sorry from where we are now, but we feel confident that in the next few years we should see margins continue to improve towards that direction.
Operator: The next question comes from Kristine Liwag with Morgan Stanley (NYSE:MS). Please go ahead. Ms. Liwag, your microphone seems to be on mute.
Kristine Liwag: Hello, can you hear me?
Operator: Yes.
Francisco Gomes Neto: Yes, Kristine. Yes, Kristine.
Kristine Liwag: Hey, good morning, Francisco, Antonio and Gui. Sorry about that. Maybe Francisco, on competitive dynamics, Airbus continues to lose money on the A220, and they are aspirationally breakeven at 160 per year. But they're continuing to see pressure from labor costs in Canada and as well as their supply chain. Can you talk about what this means for the pricing environment for the E2? And how has the pricing environment for the E2 changed over the past few years since COVID. Are you seeing any improvement?
Francisco Gomes Neto: Well, Kristine, thanks for the question. Good question, by the way. Well, when we have a free competition in the market, the result is pressure on the price, which benefits the customs, right? In case of Embraer, I mean, even with the tough competition, we have been profitable in our Commercial Aviation. In the past year -- the past years, in fact two years, we've been profitable the commercial without services, and we don't sell our aircraft below cost. So what we have done, we have tried to offer competitive prices to our customers to show the value of our products that we -- our product we believe that we do have the most efficient aircraft in that category. And we continue to work on reducing our internal costs with Kaizen programs, with cost reduction initiatives involving many engineers in the organization. So again, we have prepared ourselves for this competition, but without selling products below our cost. So again, we expect again this year to be profitable in Commercial Aviation without service. If we add service, we even improve the profit in our commission business.
Kristine Liwag: Thanks, Francisco. And if I could tack another one, and following-up on Myles question, there is a shortage of aircraft globally, and Boeing continues to struggle with production, and Airbus can't meet all the demand out there either. Now, the E2 is a very attractive aircraft. I actually flew it recently from Paris to Zurich. I mean, what prevents customers from committing to more firm orders? I mean, that said, right, you are sold out through the end of 2026, but what's preventing them from committing for the slots in 2027 and beyond?
Francisco Gomes Neto: Another good question, Kristine. I think there was a wave of customers buying bigger aircraft. But now, I mean, I think we see more and more opportunities for this we call small narrow-body. I mean, our E2 can fly up to 6 hours, and it's very efficient, very quiet, and it's perfect for, if the airline wants to offer a higher frequency of flights to the passengers also to explore routes. I mean, until the demand is big enough to fill a big narrow-body buy, I think they too is a perfect solution. And we see more and more customers now. I mean, we see the interest growing more and more in that segment of small narrow-body that will for sure benefit our interest.
Operator: Thank you very much. The next question comes from Noah Poponak with Goldman Sachs (NYSE:GS). Please go ahead.
Noah Poponak: What unit growth are you planning for based on the demand backlog, how full the skyline is in the medium-term in Commercial.
Francisco Gomes Neto: Could you please repeat the questions? I have difficulty to understand here.
Noah Poponak: Yes. Can you hear me okay?
Francisco Gomes Neto: Yes, please.
Noah Poponak: Yes. I'm wondering from the starting point of 2024, given you have to set the system, the production system in motion pretty far in advance, and delivery -- production deliveries are still pretty far below pre-pandemic in Commercial. I'm wondering how you're triangulating all of the inputs you have to decide where you should take production over the next two or three years in Commercial.
Francisco Gomes Neto: Okay. Now I got your question. Thank you. Well, this year we are planning in Commercial Aviation deliveries between 72 and 80 aircrafts. And we -- as I said before, we are working in a lot of sales campaigns for the future. Next year, we expect to grow the production of commercial jets which should be very close back to the three digits production in the, I mean in the commercial jets. And we expect to keep that level of production with small growth in the years ahead. So again, we believe that next year in the 2025/2026, will be back to the production levels, pre-pandemic levels, which will bring our Commercial Aviation to even better profitability performance. So again, we are very optimistic with the production growth in the levers of Commercial Aviation as well.
Noah Poponak: Okay. Great. Appreciate that detail. And then at Executives, obviously the deliveries are up a lot year-over-year in the quarter, obviously, it's off a low base. But have you had resolution of supply chain issues in Executives such that the year can be more level loaded as you go through the year? Or is there an implication that there's upside to the full year range?
Francisco Gomes Neto: No, we had some difficults to last year. I mean, external with suppliers, but internal as well, because we were ramping up a lot the production. But I know since then we have approved a lot of investments in our plants to increase the production capacity either in Brazil, in the U.S. So with that, we expect -- we are planning on growth this year and an even more important growth in 2025 in years ahead. Because of this I mean investments we are implementing this year to help us to increase production from 2025 onwards in Executive jets.
Operator: Thank you all very much. This concludes the question-and-answer session for equity research analysts and investors. Now we will start a Q&A session dedicated to the press. First, we will answer questions in English, and then we will answer questions in Portuguese. We will also answer questions sent via the platform chat. [Operator Instructions]. Our first question is from the chat is from Richard Schuurman, a freelance aviation reporter. Hello Francisco, obviously you were very happy with the large order from American for 90 E175s, but how do you rate the chances of Embraer to win E2 orders from U.S. customers? They seem to favor larger aircraft.
Francisco Gomes Neto: Thanks for the questions. Yes, we are extremely happy with the order of American Airlines last March. It was very important order for us that shows that our E175 still have many opportunities, especially in the U.S. market. The E2s more recently we have seen the E2s flying over U.S. with the Porter Airlines. Porter is flying out to New York, to Florida, to California with the E2s. And we -- yes, we are in conversation with potential customers in the U.S. I mean, showing how good the aircraft is and how the aircraft can help them to fill the gap between the regional jets and the big narrow-bodies. So again, we see opportunities, not only the U.S., but in many other regions in the world for the E2s.
Operator: Thank you. The next question comes from the chat from Richard Schuurman, the same questionnaire. Do you have updates on the initial agreement with Richard Schuurman for the conversion of E1s jets in China as announced at the Paris Air Show?
Francisco Gomes Neto: No. We don't have any updated to share with you about that program at this point of time.
Operator: Thank you. [Operator Instructions]. The next question comes from Gabriel [indiscernible] Please go ahead.
Unidentified Analyst: Hey, Francisco, Antonio, good morning. I was wondering if you could update us on the sales campaigns in Asia. We know India has a big market. China as well [indiscernible] trying to tap into the Chinese market for commercial airplanes. How the different things in Asia are developing, especially now that you are flying the E2 in Singapore now.
Francisco Gomes Neto: Gabriel, thanks for the question. Yes, Asia is a region we see a big potential for E2s. Last February, we inaugurated the full flight -- the first full flight simulator of E2s in the region, in Singapore, and this will help us to pursue more opportunities in the region. And we are working in sales campaigns in many different countries. We have already more than 300 aircraft flying over the region I mean, in China, in Japan, in Australia, and we are working all those countries to introduce the E2s as well. So good opportunities for us in Asia-Pacific indeed for E2s.
Operator: Thank you. The next question comes from Juliana [indiscernible] and it comes also from the platform chat. Can you give details on the arbitration proceeding with Boeing? When do you expect it to be over?
Francisco Gomes Neto: Well, I mean, this process is not under our control, but it is the process in the final phase, and we expect a decision. See you within this first half of 2024.
Operator: Thank you very much. This concludes the question-and-answer session in English for the press. This Q&A session is now being conducted in Portuguese. [Operator Instructions]. [Foreign Language].
Operator: [Foreign Language].
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