Embraer Order Backlog At 5-Year Low

April 17, 2012

Bookmark and Share

Embraer, the world's third-largest commercial aircraft maker, said its order backlog fell to its lowest level in more than five years, underlining doubts about global demand for regional jets.

The company delivered 21 commercial planes in the first quarter but booked only 12 new orders in the segment, drawing down its backlog to USD$14.7 billion, according to a securities filing. It was the first time since 2006 that Embraer's backlog slipped below USD$15 billion, shrinking its pipeline of orders to less than three years of revenue.

Embraer has struggled to build up its order backlog, a gauge of the company's ability to weather industry downturns, since the global financial crisis of 2008. Its backlog has dropped from a peak of USD$21.6 billion in September 2008, or about 3.5 times revenue that year.

By contrast, industry giants Airbus and Boeing have grown their backlogs to more than seven years' production, boosted by a round of new orders for their next generation of fuel-saving jets.

Embraer, which builds smaller regional jets, forecast that stable demand this year will allow it to replace deliveries of its E-Jets with new orders of similar value. Embraer reaffirmed its performance targets for the year on Tuesday.

A spike in oil prices this year has hurt airlines' profitability, leading some to put off major investments.

Embraer's chief regional jet rival, Canada's Bombardier, said last month it expects plane deliveries to dip in 2012 due to weak demand for its commercial jets.

Embraer's commercial and executive jet delivery total was 34 planes in the first quarter, up from 28 a year earlier.

Embraer executives have been more pessimistic about the market for private jets, where they do not expect a rebound until 2013. Embraer delivered 13 executive aircraft in the quarter, compared with eight planes a year earlier.

(Reuters)