Q4 2022 Embraer SA Earnings Call
William.
Speaker 1: $17.5 billion.
Speaker 1: Designative aviation presented an outstanding performance in 2022, and in commercial aviation we had several campaigns underway.
Speaker 1: Later on, I will talk more about the 2022 highlights of each business unit.
Speaker 1: On the next slide, we will see some important steps in our journey towards a more sustainable elevation.
Speaker 1: The NGF program was consolidated with two concept aircraft models.
Speaker 1: 19 to 36 with hybrid electric and hydrogen electric propulsion.
Speaker 1: Together with Pat Whitney we have successfully tested an E195E2 using 100% sustainable aviation fuel.
Speaker 1: As part of the reducing emission goals in our operations, we anticipate the use of 100% of the total energy in Brazil by 2024.
Speaker 1: In addition, we signed an agreement with Rheezin from the Shell and Cozen group to assess the production of sustainable aviation fuels in Brazil, which may contribute to lower emissions across the sector.
Speaker 1: In the social pillar, we are increasing the hiring of underrepresented groups in our entry-level programs, as well as the number of women in senior leadership as part of our goals.
Speaker 1: Furthermore, we were honored to receive the Great Place to Work certification in several conferences where we operate.
Speaker 1: For us, it is an important recognition to celebrate.
Speaker 1: On the next slide you see some highlights of last year's business units.
Speaker 1: In commercial aviation, we delivered 57 aircraft.
Speaker 1: 19% above the previous year.
Speaker 1: The delivery of the first EO95E2 jets to Canadian Porter lines marked the beginning of the E2 cooperation in North America.
Speaker 1: Porter has also placed a new order for 20 jets in addition to the existing third firm orders.
Speaker 1: Another important sale was the 20 E2 jets to Azura, a US leasing company.
Speaker 1: In addition, the Chinese City Aviation Authority granted certification for our EO90 E2, opening doors for the E2 family in the relevant Chinese market.
Speaker 1: Business Aviation presented excellent results for another year.
Speaker 1: with a 102 aircraft delivery.
Speaker 1: a strong demand in the entire product portfolio.
Speaker 1: and a sustainable sales level. The Phenom 300 became the world's best selling light jet for the 11th consecutive year.
Speaker 1: In defense, the geopolitical scenario continues to influence several countries to invest in renewing their armed forces' capabilities.
Speaker 1: The selection of the C-39 Millennium as the only aircraft that meets the requirements of the Ministry of Defence of the Netherlands was our ears highlight.
Speaker 1: with a 5-C290 acquisition forecast.
Speaker 1: Moreover, we announced a partnership with Elitri Harris to develop an Agile tanker, a tactical aerial refueling option to meet the United States Air Force needs.
Speaker 1: Our service and support business continues to evolve positively.
Speaker 1: In commercial aviation, growth was based on full program contract renewals.
Speaker 1: as well as new clients.
Speaker 1: And in business aviation, new clients in the executive care program.
Speaker 1: The Service and Support backlog grew 8% compared to 2021.
Speaker 1: Finally, in 2022, we took an important step to consolidate our operations in the human and mobility segment.
Speaker 1: A great business opportunity in the coming years.
Speaker 1: We completed the EV spin-off by listing the company on the New York Stock Exchange and in the year with potential orders for over 2,700 vehicles.
Speaker 1: valued at 8.3 billion.
Speaker 1: Now, I hand it over to Antonio to give further details on the financial results and return at the end. Thank you.
Speaker 1: Now I hand it over to Antonio to give further details on the financial results and return at the end. Thank you. Thanks Francisco and good morning everyone.
Speaker 1: 2022 was a great year for us.
Speaker 2: The entire Embraer 1 team worked very hard.
Speaker 2: the way to the last minute of December .
Speaker 2: to successfully overcome many external challenges we faced during the year. As a result, I'm proud to share
Speaker 2: our 2022 financial results with you today.
Speaker 2: deliveries, we increased the number of aircrafts delivered by 12.7% compared with 2021, even with significant supply chain constraints. It's important to note that Q4 deliveries were concentrated around 50% of all deliveries in 2022 with an abnormal seasonality.
Speaker 2: Embraer delivered eight jets in the fourth quarter, of which 30 commercial jets and 50 executive jets.ious
Speaker 2: There are 33 light jets and 17 mid-sized jets.
Speaker 2: In 2022, we produced 61 commercial jets but delivered 57 with 4 jets postponed to January 2023. Therefore, we slightly missed the guidance.
Speaker 2: For executive aviation, we deliver 102 jets reaching the guidance.
Speaker 2: Deliveries are gaining traction and we are optimistic on our 2023 deliveries guidance.
Speaker 2: Term Order Backlog ended 4th quarter 22 at 17.58 billion dollars.
Speaker 2: 500 million more versus Q4-21.
Speaker 2: This is one of the highest quarter backlog since the beginning of the pandemic.
Speaker 2: or 800 million more versus Q40 2019.
Speaker 2: driven by solid sales activities in the executive aviation and service and support.
Speaker 2: Net revenues reached around $2 billion in the quarter.
Speaker 2: 44% of the whole year revenue.
Speaker 2: approximately 700 billion compared to Q421, most driven by higher revenues and commercial executives and service and support, partially offset by lower revenues and defense security.
Speaker 2: Revenues reached $4.5 billion in the year.
Speaker 2: approximately 343 million more compared to 2021.
Speaker 2: or a growth of 8%.
Speaker 2: delivering the guidance with revenue well balanced by business units.
Speaker 2: moving to adjust a bit and a bit, but before that I want to report on gross margin.
Speaker 2: Q4-22 reported consolidated gross margin of 19.1%.
Speaker 2: higher than 15% of reports in Q4'21.
Speaker 2: Do it you. Volme mix 2%
Speaker 2: Enterprise efficiency is 1.6% and one-time actions 0.4%.
Speaker 2: in Q4.
Speaker 2: $166 billion yielding just a bit the margin of 8.3% or 400 base points above Q4.21, even with some negative impacts from provision and SDG&E expenses. Q4.22 adjusted a bit the were...
Speaker 2: 80.1%.
Speaker 2: higher than 15.7% reported in 2021 due to volume increase 1%, enterprise efficiency 2%, one-time effects 1.4%.
Speaker 2: In 2022, adjust a bit worth 270 million.
Speaker 2: using just a bit margin of 6%.
Speaker 2: or 200 basis points above 2021.
Speaker 2: even with some negative impacts from provisions and SCDNA minus 2%, and surpassing our guidance.
Speaker 2: In 2022 adjusted EBITDA were 459 million using adjusted EBITDA margin of 10.1%.
Speaker 2: or 147 basis points above 2021, and also surpassing our guidance.
Speaker 2: SEG&E Investments.
Speaker 2: SCDNA rose 18%, driven by higher sales campaign and market activities compared to 2021. A year is still impacted by COVID as well commercial concessions and inflation.
Speaker 2: In 2022, Embraer invested a total of $176 million in product development and research, mainly in product development, for example, E2 family, P2S, executive aviation, and turboprop braavits.
Speaker 2: We invested 66 million topics.
Speaker 2: We set 66 meeting topics, mainly for service and support expansion.
Speaker 2: Free cash flow without ease in Q4 2022 was positive in $584 million due to a strong concentration of delivery during this quarter.
Speaker 2: Precash flow without ease in 2022 was positive in 540 million due to the outstanding results and sales performance from executive aviation and very strict control over working capital.
Speaker 2: Adjusted net results in Q4-22 was a profit of $43 million or 2.2% of adjusted net profit margin.
Speaker 2: Adjust net results in 2022 was a profit of $39 million or 0.8% of adjusted net profit margin.
Speaker 2: Trading positive from enterprise efficiency less interest expenses.
Speaker 3: liquidity
Speaker 2: In the top left of the chart, we finish the quarter with a net debt without ease of $950 million or $457 million less than 2021.
Speaker 2: in line with our liability management strategy.
Speaker 2: We reduced gross debt around $824 million compared to 2021 with a significant reduction in net financial expenses on cash flow, 35 million sales in 2022.
Speaker 2: It's important to highlight that our netbend
Speaker 2: A BTDA ratio decreased from 3.9 times in 2021 to 2.1 times in 2022.
Speaker 2: This is a 1.8 times decline in just one year.
Speaker 2: The company aimed at 2022 with a strong liquidity.
Speaker 2: of $3.1 billion, including revolving credit facilities, due to the outstanding free cash flow and the working capital management. On the debt side, we re-profiled $300 million of debts from 2024 to 2027.
Speaker 2: And the maturity of our deaths gives us a comfortable situation on amortization until 2024.
Speaker 2: We continue to work on increasing duration and improving the financial metrics.
Speaker 2: at the same time, monitoring for a marked window to re-profile our 2025 and future maturities.
Speaker 2: Rating, it's important to highlight that moods are filmed in February 2023 in various ratings at BAII and raise the outlook for all ratings from negative to stable.
Speaker 2: Standard Reports upgrades in February 2023 from BB to BB+, on solid cash flow.
Speaker 2: We are one notch below the investment rate level and hope to get back to the IG level soon.
Speaker 2: Moving to 2023, guidance.
Speaker 2: I will now guide you through our outlook for 2023, starting with deliveries. For commercial aviation, we forecast 65 to 70 aircrafts still limited by supply chain classrooms.
Speaker 2: an increase of at least 14% than delivered in 2022.
Speaker 2: For Executive Aviation, we forecast 120 to 130 jets.
Speaker 2: An increase of at least 18% more jets than delivered in 2022.
Speaker 2: for revenues between $5.22 to $5.7 billion.
Speaker 2: at least 700 million increase or double digit growth of around 15% compared what was achieved in 2022.
Speaker 2: increase or double digit growth of around 15% compared to what was achieved in 2022. So, Roger is a first investor and looks Questions One to Ask.
Speaker 2: Adjusted A-B to margin of 6.4 to 7.4%. A-B to the margin from 10 to 11.
Speaker 2: In regards to free cash flow, with the substantial having a growth, we do have some challenges on working capital. Therefore, free cash flow guidance is 150 million or better.
Speaker 2: As the year progresses, we will keep you up with data accordingly, the same we did in the last years. With that, I conclude my presentation and hand it back to Francisco for his final remarks. Thank you very much.
Speaker 1: Thank you, Antonio. In my closing remarks, I would like to comment on this and following years.
Speaker 1: First of all, the 2022 financial results show that we are making consistent progress in our journey of shifting the company towards a sustainable growth.
Speaker 1: As we have said since 2020, the 2021 and 2022 years would be dedicated to the business recovery of the two simultaneous crises.
Speaker 1: the pandemic and the end of the Boeing deal.
Speaker 1: The focus will be on growth from 2023.
Speaker 1: We can now state we have fulfilled what was promised.
Speaker 1: The business turnaround was completed in 2022.
Speaker 1: and we are ready to start a new growth phase.
Speaker 1: capturing the company's full potential in the coming years.
Speaker 1: We still face supply chain challenges this year.
Speaker 1: but we are optimistic about the company's future in terms of revenue growth and profitability.
Speaker 1: Regarding revenue growth, several ongoing sales campaigns are progressing very well in commercial.
Speaker 1: business aviation and defense area.
Speaker 1: The aircraft slots on the production line for deliveries in 2023 and 2024 are practically filled.
Speaker 1: The aircraft slots on the production line for deliveries in 2023 and 2024 are practically fused for commercial aviation and executive jets.
Speaker 1: The service area will continue to grow, generating better margins, and we are confident in the improvement of decentralized results.
Speaker 1: The organizational changes announced at the beginning of the year with the creation of new vice presences for global procurement.
Speaker 1: and strategy and innovation also play a relevant role in accelerating growth.
Speaker 1: We will give even more focus to the procurement area directly impacting efficiency and value generation.
Speaker 1: In the case of innovation, we will strengthen the integration of these projects in our long-term strategy, opening new growth opportunities.
Speaker 1: For this reason, adding our recognized execution capacity
Speaker 1: to ongoing sales campaigns and innovation projects, we are very confident in Embroer's sustainable growth.
Speaker 1: And finally, my thanks to the Embraer team, which overcame all of last year's challenges with outstanding commitment and dedication.
Speaker 1: Always focusing on quality and safety.
Speaker 1: And thanks for the support of our customers and partners, and our shareholders for their trust in our company.
Speaker 4: Thank you. We will now start the question and answer section. We will ask who are interested in making questions. At any time press star 9 in your phone or press raise hand on Zoom's platform. When your name is announced press star 6 or on your phone.
Speaker 4: on your phone or activate your microphone on Zones platform.
Speaker 4: To give everyone a chance to participate, we request to ask just one question per call. Wait, why we pull four questions?
Speaker 4: Our first question comes from Ronald Epstein from Bank of America.
Speaker 4: Please, Mr. Ronald, your microphone is open. Yes, can you hear me okay?
Speaker 1: Yes, we can. Go ahead. Great. Great. Thank you.
Speaker 5: So maybe just a couple quick questions. How should we think about Embraer in the Chinese market?
Speaker 5: Typically, aircraft don't get certified in a market unless deliveries are imminent. So how should we think about that?
Speaker 1: Since we have Arjen here with us, Arjen, can you jump in and answer this last question?
Speaker 2: Absolutely, Francisco. Thank you everyone for the question. I think the great news in 2022 was that the 190E2 was certified. We're currently in the process to add the 190E2 to that.
Speaker 2: We strongly believe that the 190 and 195 combination in China is a very strong addition to the local portfolio of the AOJ21, which falls slightly below our segment, and the 919, which is the narrow body the Chinese industry with COMAC will bring to the market.
Speaker 2: It's a gap where there are no Chinese products. The 190 has an incredible performance and is very useful for the higher level airports in the Tibetan Plateau. And the 195E2 obviously is a great complement to the narrow body aircraft from China. We believe it's a great vehicle to help the Chinese.
Speaker 2: connect the many airports that are being created in China that need a very efficient aircraft. So we're very bullish about the Chinese markets and we're working with airlines and our team. We're working with our team in Beijing at the moment to see if we can campaign over the line.
Speaker 5: Got it. And if I could follow on to that question.
Speaker 5: Given all the tension right now between the US and China
Speaker 5: and kind of what that means for Boeing. Does that have been an opportunity for you guys? I mean, I don't know how you can answer that, but if you could give it a shot. Well, obviously with our segment, we are in the lower second than the narrow bodies than Boeing.
Speaker 2: But we do believe that with a Brazilian product, we add a very interesting alternative to the Chinese airlines. So I think the moment is key. China wants to really connect the country and the domestic market. And I think getting an aircraft that can complement either a MAX or a NIO, and obviously...
Speaker 5: Thank you. And then maybe just one last one on commercial. How should we think about...
Speaker 5: new product development in commercial, right? I mean, the Turbo prop was halted, if that's right. So where to now? I mean, Embraer has always been very innovative when it comes to new products, and how should we think about that?
Speaker 2: Yeah, that's a great question, Ron. The turboprop is on a slow down at the moment. We have not disbanded the project, if you will, but we need to have more in-depth conversations with these systems.
Speaker 2: supply so that's definitely a product where we believe there could be a market. On the slightly longer term the Energia platform is really something that we're spending a lot of time on. We had our first airline advisory board at the end of 2022 to really understand what the feasibility is of smaller aircraft.
Speaker 2: with a much more sustainable footprint than the bigger aircraft. So, a lot of focus on the long-term sustainability agenda and the roadmap, perhaps, for commercial aviation. We believe the E2 has a great footprint in terms of CO2.
Speaker 2: We're working on getting that aircraft also 100% SAF. The turboprop will still be existing technology but more efficient than anything out there, more seats and also 100% SAF capable and then below that the energy platform which is of course further out there's a lot of work to be done. We're looking very closely at a part of the market as well.
Speaker 2: And maybe using the opportunity, Ron while I have the microphone, there was a comment on the introduction about 20 aircraft order by US LESWORD. That deal was announced early 2022, but was part of the 2021 backlog. So we had 60 aircraft in our order book.
Speaker 2: It did include the 20 porters, but the 20 aircraft from the lease company were in the 2021 orderbook. Just to be precise. Thank you.
Speaker 2: It did include the 20 porters, but the 20 aircraft from the lease company were in the 2021 orderbook, just to be precise. Thank you. Great, thank you very much.
Speaker 4: Our next question comes from Luis Jaffeto from Wolf Research. Please Mr. Luis, your microphone is open.
Speaker 1: Thank you very much. Can you hear me? Yes, we can. Luis.
Speaker 6: Maybe just to follow up on Ron's question, I guess you mentioned your active campaign, so any additional call you can give, I think you guys are expecting a stronger book to bill in 2022 than what you kind of wound up with. So just how do you see this year playing out?
Speaker 2: We can continue on that one Francisco. Yes, go ahead and maybe Michael can complement you as well from the executive side. Yeah, so very quickly, obviously we can't comment on individual campaigns. What I can say is that as Francisco noted on his opening speech is that we see a lot of appetite for the segment.
Speaker 2: I think pre-crisis we were in the uncertainty with the Boeing deal during the crisis. Obviously the market was very slow. But now post-crisis we see a different market ahead. We see a lot of interest from airlines in being risk-averse, looking at different ways to do business. So there's a lot of appetite in the smaller segment.
Speaker 2: You may have seen the announcement of an LOI from SCUD in Asia. That's one of the information that's out there. That's great news for the E2 program. We really see new airlines interested, but we also see a golden moment ahead of us.
Speaker 2: for current eJet operators looking at replacement aircraft. So bullish about the future, but hopefully we can share more information later.
Speaker 4: Michael, do you want to add something from your side? Thank you so much Francisco and thank you again for the question Luis. Market in executive aviation is extremely strong, very robust. We have booked a bill in excess of two to one.
Speaker 7: We have market interest from all of our customers across all four product sectors, most specifically obviously with the Phenom 300e and the Prater 600 capturing significant market share growth as we look ahead into that backlog.
Speaker 7: We are currently selling positions in first and second quarter 2025 across the sector with the aircraft for 23 and 24 completely sold out. The market remains very robust in terms of demand. Obviously we are managing all the characteristics that you heard from Francisco and Antonio regarding our...
Speaker 6: just said there. This is for both of you. Were engine availability an issue for you as you look to the 23 guidance?
Speaker 6: for both of you. Was engine availability an issue for you as you look to the 23 guidance for, you know, going on any of deliveries?
Speaker 2: For commercial aviation, engines is certainly part of the supply chain challenges ahead of us, but it is included in our guide. Yeah, and Luis, on our end, obviously we're facing the same supply challenges that the entire industry is facing across.
Speaker 7: through those relationships.
Speaker 8: Thank you very much.
Speaker 8: Thank you very much. Very good.
Speaker 4: Our next question comes via phone and the number ends in 6273. Sir, you may press star 6 to enable your microphone and identify yourself with name and company before asking your question.
Speaker 4: So the telephone number that ends in 6073, you can start your microphone pressing star 6. The phone number that ends in 6073, you can start your microphone pressing star 6.
Speaker 9: Hey guys, can you hear me? It's Noah Papinek.
Speaker 9: Yes, go ahead. Okay. Great.
Speaker 5: You expect book to bill above 1 or below 1 in commercial and executive in 2023. Thank you, Michael, you can answer this as well.
Speaker 10: Yeah, I'll...
Speaker 2: What I'll say about the book to be over 2023 is that on the US markets on the eJet 175e1 we still see some challenges on the pilot shortage so I think that market will will be less strong than what we've seen in the previous number of years.
Speaker 2: On the E2, I just elaborated on that, we're very bullish about the opportunities and we hope to have a good performance there on 2023. On average, we're very bullish about the opportunities and we hope to have a good performance there on 2023.
Speaker 7: I'd say a round book to bill or better. Hopefully that's where we end up, but it's a bit early to say. Michael? Hey Michael here. Yeah, just to follow up on the executive aviation side, as I mentioned in 2022, our book to bill was consistently in excess of two to one.
Speaker 7: In 2023, obviously, we'll see some slight reduction as the marketplace continues to calm to more normal levels. However, our demand for our products across the sector remains very strong, so we anticipate that we will be at the high end of any historical book-to-bill averages for the industry. Thanks, guys. On the pilot shortage, we saw a slight reduction in the market price.
Speaker 5: to get scope change. And because there's a pilot shortage across the board,
Speaker 5: Formerly regional pilots are all moving to mainline, and then the carriers order large narrow body Boeing and Airbus aircraft and just kind of move on from your segment of the market, and therefore it's a little bit more locked in. Yeah, thank you. I'll try to be short on that.
Speaker 2: there is a lot of airports that will struggle to handle the bigger narrowbodies. We do see a continuing interest from the majors in the segment. So we do believe there is a cyclical trend here, it will not be so often short term, it will probably take...
Speaker 2: one or two more years to restabilise. But we do believe that there's a lot of focus on getting that issue resolved. We're seeing both the majors and the regionals spending money and time on increasing the amount of pilots to be trained.
Speaker 2: And what we also see is that a lot of pilots are still caught up in the training system because of the COVID scenario. So we're still in the tunnel when it comes to pilot training, but we do believe that we will come out and come to a more stabilized scenario in the period ahead of us.
Speaker 5: Is it possible to quantify, just lastly, expenses in 2022 that do not repeat in 2023, whether that's related to turboprop investment or legal or otherwise?
Speaker 8: Antonio, maybe you can get this one.
Speaker 8: I'm trying to maybe you can get this 1. You are a mute.
Speaker 11: You're on mute.
Speaker 1: He is asking about the expenses related to the turboprop. I think Antonio is having a problem with the audio.
Speaker 1: Maybe Aria, maybe you can come with this answer. On the TurboProps, obviously we put the program… I'm back. Oh, sorry. Go ahead. I would say around… if I take the…
Speaker 2: turbo prop and less legal cost I would say something like 1%.
Speaker 12: the IT margin comparing the two. Which is more or less give us some good...
Speaker 12: visibility more upside than downside trends for the VAT margin.
Speaker 8: Okay, great. Okay, thanks so much. Thank you. Thank you.
Speaker 4: Our next question comes via phone from the number ended with 1339 and you have to press star 6 to activate your microphone sir.
Speaker 8: Hello, can you hear me? Yes, yes we can.
Speaker 13: Okay, thank you so much. Yes. Hello, guys. So maybe a follow up on pricing. So at one point, you know, the issue was a lot of your commercial deliveries were 175 to major US airlines with with very tight pricing. Comment if you could, you know, what's left to go of 175? What's the pricing there?
Speaker 13: and also the pricing on the E2. And then in the BizJet in the executive sector, I think everybody has been talking about stronger pricing, but more recently, some of the US producers have been talking about inflation catching up so that pricing just offsets inflation.
Speaker 13: Do you still have any net price gains to go in the business jet area? Thank you.
Speaker 2: I'll start on the commercial aviation side. On the 175E1 we have really tried to keep the pricing discipline over the last couple of years and I think we've been fairly successful on that. There are of course some deals from a few years ago.
Speaker 2: but that needs to be recovered as well. On the E2, we...
Speaker 2: Of course we want to be very sensitive on the pricing. I think we're successful there. But also we are very aware that we need to bring E2 into the market and build a market share. We believe we have a chance to do that now. So it's finding that balance going forward.
Speaker 7: And then on the executive aviation side of the business, we have raised prices on all four product segments. This has been provided to the market for 2023. It's important to note that our goal remains to be delivering the ultimate.
Speaker 7: experience in business aviation. In order to do that, you have to also deliver superior value to your customers. So we're gonna continue to push price as long as we can continue to maintain market share and growth to service the demand and customer commitments that we have in the industry. Great, and if I might ask one follow up.
Speaker 13: to Ram's question about China. You know, you mentioned that the E190 and 195 are a good fit versus, you know, the products that China is buying. But what about the A220? It would look like. Is that a direct competitor and to what extent is that a major threat?
Speaker 2: to your sales in China? At the moment when the A220 gets certified, for sure we will compete in maybe a share of the market. But the E2 and the A220 are...
Speaker 2: slightly different aircraft in the market. And I believe, as I described earlier, with the combination of the HOD and I performance, the 190, the cost performance of the 195 V2, which is really stellar, but also the gap to the narrowbodies. We see that the 195 respects a bigger gap.
Speaker 2: to the narrow-buddy segment, which allows the airlines to play the value difference between those aircrafts even more with the E2 family than with the A220 family. We believe for China it's a very attractive combination of aircraft. But of course there will always be market where we will see competition. But we're confident that the E2 has a good place there.
Speaker 2: aerobody segment which allows the airlines to play the value difference between those aircraft even more with the E2 family than with the A220 family. We believe for China it's a very attractive combination of aircraft. But of course there will always be market where we will see competition. But we're confident that the E2 has a good place there. Terrific. Thank you very much.
Speaker 4: You're welcome. Thanks, Greg. Our next question comes from Victor Mizuzaki from Bradesco BPI. Mr.Vistor, your microphone is open. Hi, congrats for the four key numbers. I have one question here. In the conference call on part B, this is fromOTN.
Speaker 1: you give some details about the discussions in India. Apparently, you mentioned about the potential order of life of 40 to 8 KC-39s.
Speaker 5: So my question here is, when do you expect this, I mean, let's say to be confirmed, if this is something that can happen this year, and if you can also comment, if there is something else related to commercialization. Thank you.
Speaker 1: Okay, Victor, thanks for the question. Francisco speaking. I mean, it's tough to predict, but the information we have is that this process can last a couple of years.
Speaker 14: Okay, and Francisco, this is only about defense or maybe if you have a firm, let's say, if negotiation evolves, that maybe this can also be extended to commercial aviation.
Speaker 1: Well, this process, the RFE, I mean request for information, RFEI is basically for the C39 from 40 to 80 units.
Speaker 8: But we have been in contact with India for other opportunities. Maybe I can talk a little bit.
Speaker 1: more about the opportunities we have in India. And yes, as we need a partnership there for the military aircraft, this might be combined with commercial as well. Feel free to add some more information here.
Speaker 2: You are on mute, Arjen. Yeah, that's not very helpful. Thank you, Francisco. Yes, we see, well, like China, we see a great application for the 119 and 195 also in India. The previous Egypt family struggled to get to the right cost level vis-à-vis the much bigger narrowbodies.
Speaker 2: We're always talking to the engine customers. We believe that there's a great market to complement also that in everybody's. And if there is a way to combine it with partnerships, then that could be a potential combination. But it will be a somewhat longer term outcome.
Speaker 2: we're always talking to the engine customers. We believe that there's a great market to complement also that in everybody's and yeah if there is a way to combine it with partnerships then that could be a potential combination but it will be a somewhat longer term outcome.
Speaker 4: Our next question comes from Josh Milberg from Morgan Stanley .
Speaker 5: Please, Mr. Josh, your microphone is open. Thank you very much. Good morning, everyone. And God bless you. filim
Speaker 5: Very good morning to you guys and appreciate your comments. You guys have covered a lot of ground, but I had a few additional followups on the commercial side and the demand outlook there. One is just you mentioned the number of campaigns underway, and I wanted to ask if you could give a rough idea of the total number of.
Speaker 5: potential aircraft sales contemplated in those campaigns. And then with respect to China, I wanted to ask you guys if you could comment on how broad that opportunity is in terms of the number of airlines for which the E-2 could make sense.
Speaker 5: And then just finally on the E-1 side, I know you had that pilot issue in the US, but in the past you've talked about the replacement opportunity being some 500 aircraft in the next 10 years as a function of aircraft aging. And I just wanted to see if you're still seeing the market that way.
Speaker 2: Thank you, Josh. That's a triple layer question. So let me start with the E2 campaigns. We're having a big number of discussions. Some are more advanced, some are lesser advanced. But I think if you added up you're talking about several triple digit number of E2s.
Speaker 2: up. But as I said, we have a big local team in China that is talking to all the airlines. So we hopefully can specify that a little bit sooner, but I think it's too early today. On the E1s, that opportunity that you're talking about, about 500 aircraft, we still see that ahead of us. Obviously, the airlines will be a little bit reluctant at the moment to have that confidence.
Speaker 2: there's a lot of regional capacity to be replaced or added.
Speaker 5: Okay, I appreciate that great collar. Have a nice day everyone. Thank you Jeff.
Speaker 4: This does conclude today's Q&A and the Embraer's audio conference.
Speaker 4: Thank you very much for your participation and have a wonderful day.
Speaker 11: Thank you. Thank you.