Embraer Makes Provision for Republic Bankruptcy
Embraer, the Brazilian aerospace conglomerate, has recently recorded a $101 million provision in their fourth quarter results. This reporting comes after the bankruptcy of Republic Airways on February 25, which resulted in a fourth quarter profit which did not meet the estimates of analysts. The commercial aviation business of Embraer established a 10.4 percent operating margin for the quarter. Not including the Republic Airways bankruptcy provision, the company produced a 13.4 percent margin.
Embraer CFO Jose Filippo and CEO Frederico Curado seem to be unfazed by the company’s exposure to the bankruptcy, as they suggested during the company’s year-end earnings call that all 24 of the undelivered E175 regional jets on Republic Airway’s books will eventually find homes with other operators if Republic Airways is unable to accept them. Filippo stated that nine E175s will be delivered between August and December, with the remaining 15 aircraft to be delivered next year; this is all in association with a capacity purchase agreement with United Airlines.
“United has a big need for these aircraft,” Filippo said. “So be it Republic or be it another regional airline, we believe that we will deliver these aircraft. It’s still a little bit early to say what will be the structure or the format because of the Chapter 11 [filing], but we are working on this now and as the next delivery is in August we have time to structure something.”
“We do not see airplanes exiting the Republic fleet,” Curado said. “Actually we don’t see them even waiving deliveries they have in backlog. So we believe those airplanes will be delivered, hopefully to Republic, but if not I think other alternatives will show up.”
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