Embraer S.A. (EMBJ3) Earnings Call Transcript & Summary

Hi. Good morning. My name is Gui Paiva, I'm the Head of Investor Relations M&A for Embraer. I want to welcome you guys to kind of spend the day with us. I also want to say good afternoon for the [Technical Difficulty] if you are overseas, [Technical Difficulty] to the end, and it has been a remarkable [Technical Difficulty] talk is up. And as importantly [Technical Difficulty] special year for us, [Technical Difficulty] not only because we're going to repeat or even do better the performance of our company because we're also going to be proud to celebrate 25 years of listing here in the New York Stock Exchange. We have a great event for you. We have speakers from Embraer from the different divisions. More importantly, we have also friends and guests and customers who are going to share their view and their feedback about the company. But before we kick in, we're just going to run by you a quick video about our 55th anniversary. [Presentation]

So the agenda today, we have 6 fireside chats, we're going to talk about Commercial Aviation, we're going to talk about Executive Aviation, Defense, Services. We're also going to talk Eve and how it's going to change air mobility, and we're going to also talk about technology engineering, so a lot of the new things that we bring into the market in the next few years. We're going to have a break section in the middle between the third and the fourth, but let's start the show. So the first section we have is with our President and CEO, Francisco Gomes Neto. So I'm very happy, and it's a pleasure for me to join and I ask Francisco to kind of talk about the company. Thank you.

Good morning, [Foreign Language]. I'm very happy to be here with you today with opportunity to share some good things we see ahead for Embraer. Currently, Embraer, have a very great and very competitive portfolio of technologically advanced products. So we are enjoying a very good position in the marketplace. But in this slide here, I'd like to get your attention for towards the efficiency and innovation. Those have been 2 very important pillars, very important focus areas that have supported the performance of the company. I'm going to talk more about the efficiency and innovation later on. So we have improved a lot our financial performance in the past years. Now I want to share with you some of the highlights about where we are today. So backlog of $22.7 billion, the highest over the past 9 years, almost 30% higher -- 30% increase year-over-year. Investment grade by Fitch and Standard & Poors. Our stock price appreciated almost 150% in the last 12 months. All of our business are profitable and growing. And also very important, for the second consecutive years, our employees have recognized Embraer as a great place to work by the Great Place to Work Institute Survey. And also very important, the foundation of our culture is safety first and quality always in everything we do, from design, supply chain to manufacturing and customer support. We really want to be recognized by our culture of excellence in safety first and quality always. So our company as I said before, is in a very good shape, and we are ready to grow. Actually, we see potential to reach revenues of $10 billion until 2030. And we -- together, we are focusing in these 5 fronts that I'm going to share a few more details with you in the next slides, having always in the middle, our customers. Starting with sales. Sales, we are working to materialize the sales campaigns. And we have many sales campaigns ongoing in all of our business. We can discuss this later during the panels, but we are working in a lot of sales campaigns. Also promote synergy and integration among with the different business units. If you put all the products together, so Embraer has a unique package of products with commercial jets, business jets, military aircraft and eVTOL, and those -- that combination might be of interest of some countries to develop their aerospace industry. And also, we are working to convert its letter of intent into firm orders, and will share more with you later. Deliveries, very important. We are working to make sure that we have production capacity to deliver the products we are selling in the next years. We are making punctual investments to remove bottlenecks in our production process. Also, another big challenge we have, Mike, we are discussing before, is the supply chain, right? So -- and we are preparing ourselves to make sure that we'll get the parts we need on time. In last year, production deliveries linearity. This is a very important initiative that we have put in place since the last year. In the past years, we have seen a concentration of the deliveries in the second half of the year and even worse in the Q4 of the year. And this will affecting our ability to be more productive, to be even more efficient. So now we are working in an initiative that we want really to level our production in deliveries, and we hope to see results already in 2025. But from 2026 onwards, we expect to level our production deliveries throughout the 12 months of the year. Supply chain, this is one of our biggest challenges. So what we are doing, we are now reinforcing our supply chain organization. We are bringing more people to work in that area. We are training them in our Supply Chain Academy. We are localizing senior -- more senior people to work closely to our most critical suppliers around the globe. We are bringing digital tools to help us to speed up, to improve the speed and accuracy in our relationship with our suppliers. Also, artificial intelligence tools to help us to manage our 150,000 SKUs inventory and also to help us with the material forecasting. In the supply chain, we are here put in place another initiative we call global supply chain management. We really want to anticipate capacity issues, not only of our direct suppliers, but in Tier 2 and Tier 3 to make sure that all the chains will have a capacity to support our production process. Talking about our presence in the U.S. We've been in this country for 45 years, with more than 2,000 aircraft in operation, more or less half commercial jets and half business jets. We have today more than 3,000 qualified jobs in the country with tax presence across 32 states and $3 billion in assets. So U.S. is one of our most important markets for Embraer. Then we see a lot of opportunities to grow our presence in the U.S. even further. No commercial jets. We see potential to sell the E175 more than 300 jets in the next 10 years. The E2s that we have been able to introduce in North America with Porter, Canada Flying to many states in the U.S. and more recently, Mexicana in Mexico, we see the E2 a great opportunity -- to fill the gap between the regional jets in the large narrow bodies, helping the airlines to offer a higher frequency of flights and explore new routes with efficiency. In the executive jets, our products -- the demand for our products is growing the market from the Phenom 100EX to the best selling Phenom 300 and Preators gaining more markets -- in the market as well. We see the Preators -- probably the Preator 600 is the new Phenom 300 [indiscernible]. So Defense & Security, also opportunities with the Super Tucano A-29 as a light attack in tactical training aircraft in the C-390 Millennium our state-of-the-art technical multi-mission aircraft. We have sold to many different countries, and we see a great opportunity for the aircraft to support the U.S. needs in transport, mobility and air-to-air refueling. Servicing supports, we have doubled our service centers to support our private jets in the U.S. And more recently, we announced an investment of $77 million to expand our service area in the Fort Worth, Texas to support our commercial jets in operation in the country. And last, if we see cities like Los Angeles, San Francisco, Chicago, New York, Miami, Orlando has the opportunity to be among the first cities to see the eVTOLs flying. So great opportunity for us to grow our presence even further in the U.S. Talk about efficiency. Efficiency is something that we take very seriously at Embraer. Here, I want to share with you some examples of what we are doing. Inventory turn. We have a plan to more than double our inventory turn in the next 2 or 3 years. So we have reinforced the governance of our inventory management, reinforce our S&OP process and bringing more digital intelligence to help us to manage our inventories. COGS reduction. Also, this focus has helped us to mitigate partially, at least partially the inflationary impact. So we have multidisciplinary teams working in the organization. I mean cost reduction is a noble activity at Embraer. We recognize the teams who bring ideas for cost reduction, and also production lead time reduction. This initiative, we have been working for 3 years already to reduce the production lead time of our aircraft. Our target is to reduce by 30%. This will help not only to reduce the cost of the aircraft, but also to reduce the working capital and allow us to produce more aircraft with the same infrastructure we have today. Lean Digital, we call lean digital because we don't want to automatize inefficiency. We want to first to remove the waste of the process and then to automatize the process. And also, we don't want to digitalize the entire company. We picked the areas where we believe we can capture more value, as for example, efficiency and growth, inventory, product development and service to focus on our digital initiatives. And finally, the efficiency program that we have in the company, as, for example, Kaizen. We are really Embraer, we really embrace the lean philosophy. So Kaizen programs, just for idea, only in 2024, we had a performance almost 1,000, 1,000 Kaizen projects across the organization. Boa Ideia in Portuguese, in English means good idea. It's a program we have to motivate our people to come with ideas for us to improve our process. And this year, we have implemented more than 7,000 ideas generated by our people and most of them to improve safety and quality. And again, production linearity, I mentioned before, how important is this process for us to level the production throughout the year. Innovation. Remember, efficient in innovation. Innovation, Embraer is known by its excellence in engineering, and innovation is in the DNA of the company. And to keep us to keep our readiness for future programs and also to help us to optimize the investment, we have decided to create this 6 innovation verticals. Zero emission, autonomous flight, artificial intelligence, Industry 4.0, airframe competitiveness and passenger experience. [indiscernible] will come later and share more details about the innovation verticals with you. ESG, we continue working in our ESG to implement our ESG commitments. About environmental to support the industry net zero emission by 2050, we tested already our commercial and business jet to fly with 100% SAF. Also, our target of carbon neutral by 2040, we are increasing the usage of SAF in our test flights in Melbourne. Also we are -- our operations -- 100% of our operations in Brazil and Portugal, are now using 100% of the electricity from green sources. Social, we are increasing the diversity for entry levels in the organization. Now more than 50% of the entry levels position are filled with diverse people. Also women in senior leadership position, our target is 20% by 2030, and we are now at 16%. And other programs as well as the women in the master of science in aeronautical engineering program that we are now more than 25%. And governance, we want to continue maintaining the highest standards of governance. And more recently, we received this transparency award of an important institution in Brazil. So finally, these are the key success factor for Embraer in the next 6 years. As I said before, we see the potential of Embraer to be a $10 billion company. In these other areas, we will continue to focus on in sales -- materializing sales campaigns, continue to expand our service network, ramping up production capacity, improving the leveling -- the production leveling, continue focus a lot on improving efficiency, lean philosophy of Kaizen, lean digital, continue invest in technology, innovation verticals and partnerships and also continued focus on delivering our commitments in the ESG. And having as a foundation of our culture, safety first and quality always. Thank you.

Thank you, Francisco. So before I introduce the first fireside chat, which will be with commercialization, I just want to make some to you how you can submit questions for each one of the sessions. We don't know if you're going to have time to kind of address the questions we received, but in case we do you can submit. [Operator Instructions] If we don't have time to address your questions here, the Investor Relations team will get back to you with all the answers in the appropriate time of the following few days. So to start, our first fireside chat, which is with Commercial Aviation. I'm honored to ask to the stage Arjan Meijer, which is the President and CEO of Embraer Commercial Aviation. One of our friends, Ron Baur, which is the President of Azorra; and somebody that I know for almost 10 years, which is Steve Trent, who cover stock at Citibank. Welcome, guys. And before we start, we just want to play a quick intro video for you for commercial aviation. [Presentation]

All right. Well, good morning, everybody, and thank you for being here. I'm Steve Trent from Citi. Delighted to be joined by Arjan, CEO of Embraer Commercial; and Ron, the President of Azorra, one of the premier global aircraft lessors. Thank you very much for joining gentlemen. And this is probably best if it's interactive as possible. So please feel free to cut each other off. . But maybe, Arjan, let me start with you. Airbus and Boeing announced further delivery delays. How would you say that these issues have any effect on your commercial aero business? And Embraer itself does a lot of aero structures work in-house. And could you explain the advantages to that? And do you have any particular advantages on the engine side? And would you say that the engine side is actually one of the more vulnerable part -- excuse me, vulnerable parts of the global supply chain?

Yes. Thank you, Steve. First of all, thank you for moderating, and Ron, thanks for joining us on the panel. And it's great to see so many people here interested in the session. Yes, it's a great question. I think we all know the supply chain issues of the industry. Embraer is not prone to that either. So we do have our impact, I think. And maybe Ron talked about it a little bit later, is that the impact that we see on Embraer is a lot less than on the competitors. There's a couple of reasons for that. I think partly because we have verticalized more of our work. We still do a lot of the core business ourselves. We have debt in control. What's also important, you mentioned the engines, which is -- we haven't been clear that's been one of the challenges is that there is a couple of reasons why the engine has a little bit less impact. I think we are very close to the supplier. We are very open with them on what we plan in terms of our OEM needs because they also need parts for their MRO and for their spare build. I think we have a very close partnership with them. And the fact that the E2 is less affected, and I'm sure we can talk about that a little bit later. By the engine issues than the other programs with the GTF that also helps us as an E2 program.

Great. Terrific. And maybe one for you, Ron. So when you look at Azorra's aircraft portfolio, have you seen any shift in demand among what type of equipment is being sought after? And can you provide a little more color how Boeing and Airbus throughput challenges have changed? Any of these dynamics, vis-a-vis residual values or something along those lines?

Sure. Thanks, Steve. First off, I'd just to add to what Arjan said. I think we have aircraft from all the manufacturers and Embraer does a really good job of managing their supply chain, you're really kind of mitigating the risk of delivery delays to their customers, nice to work for an airline. And obviously, getting aircraft on time is really important. You really just disrupt your operation. When we think of the E2, what we really like about the aircraft, is it the diversity, it's got many different missions. A deal we're very proud of, that we work closely with Arjan's team on is a good deal, scoops the low-cost arm of Singapore Airlines, a really great airline fight carrier out of Singapore, and they're using aircraft -- fly the aircraft differently. And we do think that the travel patterns have changed since COVID and Scoot is taking advantage of that where in every day or a 3-day weekend, airlines are using the aircraft to open up new markets. So Scoot's doing both of those things where they're adding frequencies they're opening up new markets. We see that trend kind of continuing around the world. And I think the E-Jets ideally suited for that. We also like the E-Jets in a sense that aircraft with low trip costs and smaller aircraft do well during a downturn. Gordon Mattoon used to say -- he worked for Continental, he used to say, you don't get a business flying an airplane that's too small. So in a downturn, airlines keep the smaller aircraft flying just to keep the operation going, to keep the frequency and connectivity going. Then in good times, they use it to expand their route networks. We think that the E2, the small -- we call them small narrow bodies, 100 to 150 seat aircraft are ideally suited for that.

Great. Terrific. And maybe, Arjan, I'm going to jump back to you a second here. Regarding competition, what are your thoughts about long-term opportunities in China's domestic market? How do you see the opportunities to sell E2s in China? And maybe you can mention sort of what's going on more broadly in Asia? I saw that great video. You guys now have scoot in Singapore. I believe you recently sold some planes in the Australasian Theatre. I would love to get your view on what the panorama looks like in that market?

Yes. Great question. Well, on China, I think the benefit of the E2 family is that it is truly complementary to the Chinese products. So the Chinese have the ARJ21, which was readopted as 909 just before the weekend. And then the 919 is the bigger narrowbody. And the 190, 195 E2 aircraft that fit nicely in the middle. The 190 E2 is a great aircraft for hot and high performance in China. So for the connection of the Tibetan plateau, it's a great aircraft. The 195 E2, as in the rest of the world, it's a great aircraft from a cost per trip and cost per seat perspective as also mentioned in the video by the team from Porter. So we believe there's great opportunities there. If you look at the U.S. and you look at Brazil, where the E2s are -- E1s are really connecting the networks, we believe with the expansion that China shows in terms of airports to really connect and improve the Chinese economy, it needs to connect the mainline -- the mainland, and we believe the E2 is a great aircraft to do just that. And maybe a little bit more in Asia. Of course, we're very proud that we're bringing more and more current E-Jets into China -- into Asia. And the E2 coming into scoot we really see that as a great showcase for other airlines. We know that when we speak to other airlines, they're very aware of scoot is doing. It's a low-cost airline that is now embracing a smaller aircraft with very attractive seat costs to fly into smaller destinations. So we really feel that in Asia, we're on the brink of bringing more E2s. We have several discussions going on, and I'm very, very hopeful going forward about the Asian market.

That would -- please go ahead, Ron.

Yes, I would just add to that. We're somewhat dealing with Arjan in terms of Asia and scoot is a great example, right? A lot of airlines follow their lead, and we see a lot more demand for the aircraft in the area. We're actually opening up a Singapore office at Azorra. We're a small but growing leasing company. We really believe in the Asian market, and the aircraft can really open up new markets, especially with the performance, the Scoot aircraft are 190s. It's a great performing aircraft for challenging airports. And when you add the 195 economics to really see it as a nice complementary fit themself.

And local presence is key. So it's great to see that [indiscernible] opening the Singapore office. We have an office in Singapore. We have an office in Beijing, and we're also about to open an office in India. So getting localized people to do the sales is extremely important and to do the support, of course.

No, great color. And I was actually going to ask about the Indian market as well. And you guys opening an office there, of course, China and India together are massive cross-section of the human race. So intrigued to hear that you're having that connection over there, great stuff. Ron, maybe I could jump to you again and just digging a little bit more about what I was asking about residual values earlier, your high-level view on Embraer's products? And what are you guys seeing on the E175 versus larger gauge equipment?

Yes. So the residual value, it's interesting. I think there's a misnomer a bit that it's a regional aircraft, people equate it to like a CRJ 200-type thing. And what we see is quite different. If you look during the downturn, for example, like I said earlier, airlines during a downturn, they fly the aircraft more. So if you look at utilization of the aircraft, it's being utilized heavily by the airlines. And as a result, the demand stays constant, whereas bigger gauge aircraft, they fall off and they kind of come back to the same residual value point. But we like about the smaller gauge aircraft like the E-Jets is that they can hold their value even during a downturn. And then during the good times, they're used to augment the network. The 175 is a great aircraft. Obviously, [indiscernible] ordered a lot of aircraft to really -- I think, transformed airline networks. Again, Embraer innovation putting the big win on the aircraft as a game changer. And you can see the demand is quite strong for that aircraft here. So I love to fly on it. I was at United, we actually had some of our best CSAT scores, customer satisfaction scores on the E-Jets because of the configuration stuff.

We saw that, especially during COVID the biggest downturn ever where the 175 aircraft were the ones that put the airlines out of the crisis, right? So it's just to strengthen the point.

No, great color, and I appreciate it. If I'm going to jump back Arjan you in this case. I mentioned the engine side of the fence as it's been just a tremendous focus, of course, with all the GTF problems and what have you. How close are you guys to the jet engine manufacturers in terms of supply and product development would be great to hear?

Well, Roberto, our Head of Supply Chain is not here, but he could tell you how much time he's spending on working with them. We do that together. So we have a lot of engagement, especially with the engine manufacturers. And I think that's really key because we know we have an issue, but we also know we have to fix that together ahead on. There is a benefit that I mentioned earlier on the E2, and it's basically threefold. First of all, we were the last program that came to the market with GTF. So the initial teething issues never made it on our engine because they were already fixed. The second topic is that our aircraft came to the market gradually. So in a number of years, we do have some engines that are being affected, but it's a lot lower number that needs to go back to the shop. So the impact on the MRO side is a lot less. And I think the third, and that's a very important point that we can't stress enough with our customers is that the engine on the E2 is the same engine as on the A220. But the E2 is almost 9 tons lighter, it's 10% lighter as an aircraft in Max takeaway configuration. So the wear and tear on that engine is a lot less, and that's what we're really seeing in operations. So the GTF terminology tends to bring a lot of problems to people's minds. But I think if you look on the E2 and especially engines that are coming out of the shop today, they're in a very good shape.

Great color on. I appreciate that. And I'm going to jump back to you, Ron. When we look at the Chinese market, some of your competitors are reducing their China exposure but adding to other parts of Asia. I was actually just overseas with one of your competitors mentioning this. How are you viewing opportunities geographically? And in which regions do Embraer aircraft have the biggest edge?

So I think we have a limited exposure in China. We have a couple of A330s there that we acquired through an acquisition of the company. But like Arjan said, I think it's a growing market. I think aircraft is ideally suited for that part of the world. You see it with Virgin and Scoot and others. So for sure, I think we see that as a role growing market. For us, the backbone of the E-Jets is really Europe. The European airlines use aircraft well to supplement their network. They're I'd say, very focused on efficiency and environmental aspects, and that really lends itself well to the E2. What we like about the lead E-Jets is it's a very diverse aircraft. The low-cost airlines can use them. Flag-carrier have them and mainline aircraft having too. So it's really used by all facets of the industry.

Great color, Ron. And back to you. And back to you Arjan. What areas of growth do you see for the E2? Do you think that the stumbles of larger OEMs can create E2 opportunities? And for the E1s, is this still primarily focused on U.S. replacement cycle? And are there good cargo or freighter opportunities for the E1? I know and that great video Francisco put up I saw some cargo information. But would love to just care if you could expand on that.

Yes. Well, for the E2 market, we really see 3 different pockets of airlines. The first one is, of course, obviously, the replacements of the current E-Jets. So all the 190s and 195s that are flying out they need replacement. The E2 is really the best option for airlines because it's a very easy transition. They don't have to take long -- they don't have to do it very quickly, they can take a long time to do that. If needed, it's completely pilot common. I think that's why we love to have Azorra in the program as a "regional lessor." Although we like to call ourselves smaller narrow bodies, not regionals, but it's one market where we really see a lot of E2 demand over the next couple of years. And E1s now getting to an age where that's becoming really relevant. The second very strong point that we see, and again, we will show that in the video where we looked at the trip cost versus seat cost, is that there's a real paradigm shift from history where traditionally, the smaller jets were cheaper per trip, but still quite a bit more expensive per seat. And the E2 has changed that. So the trip costs are 25%, 30% lower but the seat costs are almost the same. So for airlines, it's now a great tool to complement their much bigger narrow bodies at very similar seat cost. And although there might be a small gap, and airlines always want to talk about the lowest cost per seat, but we always say, well, it's great to have low cost per seat. But if no one sits on that seat, it's still pure cost, right? So with an E2, it's easy to fill, it's easier to reach the load factors. And I think airlines are starting to see that. And the third group is a low-cost area where we saw Scoot getting on board where we have more discussions with airlines. I think there's another element coming into the mix that airlines are getting more and more aware of the threats of putting all your eggs in one basket. We had a lot of issues across the industry, unfortunately, that have shown that if you have everything in one basket, if something happens, your whole fleet is affected. So airlines are really starting to look at how can they spread their mix, how can they move to multi-OEM. And I think that's where a combination of narrow bodies as -- for low-cost operators to add a smaller aircraft type also makes a lot of sense. So those are the 3 pockets. We also have a lease base that is helping us to play across those fields. And on the E1 side, it was mentioned earlier that the 175 E1 is still a great aircraft for the U.S. We believe there's a tremendous market ahead of us. And the existing 190 and 195 aircraft, we have now certified the 190 freighter, the vast majority of 190, 195s are actually 190s out there in the market. And we believe that's a freighter that can perfectly fit between an ATR and a narrowbody freighter. So we believe there's a huge market. We have one converted aircraft at the moment. We're busy placing those. We have several customer discussions at the moment going on. But we believe there's a very bespoke market for E-Jets in freighter configuration.

If I could just add to Arjan second bucket, it might be a bit in the weeds, but I think it's a good analogy. When you think about an aircraft, what Arjan is really important in a sense that the E2, it's an all new aircraft, right? We like to say it's all new aircraft on a proven platform, the E1. But having an aircraft that's got a lower trip cost -- is going to be lower trip cost and a very similar cost perceives really what the 787 did to the 777 and A380, really transform airlines networks when I work to United, it's a game-changing aircraft. When we think about the 87 compared to what it did to the current generation aircraft. And you see that with E2, where the aircraft and A320, they're both clean sheet designs. And it's really putting aircraft like the 700 and the A319 at a really competitive disadvantage of ownership cost is different for used aircraft, but it really transforms the networks. And you can see as airlines realize that and Scoot realize that they're clearly a market leader, they're using that aircraft to start to really augment their network and think about 15, 20 years ago when all the traffic flew through Kennedy. Now you can fly from London to Austin, Texas on the 787, and we kind of see a similar analogy with the E-Jets and the small narrow-body aircraft because the economics are quite amazing.

That's why we stopped calling it regional aircraft because 6-hour flight is nothing regional, right?

Great color. Really appreciate that. And Ron I'm going to jump back to you. When you think about opportunities for Azorra's broad business, how do you think about leasing Embraer jets versus are there commercial jets leasing engines, leasing helicopters, there's something along these lines. And you have entities such as Fortress Aviation digging deep now into the engine segment. Do you see any opportunities for to do something along those lines?

We do -- we try to be different at Azorra. In a sense that we have to distinguish ourselves or differentiate ourselves, I should say. And we actually [indiscernible] good salesman because we are customers for the E-Jets. We have phenoms in our fleet as well, as well as we're one of the launch customers on Eve. We think, again, trying to differentiate ourselves in terms of aircraft. The E-Jets really complement the airline fleets. We have Phenom aircraft that we can do quite well with -- it's an amazing aircraft. And it's a business segment that we want to kind of increase. And on the engine side, we're a bit unique where we're actually acquiring CF34 engines and GTF engines to support our customer needs. One constant feedback we hear right now from airline customers is they're concerned about the engines. So we acquired some engines from Pratt to support our customers. We're talking about doing like pooling type arrangements so we can really kind of support some of our smaller customers because you can't obviously, at least half an engine to an airline where we can actually pool engines. So we think being a full-service provider, being creative and innovative, it's part of our core values, and we think providing engines as part of that. With respect to Fortress and FTAI it's a very different business model, something we watch closely. But when you think about the CF34 engines are quite -- it's very similar to the CFM56 engine, they're equally reliable, but the modules are kind of more in tune. So we don't see that as much of an opportunity like what FTAI has done. But of course, we're very impressed with their performance, and we keep an eye on them for sure.

One of the key points that you don't mention that, but you have actually some contracts with engine manufacturers, right? So you are able to not only supply an aircraft but also to supply engine leases with that, which is something that not many lessors are doing, which is quite innovative?

Yes. We -- thanks for bringing that up. We do have an industry-leading contract with GE on the CF34, and then we're the only lessor that has an FMP, a fleet management program with Pratt on our aircraft. We work closely with the Pratt team trying to expand the customer base, just like we do at the Embraer team. But we think that's quite helpful to our customers because we're a smaller airline, it's quite difficult to get an FMP on a longer-term basis.

Interesting. It is for Ron, one of our main customers you are involved in both the E2s and its main competitor, which shall not be named. So when you think about the relative strength of the aircrafts, their difference, how they fit into your fleet and your business strategy, how do you see the many differences between them?

It's a great question. And when I ran fleet, it was actually fairly fortunate position to be in because both competitors make really good aircraft. We looked at the neo versus the MAX as an example. It really comes down to how does that aircraft integrate into your fleet, the overall deal, the economics, how you can use aircraft. When we look at the A220 and the E2, we view them very similarly. They're both clean sheet designs. They both have their the pluses and minuses, and it's really up for the airline to decide which is the best and optimal aircraft for them. I do think with the large installed customer base of E1, there's a huge opportunity and there's even more than 1,500 aircraft out there eases transition is a huge, huge benefit, especially when I was like United being in a bigger airline, that transition is quite a benefit. But look, I think they're both great aircraft. I know Investor Day. But we like them both. We let our airlines choose. And I think they're both clean sheet designs that really, like I said earlier, have game-changing economics so we can really kind of capitalize on that.

Thank you, Steve. Let me let you ask the last one.

Appreciate that. No, maybe I'm going to go back to Arjan. I was really intrigued by what you said about the E175 and how extremely well it's done in the U.S. market considering any potential competing aircraft really get skewed up on maximum takeoff flight limits. Do you see any potential over the next 20 years that we could see some kind of scope clause adjustments that could leave you to pivot on your product strategy?

Well, Steve, I'm glad you make that -- do I see anything in the next 20 years because that's far away. I think short term, I don't see a lot of changes coming. Historically, I think this is not the moment. What I would say is that the 175 is such an amazingly strong aircraft. It's basically causing its own need not to change the scope clause, right? So that's what we've seen over the last couple of years. The E175-E1 was so good that the gap of the 175 E2, which had a smaller engine, which has a smaller gap in terms of fuel burn, it was not enough for airlines to say, okay, let's go to [indiscernible] to get the 175-E2. However, maybe going forward, there needs to be discussions around this, right? If we want to bring the world really to a more environmentally better place and we want to reduce the fuel burn per seat, then I think something needs to happen in that space. It can either change on the seat count or it can change on the max take of weight size. I think short term, no. But I think long term, I think we're going to have to see what's next to cover that base because I really don't believe that with the size of the smaller segment in the U.S. that, that is a segment that the airlines can do without. You need to fly those destinations to a smaller gear. The 50-seaters are now all disappearing. There's no new 50 seats to the market. So I think the market will be depending on something between 80 and 100 seats for long term. And maybe 190 E2 could be something that could fit there, but this is maybe wishfully looking into the future.

Great stuff. And it looks like we're just about out of time. I want to thank you, gentlemen, for the time and insights this morning. I appreciate that.

Thank you, Steve. Thank you, Ron. Thank you, Arjan. Thank you for the conversation and the insight gentlemen. We're going to remain on track here over the agenda. So we're going to have our second fireside chat with our Executive Aviation trend, some very helped and I'm very happy to invite to the stage, Michael Amalfitano, which is the President and CEO of Embraer Executive Jets. One of our best friends, which is Mike Silvestro, CEO of Flexjet, and Noah Poponak, our moderator, works at Goldman Sachs and also covers our stock. Welcome, gentlemen. Before we start, let's just play a quick video for Executive Aviation. Thank you. [Presentation]

That was great. Well, good morning, everybody. I'm Noah Poponak. I'm the aerospace and defense analyst at Goldman Sachs. It's great to be with all of you this morning. Thank you to Gui and the Embraer team for having me here, which is pretty cool. I didn't think we'd be in this reverse position at your event. But this is a great idea. I'm excited to be up here. Hopefully, we'll have some fun talk in private jets. So with me on the stage is Michael Amalfitano, who's the CEO of Embraer Executive Jets. And then man of the hour in the middle here is Mike Silvestro, who's the CEO of Flexjet. So gentlemen, I think for me, the biggest question, and I assume what everybody wants to hear about is really how is business? And overall, with demand, we saw this very strong period of time during the pandemic. It seems like -- I was really surprised to hear from you all how low the penetration rate of those that could theoretically afford to fly private actually did. It seems like that went up. And I think the biggest question on a lot of investors' minds is what's the sustainability of that? And is that going to prove temporary and pull back? Or did you actually pull a lot of new people into your market that are really permanent recurring new customers in your market? So Mike, since you're sort of directly facing that customer and the shared economy saw a lot of that -- those new flyers come in, why don't you take that first and tell us what you're seeing in your business?

Well, I think all of us saw a significant trend in the last 4.5 years. I can't believe it's almost been 5 years since the pandemic hit all of us around the world. So we had a -- what we saw was this interesting phenomenon like we coined a little phrase called the frugal wealthy. So a couple of things happened coming out of COVID. Number one, those that had the financial wherewithal to fly privately before, but just chose not to because they just don't want to spend their money this way. They came out of that pandemic and thought life is too short. I want to stay healthy. I'm for myself, for my parents, for my children. So we had this incredible influx of people who could always afford to do this, but just chose not to. And as some of you or all of you have had a chance to fly privately, if you've got the money, there's no going back. This is just an unbelievable thing. The second thing we saw -- well, is I've seen this incredible trend of people flying privately younger. So in a generation ago, a man or a woman who worked, they waited a little bit maybe until their 50s or so to start flying privately. And what we've seen -- and they usually started with a light jet and move their way up the food chain. An incredible trend today is people are flying younger, they're flying larger aircraft and they're flying further. So in the past, you'd have a 55-year-old person start light and move up. Now you've got a 45-year-old and they're moving right into mid and super-mid aircraft. So as I see it, from a private aviation demand standpoint, we've gained a whole tranche of people, and we've gained them 10 to 15 years younger, which just gives us that much more opportunity to grow.

Yes. It's interesting, Mike. The dynamics that Embraer saw in the segments that we serve was quite similar. You had a step change in the executive aviation sector post pandemic, and new entrants was at a peak between '22 and '23 that 30%, 35%. Normally, it's high single digits as a percentage in terms of new entrants. So Mike's point about bringing new entrants in the market and bringing them younger, we saw that in the entry-level Phenom products as well as in the midsized cabin category for the executive Jet Preators. The other thing that's interesting about the steadiness of the demand is they were all concerned about are they staying, right? So it's one thing to do it and then they realize how much does they cost, how much does it operate, the maintenance, the downtime, it can't get into the service center or whatever, right? So that's the natural reaction was, are they staying? And so we've done some studies that said less than 8% of some who buys a jet for the first time sells in the first year, which is a good first barometer as to the stickiness of these customers. And we've seen that happen in prior cycles with the financial crisis, and we're seeing it here, folks are staying in. And Mike -- so I talked about privacy, talked about security, talked about health, talked about convenience, talked about efficiency. Those are the reasons why they stay. So they always have the ability to invest in private aviation asset, whether as a whole ownership or in a fractional share. And now they're staying because of what it allows them to do from a business efficiency standpoint.

Really interesting. Could you maybe frame a little bit where demand volumes are year-to-date '24 or I guess, what you expect in '25 compared to their strongest level? Is it -- has it pulled back at all? Is there any percentage of the people that came into the market that have left? Or are things really just still growing from that base level?

So our business -- our revenue hours are up 12% year-over-year. And that was on top of a 12% year-over-year growth before that. So if I looked at my book of business, COVID versus today, we're up about 60% of the number of people they are flying. Now a lot of that has to do with, obviously, what we've seen as a rebound what we just spoke of, but I just think that particularly the fractional model just provides as close to and experience this whole aircraft ownership without any of the challenges that you incur when you own your own airplane. So anonymity service, the interchangeability amongst different sized aircrafts within the fleet. So I'm very confident and very bullish, particularly on our piece of the business where demand has not even come close to.

And you just saw the earnings release that we did with the third quarter and executive jet business revenues were up 65%. And we actually had the best 9 months in the history of the company's executive jet business. So the revenue is starting to really materialize. And when you look at the backlog, you recognize that folks are buying aircraft, not just for today, backlog out to 2027, and I know it's similar with Mike in regards to -- you're not trying to sell a share. The airplane is already sold before the airplane comes off our line and goes into the operation.

Yes, it was kind of interesting is as a salesman at heart, have been in the business for 25 years. In the last few years, we've actually been on allocation where we don't -- we'll sign up a customer, but we can't have them fly until the airplane actually delivers. You've got this even I have this pent-up demand of people who want to fly on our fleet of aircraft, but we need to preserve the service levels with our current customers. So we've gone through this very detailed sort of thoughtful operational analysis to ensure that we have the right number of airplanes for the number of customers that are signing up.

So we both still think demand is higher than supply?

Yes. Absolutely.

Okay. Mike, let's talk about Embraer's airplanes. You fly several types of airplanes in your portfolio, but you have a higher mix of Embraer than I think most other fleet operators. Can you talk about why that is?

Sure. Well, today, we'll finish the year. This year, we'll be buying 150 Embraer airplanes. So obviously, it represents about 50% of our fleet today. And we're not slowing down. What's interesting, too, which bodes well for -- in terms of profitability, 75% of the airplanes that I'll take in 2025 are Preator 500s and 600s, but in my comment earlier, as I look across the 3 types that we fly, Phenom 300, Praetor 500s and 600s, 3/4 of those are in your Preator mid- and super midsized aircraft. Again, that speaks to our customers who want to fly in airplanes that are bigger, more luxurious and go farther.

What's interesting about those dynamics, it's similar to what we're seeing in terms of the Phenom family and the Preator family. When you look at owner flown aircraft, in fact, that the Phenoms are single pilot, you have a whole opportunity to penetrate that sector. That has to do with the safety envelope, the operating use the [indiscernible] envelope that allows for that to happen. When you start working to the Phenom 300, which as you saw in the video, best-selling jet for 12 consecutive years in a row, it's also the most desired jet by Jetnet that they do a survey every quarter of 500 operators, and they say, which airplane would you buy in the next 12 months? The Phenom 300 is the first aircraft that they mentioned. And that has been consistently operating very high utilization, which is a very key factor for the Mike's fractional business is the operational utility is high, dispatch reliability is high, the predictability of maintenance for the aircraft is robust and the fact that it has an opportunity to be looking at the efficiencies of the innovation of the product. So you have -- it flies the farthest, it flies the fastest, it has the lowest cabin altitude, which means it's the most comfortable and has the most technology with runway overrun and auto throttle, but things that are very robust, as you heard from Francisco, talking about the innovation of the company. So it's an efficient aircraft, and it's an innovative aircraft, and that's why it has over 850 of them are in the marketplace, and Mike has a huge fleet of these aircraft. On the Preator, obviously, it's -- we're starting to see, as Mike said, lots of new buyers. So corporate flight departments are coming in, doing fleet replacement cycle, and for several reasons, it has all of the technology and innovations of a large cabin ultra long-range airplane and a smaller carbon footprint in terms of its efficiencies. So that's been very valuable coming out of the pandemic, coming out of the environmental pressures that are across the globe, picking and choosing the mid and super midsized category aircraft as opposed to large aircraft category and getting the most efficiency. And you saw as well in the video, the disruptive nature of fly-by-wire and what it's capable of doing. So they have direct missions, they're able to plan their missions that allow them to have less CO2 contributing to their contrails. So lots of opportunity for telling a very good story to your buying community, because as they get younger, they also have different dynamics, I'm sure that you're seeing in regards to what's important to them in regards to flying.

Yes, Mike, can you spend another minute on the Preators, because the Phenom 300 is obviously quite established I think, pretty consensus, the best airplane in the light cabin market. The Preators are a little more new and there is more competition there. What do you see -- what are your customers tell you about that?

Well, just to be clear, we still fly 60 Phenoms and plan that continuing to do so. So -- but you would -- so what's interesting is we -- of course, when we expanded into Europe about 7 years ago, we kind of thought through the airplanes that we wanted to make a commitment to. And we made a strategic decision that has become one of the smartest things we did is we didn't really -- we went right in with Preator 600. And so that is our main state aircraft in Europe. And what we chose to do that because, when we think about sort of -- when we think about an area of serviceability, Praetor 600 allows -- if you think about London, which is sort of the epicenter of European Business Aviation, you can get to New York -- New York, London. You can do London to the Middle East. You can do London once the war ends to Moscow, all in a Praetor 600 in that super midsized category, very, very capable. So we went right in on a larger aircraft as sort of our go-to airplane.

And Michael, you referenced corporate flight department refresh the Challenger 350 has long been, I think, considered the workhorse for that specific customer in that segment of the market. Is that a large market share again opportunity for you? Or will the Praetor still be more the fleet operators in private...

So you're going to see more and more announcements of corporate flight departments and not just the Fortune 500, but Fortune 100 and Fortune 50 companies that have bought Praetor 500s and 600s in bulk that are in our backlog. And so once those become public, you'll see those types of names, no. And I think what you're seeing is exactly what Mike just described. It is a mission-capable aircraft that allows for operational efficiencies and cost, and it allows them to have characteristics for the Praetor 500 to go corner to corner. So if you're in North America, you're going to be going from Florida to Seattle, or if you're in Boston, you can get to San Diego with Praetor 500. So it's a highly utilized aircraft. It has great tankering capability. So fuel and fuel cost is a big driver. So the ability for it to tanker fuel from the home base of these corporate flight departments that have low cost efficiencies is really, really important. And the Praetor 600, as Michael talked about, it goes ocean spanning. And so we recently did a video that showed the capabilities with a customer onboard that had the opportunity to fly from London to Teterboro specifically on the Praetor 600s to show that it's capable to do that nonstop. And it's comfortable because the cabin altitude is 5,800. So you have more oxygen in the cabin associated with that. So the customers are enjoying the aircraft. So to Noah's question, we're taking market share. When you see the third quarter results that came out, you'll see that we've taken market share from the 3 other competitors that are in the space in the mid-cabin and large and super midsized cabin aircraft. So I think that's the trend that you're seeing, and it has to do with that efficiency and innovation that the product delivers to the customer. And Mike, I have a question if you don't mind. We've known each other a long time, probably 15, almost 20 years now. And I'm always curious to see what more can Embraer do for you and what more can our products do for you that we're not doing?

Well, I would tell you that from Flexjet's point of view, Embraer is -- there's -- our relationship is excellent. I would tell you that there are things, of course, we all have agreements and we follow the contracts. But there are dynamics that come up in any relationship that you just can't legislate. And I would tell you that one of the most -- if I could offer you a compliment is the things that we need to do to come to the table to work issues out A plus. The challenge is what you could do, which is a common theme for anything is we need your airplanes, right? So the supply chain issues, which we won't beat to a drum are probably the most challenging for all of us in the business, so it is the more planes...

Michael, do you want to elaborate on that because from my perspective supply chain -- everybody know supply chain is very tough industry. But your delivery growth has been pretty good. You've been able to stick to a plan, I think, more than some others. So where is it better? Where are there still bottlenecks that you're seeing?

So it's an interesting question. And I know Francisco stepped up, but he talked a little bit about the Kaizen process. And we have thousands of kaizens that are trying to create efficiencies in the supply chain. And interestingly, we're bringing the technicians. We're bringing the specialists. We're bringing them to the main tiers as well as the sub tiers to help them solve the problems that they have in their operations by product. And so -- and when you go to Cleveland, you'll see airplanes on the ground, not just our aircraft, but other aircraft in their fleet on the ground waiting for something related to engines and propulsion-related products. So there's systemic issues that are not unique to any one particular product line. And so I think what Embraer has done is take a very tactile approach to the process. And we're trying to look for ways in which we can solve solutions inside, find remedies with each of those products. If you look at the main offenders, it's engines, APUs, compressors, so propulsion-related items; raw material items that are related to resin. So windshields, windows, brakes, tires, things that are related to the resin that's in there and then some interior components and the one-off product depending on the circumstances. And those critical suppliers, as we refer to it, are the long pole in the tent to be able to provide more Phenoms and Preators to the Flexjet fleet. And we're not only managing the production line to keep up with what they need delivered every year, but obviously, they have an operating fleet in those 150 aircraft that Mike referenced, we need to make sure, have parts and service as well. So we're actively developing solutions in-house with the suppliers the collaborative nature of that kind of engagement is really unlocking the potential. And so those are some of the things that we're doing very actively as opposed to blending them. We're trying to find solutions with them. And we have expert engineers in Embraer. They know the product very well. So there's -- I think we're sending hundreds of folks on site all over the world to be part of the process to find solutions and making sure serial number by serial number, our products are coming down the line.

Really interesting us 3 sitting here discussing this topic because you have a customer saying to you right here, give me more product. You have a financial analyst where I'm saying, whenever there's a product shortage, it's actually in a way good because it's a cyclical market, the OEMs often chase the demand with too much supply, and then you have to cut supply in a downturn. And so the shortages keep supply and demand tight, you take price, you have better margins, you have more visibility to extend the backlog, it can be very good. So how do you manage the business for I have customers saying they want more airplanes. I can't have too long of a line such that they go somewhere else, versus you know it's a cyclical business and you can't chase the demand too much.

Well, Francisco referred to production leveling and cash leveling, which is a very big part of that inventory turn. Cash and margins are where it's at for the fractional business as well as for the whole ownership business. So our job is to build the right amount of aircraft in the right categories for the right customers and some of the solutions that we've put in place with inventory turn, cash leveling production -- leveling allows us to make sure that we're preserving margins. And you referenced that, I think that's -- the pricing discipline of the Executive Aviation business has never been better. And we're not only growing in any given year, but we're growing year-over-year, and we're able to set in advance the list price for the future year because we have a strong backlog, because we have a stable production line that allows us to maintain efficiencies, Noah. So we're in a very appropriate spot, and you saw in the earnings, we're seeing the 16% operating margin, right, in the business without services. Whereas if you looked at other OEMs, they would be fortunate to get to those levels with services. So we're doing something right on how we're managing price and that price discipline is important. And it matters to Mike because he didn't have to sell these same products piece by piece, share by share, car by car to the customer.

You get to sell 1 customer, 1 airplane I have to sell 10 customers. And the other thing besides new aircraft is the ability to keep the current airplanes flying. And one of the things I think has been tremendously innovator is our collaboration with our service centers. So Flexjet and Embraer are teaming up in a service center module that is very unique to be able to keep airplanes flying and more dispatch available, which, of course, keeps customers happy, which then happy customers tell their friends and colleagues, and that's what kind of is a systematic growth inside the business.

Yes. So we just announced it last year, operations this year. Cleveland, Dallas and Sanford are the service centers Mike's referring to. And then I think it's also important to recognize that they are a big sales group for us. So they're selling our product every single day, which helps collaborate on the marketing side. So we do a lot of work together so that we can complement the experience that we're trying to sell.

Is there any market caps in terms of segment or features that Embraer could feel that you see the need that we could help you?

Well, the obvious one would be if strategically, you decide to build a private business jet that would be in the ultra-long range category. So I think, congratulations on 55 years. One of our predecessor company, we bought our first executive jet from Embraer, I think, 21 years ago, right. So we've been with you a very, very long time. So a wonderful job in the light, mid- and super mid category. So I guess the question would be on -- and as I shared with you before, the world is getting smaller, and the demand for ultra long-range aircraft has never been stronger. So that might be an opportunity for Embraer...

Great. Thank you. I'm going to let you ask last one.

Okay. Well, maybe we could just finish up with the profitability discussion. Mike, your market can be a leading indicator for Michael's market. So maybe talk about rate of change you're seeing in your pricing? And then, Michael, you touched on where you've taken your margins. So I think and everybody wants to know what's next after that? And how sustainable is that third quarter?

Well, our margins are very good, very strong. And I think the trend of customers wanted to fly bigger airplanes sooner bodes extremely well for profit margins because we make more margin on bigger airplanes. So the combination of -- you can actually -- as the airplanes get bigger, they aren't necessarily proportionately, they don't cost as much to be able to operate, then the marketplace will allow for pricing. So I think the fact that customers are demanding mid- and super mid aircraft, a large proportion allows for all of us to keep our profit margin strong for the years to come.

It's interesting. So I would add, Mike, some of the things we're seeing now in regards to price is actually the benefit of the supply challenge, right? So you have the ability to use factual data of supply agreement cost escalation to drive the price up to support the same margins. And obviously, because demand, as we referred to earlier, is so strong, now you have higher demand, which allows the price point to go up on each of the products. Then last point is the preowned marketplace. In the past, you would always look at, oh, if I have to wait until 2027 to buy an airplane, I'll just go buy an Embraer product in the marketplace. Well, that took place all through the pandemic period. And so right now, if you look into the marketplace to find an aircraft, 72% of the available fleet is older than 10 years. So if you have a younger buyer who wants new technology, that wants the best and greatest, fractional or owner. They're not going to go to the used market and buy an older than 10-year aircraft. And so that's also helped. Unlike the financial crisis, where prices fell in the preowned marketplace. The opposite happened. We've actually had a booming effect in the preowned marketplace. And if you went to go buy a Phenom 300 today in the market, it costs more than what we charge to build a new one. Now obviously, escalation will kick in and those prices will recover, preserving the margins, but it's really, really exciting to see that we have this balance in terms of the technology the customers desire with the younger buyer that's going to bigger airplanes. And the backlog in demand is strong enough for you to support the pricing of discipline today and in the future. The only difference to your point about third quarter, fourth quarter are they sustainable, is about how many units you deliver. So we had a very strong delivery third quarter if we are able to continue that pace for fourth quarter so that we meet our guidance of between 1.25 and 1.35, then the same kind of margins will be unlocked as well.

Okay. Chairman, I want to thank you for your insights. It was really interesting. Thank you, Michael. Thank you, Mike. Thank you, Noah. And we're going to move on to the next one. Well, we're going to move on to our third panel, which is going to be the last before we take a break. So the break is coming soon. Our third fireside chat is for Defense and Security. It's a pleasure for me to invite to the stage, Joao Bosco, which is the President and CEO of Embraer Defense and Security. Mr. Don Turnbull, which is the Director of Melora Consultancy, which specializes in the military segment. And in our moderator for the section will be Myles Alton, who will cover the Wolfe research. And before we start, I play a quick period. [Presentation]

All right. Thank you for the invitation to moderate, And it's great to have Bosco. So Don is a subject expert here to go through the portfolio for Embraer's Defense business. Probably the piece of the portfolio that has the best rate of growth over the next 5 years that I think we're going to hear about. So Bosco 2024 has been a pretty outstanding year in terms of growing your backlog, particularly on the KC-390 or C-390 which will probably dig the deepest into. I think you've gone from 29 orders to close to 40 orders. And then even Sweden coming along in the last few days with indications of interest. So maybe talk about where you are today in your business and some of the initial prospects you're seeing for the next several years?

Good morning, everyone. Thanks, Myles. Thanks Don, to join us in this panel today. Yes, you're right, Myles. So it's been a great year, amazing 2024 for our business unit. Certainly, the -- one of the best in our history. We have signed our order with 3 European countries for the C-39, and we have signed 2 different orders for A-29 as well. But if you put this in a 12 years perspective, we could add South Korea in this list as well. So we are talking about 14 units of C-39 and plus 12 units of A-29. So again, we are facing a very special momentum. 2024 was very nice to us in terms of sales and backlog. We could see the C-39 consolidate its presence in Europe, in the NATO environment as well. So we are expecting that the C-39 will continue facing this great momentum, and we are renewing the momentum of the A-29, both of them are facing amazing momentum. And we are expecting for the future the defense that our products will deliver, add value to defense customers around the globe. And I think more customers will add our products to their fleets.

And Bosco, just to stay on that point of getting the demand right with your production system from an investor perspective, we've heard about supply chains and all the other units. I'm curious, what should we think about is supply chain constraints for you as well as what should we think about in terms of production outlook over the next several years?

Today, we are facing challenges as well as Michael just mentioned about executive jet, but we have prepared ourselves for this momentum. Since the day first in the program, the C-39 program, we were expecting this momentum of the success of the airplane. We have implemented a very strong ramp-up planning together with the operation and the supply chain team. As Michael mentioned here, we are adding a lot of knowledge coming from commercial jets, business jets to ramping up our production line in [indiscernible]. By the way, back in April of this year, we host a C-39 Day on our [indiscernible] facility with more than 40 suppliers that it's the most important suppliers for us to ramping up our production line. So Myles, considering the success that we are having and the forecast that we are planning for our plan up to 2030 to deliver 10 units. We do believe that [indiscernible] is ready for that. But of course, if we need to attend some strategic market like U.S. and India, for example, we need to count with additional assembly line, and that's what we are planning.

And today, are there areas of the supply chain you'd point out as being the longest poles in the tent. Or would that be something you'd discover later on as you get closer to that 10-a-year delivery rate?

No. I think the supply chain will be with us and will be there no later than our plan in 2030. That's our expectation.

So we'll talk about the different markets where you have pretty big opportunities. Obviously, this year, NATO countries, European countries have been a big part of it, and Sweden's joining NATO was probably not a helpful catalyst for them making that decision as well. Can you talk about the opportunity within NATO to acquire KC-390, C-390s and what that market looks like for you?

Again, I think it's fair to say that we are forecasting addressable market for the next 20 years, almost 500 units of airplane like in the category of the C-390. In the NATO and in European environment, we are forecasting almost 80 units. And I think we are well positioned to capture a good share of this. Around of the sales campaign, I cannot go in too much details, but a round of India, for example, that is an open tender. They are in place with a procurement process that they call MTA. They are looking for to replace their old fleets there over there. Embraer is well positioned there with our partner, local partner, Mahindra. So we are offering to them a very strong case with the capabilities of the C-390 and a very comprehensive localization plan as well. So I do believe that we have a strong case in India. And those plans around of the capabilities and the localization is 100% compliant with Make in India requirements. So again, we have a tangible sales campaign around of the globe, in all the corners of the globe, not only in Europe or NATO, we are facing a very special momentum with this airplane.

So when you think about the campaigns you just talked about, what kind of lead times do you want to have? What kind of lead times work against you in terms of having slots available for customers? So as you fill in that pipeline, how do you think about staging them over the course of time?

Today, we are completely sold out in 2026 and 2027. We still have some slots available for 2028 or on. And as I mentioned to you, we are getting a lot of knowledge coming from the other business units, commercial and business jet to apply some cycle reduction inside of our assembly line. We are trying to prepare ourselves to deliver planes faster to the customers.

Okay. And Jon, not ignoring you. We're going to get back to your NATO expertise, but I figure to stick with the Embraer side of the house first. Maybe you can talk about the United States as an opportunity. Clearly, there's an element to the video that was pointing to that as a key opportunity. What are the market size you see and how do you think Embraer best goes about addressing some of that?

No, that's a very good question. Again, since I took over this position in December 2022, we put a strategy to turn Defense secure international players. An international player cannot be international without a good relationship with U.S. That's the most important defense market in the world. So talking about the possibilities around of our portfolio and more focused on the C-390 and A-29, I think it's fair to say that, again, the fleet of tankers in news today is derivative of commercial airplanes. So it's a big tankers, derivative of commercial airplanes. So there is a gap, there is a best in this capacity and capability and here where Embraer could support [Audio Gap].

Don, can I you in here for a second. This integration of the C-390 into NATO operations and flight testing. Has the Air Force been in contact and how many times and to what extent with the KC-390 yet such they can observe the quality of the plane, the operational attractiveness such that they would then be induced to enter conversations?

By that, I mean you assume you're referring to the United States Air Force?

Yes.

There has been engagement mainly through AIRCOM in -- so Air Command for NATO at Ramstein airbase in Germany, where they have interacted with the company. We took a Portuguese aircraft there back in July. And they have been onboard and seen the aircraft. Also the Brazilian Air Force participated in Storm Flag a couple of months back, where the aircraft worked extremely well in conjunction with the USAF counterparts. And I think that's the opportunity for the likes of the USAF to get to know the aircraft is more and more as deliveries increase and the aircraft participates in more of these exercises, then there'll be greater opportunities to see what it's capable of.

And Bosco, back to you. In terms of integrating the production system into the U.S., what kind of effort would be involved to put that final assembly line? What timeline? How would interact with the other businesses you already have where you have a U.S. footprint across Embraer?

Yes. We are -- of course, we are planning for that. And of course, we are observing the demand. We will not implement a final assembly line with orders here. We have said, we know what we need, what kind of toolings we need, what kind of area we need to do that. Of course, we are working very, very close with the other business units. We have a strong area close to the business jet facility. But I think it's early to say that we're going to have a final assembly line in one place or another. But we -- definitely we know that we need to have this assembly line, and we are planning for that. Of course, we are evaluating the right momentum to do that, but we are ready to do that.

And then being a non-U.S. company, do you see that as an obstacle, do you need to partner? How does it affect your outlook for going to market in the U.S.?

Yes. We are here in the United States for the last 45 years. So as Mike and Francisco presented here, we are adding value. We generate jobs here, especially for the fans, we already have a final assembly line of A29 since 2014 year in the United States. I think we could say that we see Embraer as a Brazilian and American company. So we are not seeing any obstacles to have this here. Of course, if you have a final assembly line here in the United States, we're going to add more than 1,000 jobs here, high-tech jobs. So again, we are not thinking just in the way to sell airplanes, but we would like to sell a solution, a business case that makes sense for both sides.

Okay. So Don, you've got the experience to fly these. How would you sort of describe and maybe pitch the C-390s main differentiators versus other options that are available to countries around the world?

Myles, thank you. And thank you for the invite to come and participate in this meeting. I come from the operator's perspective of 4,500 hours flying C-130, squadron commander flying the J theater Wing Commander in Iraq and Afghanistan with the J, and then 8 years in NATO headquarters on capability development and defense planning, where Air Transport and they are refueling stayed in my portfolio throughout that period. I think the key has been mentioned several times, the C-390 is a multi-mission airlifter state-of-the-art technology. But what is a key element of this, which aids is the low-speed handling and the general handling of the aircraft, but also brake-by-wire, which is a very important part of it. And as these combined together, reduce the workload for the pilots and increase efficiency. Several speakers earlier, I've spoken about enterprise efficiency of Embraer, and we've also heard about the engineering excellence of the company. When you take advantage of the lessons learned from all of those aspects and put those into a modern military air lifter, that's where you get the reduced operating costs and high availability that we're now beginning to see as the aircraft comes into service. In terms of performance, although the back end of the aircraft is very similar in size to something like a stretched C-130 the dimensions are different, which makes far better use of the space, and we can perhaps touch on that later on. In terms of performance, the aircraft hits what I would refer to as the 20-ton sweet spot for payload, and that's in terms of payload range and crew duty time. And all of this on to short and the steer runways, which makes and all these elements bring them together are essential requirements for the USAF requirement for the agile tanker concept. The aircraft is already certified for probe and drogue. There's work and development for the boom option. And as Bosco mentioned, unlike other platforms, it's not a commercial derivative. It's built for purpose as an air refueling tanker. And being built for purpose also enables other advantages such as integrated active and passive self-protection, secure voice and data, and of course, the ability to adapt to a whole range of missions. So in many respects, an analogy would be the military aircraft equivalent of a Swiss Army knife.

It's a good analogy. Maybe a Brazilian Army knife. So the 10 C-390s that are in operation are in service today with 3 different air forces. Can you give us some insights as to how they're experiencing things with the aircraft? Was that all 10 of them in that line of that video? And that sounds pretty cool. But maybe, Don, you can enlighten us on what they're seeing.

Well, as I said earlier, the aircraft is already deployed on exercise Storm Flag where it performed extremely well. But I think the key point is that it's probably one of the few military aircraft that's been operational from day 1 and the better for would be hit the ground running, but that's not necessarily the best way to describe the introduction to service of an aircraft. So for example, within the first 8 months, the Portuguese Air Force achieved 1,000 flying hours. And that included flights. The first 2 missions were to fly to the U.S. to pick up to 2 UH-60 helicopters and take them back to Portugal. And between Brazil and Portugal, the mast something like 14,500 flying hours. So I think that is -- and has already been highlighted, the mission capability rate of 93% and a completion rate of 99%. So that's all a testament to the predictions of low maintenance and high availability, which quite frankly, is unheard of on competitor platforms. And some of it, shut it shouldn't really come as a surprise when you consider that the turbo fans have millions of flying hours on commercial types. So it's a known, reliable engine, whereas if you look at the competition, you're looking at 4 engines, 4 gearboxes and 4 propellers, which are all bespoke to the platform with the associated maintenance issues that comes with that. All in all, it's a very impressive aircraft.

So putting on your completely unbiased hat, you flew C-130, you have the 390. Is there any mission that the C-130 is better at?

No.

That wasn't a planted question. Bosco, servicing these planes will also be another line of your business admittedly through the services portfolio. But as you go to market and you think about the strategy and Embraer's role in the servicing of these planes, how are you establishing that day 1 in the contract structures?

Yes. I think that's a very good question. We have a very close relationship with NATO that will be in the next panel. NATO is turning the service and support area international area for defense as well. They are following us very close. They are helping us in all the entering to serve customers. So they have a specific team support in Portugal, Hungary and Brazilian Air Force. So -- and they are responsible for those rates that don't just mention, the mission accomplished and the mission capable. So I think we are starting putting people close to the customers. We now have some people from service and support in South Korea, for example. So we are using the network already established for the other business unit to support the defense business as well. But we are not stopped here. We are evaluating, for example, a training center in the north of Europe for the C-390. We are investing, we are getting better, I think, coming -- getting some knowledge from the other business units as well.

I'm going to let you ask the last question before we break.

Okay. All right. Don, maybe come back to you. So the Army -- Swiss army knife analogy you mentioned. Can you give us a litany of the missions that this aircraft can do? And then given the amount of missions this can do, Bosco, what kind of margin profile are we going to get to with the business when we get to 10 per year in the future?

Sure. I mean in terms of multi-mission capability, in terms of military capabilities, of course, with the ramped cargo aircraft, airdrop of stores and personnel is key. Tactical air land using night vision goggles or night vision devices, including synthetic, which extends itself support to special operations. And of course, we've spoken about [indiscernible] refueling tanker, but also in support to humanitarian aid in terms of aerial firefighting medical evacuation search and rescue. But if we've got time, there just 2 key points I would like to make. One is the reroll times, and this is what makes the Swiss army knife, the reroll times are very, very short. All the roll equipment is stored onboard. Typically, you're talking less than 1 hour. Apart from those capabilities, which have a roll-on, roll-off augmentation such as the firefighting or the refueling tanks, but even for air refueling to reroll into the tanker capabilities less than 4 hours. And if you compare that with competitive alternatives, either it's fixed permanently as a tanker or you're talking days, if not longer, to be converted into a tanker. Sorry, the second point is the rapid onload, offload capability of this aircraft with the reduced ramp angle. And also, as I mentioned, the dimensions inside the back of the aircraft. Two key examples are armored vehicles, which are in use with European armies, where they can be driven straight on and off without having to take the turret off. For the C-130, you have to take the turret off, which means you need 2 aircraft, one to transport the chassis, one to take the turret and then the crane to put the turret back on when you get to the other end, which is not particularly deployable. For the U.S. example, we did a trial with high the high-ability artillery rocket system with field or tiller unit at Raston. Again, with the C-130, you have to compress the suspension and deflate the tires to get this on the back of the aircraft. With the 390, we reversed on in 8 minutes -- 5 minutes to come off and you can put 2 additional pods of missiles in the back of the aircraft, which we also trialed can be reloaded off the ramp. If that's not agile combat, I don't know what is.

That's pretty good. Bosco?

I don't have time to answer the question. No, again, it's nice to say that again. We have turned around the business. I think we are forecasting a very healthy financial solution up to 2030. And we are forecasting margin, not only for the C-390 for the entire business unit, that's what we are expecting.

Great. Thank you, man. I want to thank you very much for your contribution. It was very interesting in the panel. Let's have a for them. And this concludes the first half of our program. We're going to have a short 20, 25-minute break. And we're going to start the second half sharp at 11:10 local. Thank you. [Break]

Hi, hopefully, you all enjoyed our break. Let's go back on track here because we want to finish the sessions on time. So I have the pleasure to kind of call on the fourth fireside chat that we have for today for service and support. We have a stage full of panelists, which are going to provide their insights. From the division, from service and support, we have Carlos Naufel, who is the President and CEO of Embraer Service and Support. We do have from the previous 3 panels, Ron Baur, who is the President from Azorra. We have Mike Silvestro, the CEO of Flexjet, and we have also Don Turnbull, which is our Director at Melora Consultancy. And I have a pleasure to kind of also introduce Ron Epstein, who has followed the industry for many, many years to be our moderator. And before we start, let's play a quick video. Thank you. [Presentation]

Great. Super video. Thank you all. I'm Ron Epstein. So maybe the first question I want to start with to the whole panel. When you think about Services and Support, is it a business alone itself? Or is it really a function of the other segments?

Okay. Good morning, everyone. So it's a good question, right? Of course, we are running a business unit out of Service and Support. But the reason we have all the players here, commercial executive in defense is because we support all the business units. So we have the, let's say, the growth -- the organic growth on that, and we go beyond that inorganic like OGMA that we presented there, which is our branch that we go agnostic. We serve other products, and then we increase the mix of Embraer and -- but always supporting the customers. So of course, it's very important for sales to have the support of our organization.

And then when you think about the support across the different verticals inside Embraer, broadly speaking, in business aviation versus commercial versus defense, how much of the customer base leans on Embraer for that support?

Okay. Yes, there are differences. And the beauty of that because we take everything that it's the same back office tools and so on that we have more, let's say, efficiency, as Francisco mentioned. So in the company, we are always looking for efficiency. So we have a back end that we can leverage from now the business unit, but we have particularities on each business. For instance, when we go to commercial aviation, we have products and services like the E2, for instance. We have 100% of the customers that are on board on our pool program of parts. 100%, all the customers because it's a very good solution and very competitive on that. When we go to Executive, for instance, we have the Executive Care. So it depends if they are corporate flight departments that they have more infrastructure similar to an airline that sometimes they can be able to run their business or if they rely on a total care that we can do everything. Like since the beginning, we can sell maintenance, we can sell parts, we can have the technical support, everything included in a big package. So it depends on each business unit. They have their own characteristics that we can cover.

Got you. And then maybe for Flexjet, how important is the support function for you?

Well, it's very important. We all like to sell airplanes, but it doesn't matter if you sell an airplane if you can't keep it flying. So in terms of customer satisfaction, really across all the segmentations, we rely on Embraer a lot. We've also, at Flexjet, we've invested heavily in our own maintenance infrastructure to be able to support our airplanes ourselves. But one of the more creative things we've done, as I think I've mentioned before, Flexjet and Embraer have partnered in a new model in terms of collaboration on a service center together. And we have our first one, and we plan on taking that around the world. So we're looking at more creative ways to work together to ensure that our airplanes are as dispatch available as possible.

And for your business, is it a differentiator with customers when they're looking for a share with you guys versus somebody else?

Well, truth be told, our customers expect that. It's not anything that ever enters into their mind until something goes wrong. So it's table stakes. So that's on us to be able to be creative and to make sure that we show up with an airplane when they want it, where they want it and how they want it.

And then maybe in defense markets, when you think about marketing, in particular, lately, the C390 into NATO and around the world, how important is the logistics and support for that aircraft, let alone not just selling it, but also supporting it?

I think there are -- there's a key difference, in my opinion, between military aircraft and commercial aircraft and that nations tend to buy military aircraft and forecast to be operating it for 20, 25 years for the life cycle of the platform, whereas in commercial aviation, the aircraft would typically be replaced after 10 to 12 years. So I think there's a 2-phased aspect to this. One is the initial -- and it's very early days with the 390 being delivered and use Europe as the example. Early days, so I'm not presupposing what the solution might be, but it's early days in terms of the immediate aftersales support. But how that manifests itself as long-term life cycle management, I think, is yet to be determined. The NATO support and procurement agency is fully aware of the C390 and waiting in the wings, if you like, to become involved in the conversation. The user group, again, is in early days, but that's a conversation to have with the nations involved because it's up to them to decide what kind of long-term support package they will require. But that's why I see it very much as a 2-phased element just because of the amount of time that a military aircraft tend to stay in service and all of the platform development steps that need to take place over the lifetime of the platform, which are different to commercial.

And I would add as a lessor, like I said, it is table stakes. It's really important for us to keep our airplanes flying. We -- these are expensive assets that you want to keep flying. I think what Embraer does really well when comparing to other OEMs is turn times in terms of configuring aircraft. Francisco mentioned that in his opening remarks. Embraer is really a leader in terms of configuring aircraft in terms of when we buy a new airplane, we're a lessor with a spec order. The lead times to configure an aircraft is much, much lower at Embraer than it is at Boeing or Airbus. We use that to our advantage because we can pivot quickly. We can provide airline solutions faster because they can -- Embraer can configure the aircraft really fast. So I think it's a real testament to their engineering capabilities and their versatility that they can do things much, much faster than the big guys. So we -- as a lessor, we like that. It reduces our downtime, keeps our airplanes flying and really our customers like it, too.

That makes sense. Now do you find -- I mean, I guess, broadly to both of you, -- some of the bigger OEMs have struggled with aftermarket businesses and support businesses. Do you find that the aftermarket support business in and of itself is a differentiator versus maybe some of the bigger OEMs?

I can start. I used to run fleet at United and Continental. And when you think about decision factors when you're buying an aircraft, product supports like way up there, efficiency capabilities of the aircraft, it's the cabin. But if you don't have a good product support, it's almost a nonstarter. The airlines use these aircraft so hard that they have to be reliable and not having strong products that are behind it. Embraer is really known for that. We also had a high regard for Embraer's product support, even go back to their 145 as a launch customer at Continental on the aircraft, any new aircraft will have teething issues, and not Embraer, Airbus, Boeing, they all have it and having the OEM behind it to support it is critical. And I can't imagine something that's really the top decision criteria for airline for sure.

Yes. To this point, like we still support the Bandeirante, the first aircraft with parts and so on. So it's really important to stand by the product. And I think different from the other big 3 OEMs, like we used to say that we touch the metal, like skin in the game when we look at for MRO, for instance. Like it's a very important part of the element of our business because being the MRO, also we feel the aircraft, what is going on with the aircraft. And then putting our engineering, our Kaizens and so on, we can bring not only efficiency to the to the MRO network, but also to learn and also feedback in a closed loop, the aircraft for enhancements, modifications and so on. I think that is part of the beauty and also the high safety levels of the aircraft we have because we have a closed loop that we can learn and we can feed back the product on that.

Got it. Got it. And then maybe when you roll this all up, and you think about the growth in top line for services. I think Embraer said it could be double the size by 2030. Is that right? Can you talk a little bit about that?

Yes. Like we have a very straightforward and on the execution side of accelerating very fast the business. We have -- we really see lots of opportunities to accelerate, and that's what we are doing. Like if you look at on the -- we announced it here like the MRO footprint in the U.S. for Executive, the partnerships we have and so on. That help us to accelerate on MRO, on training, like we have the joint venture with CAE also. So we are expanding the simulators to help sales and also to help the support of our fleet like in Asia, E2 Singapore that we just launched there. And also KC in Netherlands and also Portuguese Air Force is about also to build a simulator there. So all that network of infrastructure really gets the product more powerful on those regions on that.

Got it. Got it. And then maybe broadly, how do you think about return on investment in the business, meaning the organic investments that you've made, the investments in new maintenance facilities. How do you think about that?

Yes. Like services, usually, the margins are better for sure, right? Because there's a lot of infrastructure and value added on that and also reducing risks, like, for instance, we talked a lot about supply chain. When we look at -- we're having more and more customers joining our pool parts program because imagine that we are 5 different customers fighting for the same part. Probably that part will not fail at the same time. And then the beauty of having a pool of program is that you can have the right asset for everyone to join on that. So I see to your point that we can add value and deliver value on that. The customers will be willing to pay that because it's an important element of their fleet to keep flying in an efficient way on that. So that's the reason that we see, for instance, that the E2, like 100% of the customers are on that. So you can leverage the return, the value in a very good way.

And then Piedmont Airlines, I understand, wants to take 50 145s out of the desert, right, and bring them back into service. How -- what kind of opportunity is that for the services business?

You mean in general?

Yes.

Yes. Like we see different opportunities that we can work like, like I said, like we see more and more of the customers going more to the parts, different parts program, like it's not only the pool that we have, but we have different solutions tailored for different customers. On the defense side, also, we see that the forces, they rely on different needs on that. So depending on the cases, we are building different solutions with them. So we see a lot of opportunity. As Bosco mentioned, we are getting more international on that to see the specific needs of each force and then build around their needs on that. When we look at non-inorganic like at OGMA, for instance, like OGMA will triple its size because of the engine business with GTF there. Also there, we do other different activities like with aerostructures, like we serve Airbus defense. We serve other OEMs like Pilatus, Dyer and other that we do manufacture structures there. So we see there are different opportunities on that. So an easy testament of that is that just taking care of the GTF, OGMA will triple its size by 2030, 2032 on that. OGMA already, I think, 60% -- around 60% of their business is engine related. So they have a 30-year partnership with Rolls that, by the way, this year, they received the price at the best in terms of quality and delivery shop on that. So that means that it's not only doing something to grow, but also do it right.

Got it. And then when you look across the portfolio between MRO and training and support, if you can say, is there a piece of that's more profitable or less profitable? Is training better than MRO or vice versa? Or if you can give us a feel for that?

Yes, it's a good question. It's a secret one. But it would be no secret like a part of one big element of our portfolio is materials and mainly in the supply chain that we see there's a lot of value added on that. So for sure, materials and support and so on, it's a big portion of it. But we are equalizing even more with the different business, like I said, like with OGMA and so on. We see -- when we see all the segments, executive, commercial, defense and OGMA, we will be very well balanced about all of the different units on that.

Got it. Got it. And then how do you seek feedback from customers? And maybe we can hear this from customers that, in fact, you are doing a good job. I mean what do you do to make sure that your customers are happy?

Maybe it's better they answer. But I can anticipate like this year, we got the first place from ProPILOT on the commercial, on the executive aviation market. So we run several surveys that we compare ourselves with the other OEMs. I mean we are talking with commercial, executive, it's easier to do that. And also, there are some specialized like a ProPILOT, IEN and so on that they provide feedback. But I'd like to hear.

Well, from my point of view, I would tell you that the communication between Flexjet and Embraer on this subject would be described as constant. There's not a day or within 48 hours go by that our teams aren't talking about some issues. So there's no standing monthly call. This is an absolutely dynamic relationship. And it's really a couple of different pieces, right? This whole segment is a lot about labor. It's a lot about parts supply. And it's also the exchange of data in real time because I think we're the largest operator of Embraer's executive jets in the world. So we are in a wonderful collaborative exchange of data on how Phenoms and the Freighter airplanes are being flown. We get constant feedback from our pilots. And so we're in a dynamic sharing environment, really, which is about keeping the airplanes dispatch available more so, but also about safety because we're constantly learning and which -- so we're in a constant share.

And do you -- just one quick thing on -- do you find it's differentiated from their competitors, at least the ones that you have experience working with?

Well, that's a hard question to answer in public since I buy from 3 different manufacturers. But I would say that this relationship and this dynamic is excellent.

Great.

Yes. I was just going to add to what Mike said. Even though we're lessor and I was a former worked an airline, it is a constant communication. I think we value with Embraer's, there's a lot of transparency. You're trying to solve complex issues and it's a very kind of direct, transparent conversations, how do you solve this issue? And I think it's just part of the Brazilian culture, where how do we solve this problem. So I think from our point of view, we transitioned a lot of aircraft. We probably transition more E-Jets than anybody out there. And there's all those issues that pop up. And I think just having that kind of very kind of transparent conversation makes it efficient, not a lot of drama, and not a lot of finger pointing of who did what wrong or who's doing what wrong is just how do you solve the problem. And that's really our main goal is to get the plane flying and just to move on with it. So they did a great job there.

And then maybe just a bigger picture question. Why does it make sense for Embraer to be doing MRO work or support work for competitors' products? Or products that maybe don't compete, but are just not Embraer's products?

Yes, it's a good question. Like at OGMA, like we do the C-130s, F-15 and other aircraft there, we do the maintenance. There are opportunities. It's always opportunity to learn and also business opportunities also. Like at OGMA, they have engineering capacity. They are a DOA, Design Organization Approved one. And then we are doing modernizations of the C-130 like also on that using our engineering there at OGMA and exploring opportunities that the market offer on that. So we think it's healthier to have this openness, let's say, to do that.

Got it. Got it. So we maybe have 5 minutes left and see if we've got any -- I've got more. But if we have questions from the audience, yes, we fire away. No questions. Okay. All right. Great.

So could I just -- yes, wholeheartedly agree with what Mike said, constant dialogue is absolutely essential. But if I could also reiterate the difference that what a military aircraft does is subtly different to what a civil aircraft would do. I'm a pilot, I'm not an engineer, so forgive my lack of aeronautical engineering knowledge. But the way that we used to calculate the fatigue index and look at the -- and therefore, predict the longevity of a particular fleet has moved on leaps and bounds, of course, in terms of the metrics and measurements, but it still doesn't get away from the fact that the profile that an aircraft would fly in the commercial environment is but one profile that a military aircraft would fly. And in many respects, that profile is just the means of getting to the start line for the operation for military aircraft. So it's understanding a combination of the different requirements for many, many more and replace countries instead of a commercial operator, it's a nation that's operating the platform, probably with fewer numbers. So having the user group is a fundamental element of how do you communicate what individual countries are experiencing and passing on information. So that doesn't replace the constant dialogue, of course. But it's really important to have that community to exchange ideas and information on how the aircraft is performing and solutions to any issues that may have been encountered..

So that kind of begs the question. This might be something to talk about later with Luis Carlos, but I'll bring it up now because it sort of came up in one of your comments. How is big data or AI impacted services in terms of a predictive capability or using some of the data that you have across fleets to help the business?

Yes. That's a good question. Like not only the product like the products, they usually have like we have the AHEAD system. They look at the aircraft data to help to predict failures and so on. But other than that, we are using more and more data to streamline our processes. Like a part of it is -- by the way, I think last week, we got an award from Aviation Week on the MRO side because we are crunching all the data that we have also on that. So that can help to streamline the process, predicting what is necessary during the heavy checks and so on. But on that particular case, like we were able to do paperless journeys on that to streamline all the processes on the MRO. Also, we are using a lot of -- including AI for parts planning purpose, like -- so we can analyze all the data that we have from all the customers' demands, the age of the aircraft on that to better have better forecast models of parts and so on. So we are using a lot on that, like Francisco mentioned that we are using different areas in the service and support is no different on that. So we are using materials, MRO on that. The product itself already uses on that to leverage and streamline processes.

I have time for one more, let's squeeze it in.

Great. So super. When you think about growing the business, we've talked about organic opportunities. How do you think about inorganic opportunities? Or is that something that you're not interested in? I mean one would think there would be things you could purchase out there to grow the business?

Yes. We are always looking to all the opportunities like as we mentioned, engines is one that we are already working on that. And we are looking for some other opportunities that can be inorganic, for instance, component repairs, like we already have a lot of assets in our -- because we run the pools of Embraer products and that and so on. So this is one particular market that if we enter on that, you can explore inorganically because if you do a component repair of an Embraer aircraft, it doesn't matter if you are doing for Embraer, you can do for other different OEMs also because the components, the capacity of the machine to do that repair is the same. So that can unlock a lot of opportunities also.

And maybe as one last follow-on. If you grow the component repair piece, I assume that would be margin accretive. Typically, that's pretty good work.

Yes, for sure. Lots of opportunities.

Got it. Yes. All right. Thanks.

Thank you, Ron. I want to thank the panel also Don, Mike, Ron, it's been a pleasure to host you guys, and we're going to move to the next one. Thank you very much. Well, we're going to move now to the fifth fireside chat that we have for the day. We're done with the 4 business units, but we have something very exciting. We have Eve, which is shaping the future of air mobility. I'm happy to introduce Johann Bordais, which is the CEO of Eve Air Mobility. And after his presentation, we're going to be followed by the fireside chat with Ehtisham Siddiqui, which is the VP and General Manager of Controls and Avionics Solutions at BAE, and that will be moderated by Sheila Kahyaoglu, who is an analyst at Jefferies. Johann, the stage is yours.

Good morning, everyone. Well, better than thousand words, I'm going to start with a nice video. [Presentation]

Nice. Very nice. As you can see, there are a lot of things going on. I'll give you a number, 296 hours per year, this is what someone a commuter of London will spend a year. This is what also someone that lives in New York will have to spend, it's about 10 days, 24 hours in your car stuck. Wow, it's big. It's not going to get any better, by the way, right? The world is growing, 8 billion people. By 2050, we'll have 10 billion. The revenues per capita is increasing, $13,000, it's going to go up and triplicate. We're going to have 2 billion people in the cities in the next 3 decades. So it's not going to improve. It's not going to move. We don't want to solve the problem. We want to be an alternative. And this is what we're doing at Eve, be an alternative for the air urban mobility, bring the people in the air so they can go back home where they can go to the office faster and don't have to get stuck in traffic. And to do so, there's a lot of people who have been asking me like, well, where are we going? Is it happening? Is it the present? Is it the future? It's now. It started actually this year at the Farnborough Air Show when we did the rollout of this beautiful aircraft in Gaviao Peixoto, which is a facility of Embraer in the countryside. And this is what we've been doing ever since, the ground testing all right? So you have the high low-voltage system test, the thermal runaway of the battery, thank you with the BAE system. We work together. We did the boom, the transition boom test, also just getting the cameras on the vehicle connected to the truck where the pilot will be. There is no pilot, by the way, on this engineering prototype, no passenger and also the transmission and reception of test. By the end of this year, we'll be receiving the engines. And then early next year, we will be able to fly the prototype. Now you're talking about the vehicle. Ever since we started Eve, we talk about it's not about only the vehicle, but it's about the ecosystem. It's all about where we're going to be operating the aircraft. And we got to think about it now, and we're creating now. Good thing that we have [ Nofil ] and Embraer also, and this is also why we created the TechCare solution that will take care of our customers. Exactly what [ Nofil ] is doing for the 4,500 vehicle of Embraer, we're going to do it, and we're going to do it at the next level, not because it's not going to be better because it's already at is stop, but we're going to do it closer to the customer because you cannot fly like the E-Jet across the country to do your MRO and it needs to be in the 100 kilometers range. So you got to be ready for this. Also, the training pilot, right, and the mechanics, this is what we announced about a month ago also, the contract with ACTS and Vector. And we talk about the vehicle, we talk about the service and support but also how are we going to be scaling up? We're not talking about a vehicle that will be substituting few helicopters here. This is not what we're looking for. What I'm talking about the revolutionizing and having an alternative for urban mobility, it's about scaling up. And we'll be able to do it only when we have the whole ecosystem, we'll be autonomous at some point and in between also between now and when we'll get autonomous, then we also need to have -- make sure that the operation is smooth and it goes through the traffic management. This is why we launched a Vector that will allow us to scale up eventually. Now certification is the big bulk of what we're doing today, right, to make sure that we can get this aircraft certified and its operation by 2027. We just received the basis of certification with Brazil. We worked with them for the last few years. And now a month ago, they give us the basis of certification. Now we're going to move on for the certification plan. And then the next phase will be also the means of compliance. We'll do the actual test. And then in '27, we'll get the paper that says that we're certified and we'll be able to operate, okay? Like I said, we'll have the first flight flying of this prototype next year. And basically, we'll have the 5 conforming prototype that we will start building in 2025. The first flight of the conforming prototype will be in 2026. Our strong experience shows that 12 to 18 months later, we'll be able to certify. And there's also the last bit, which is very important, is preparing the production side, right, making sure that we have the modularity, we have the flexibility. And this is what we like to call the brownfield. We don't -- it's not a greenfield, we just don't spend the whole money just to build up a hangar. It's already there. We already have the full facility. It's an existing Embraer facility. And we can start with 120 units per year, then we can double this. And then with the full capacity, it's in Brazil, in Taubaté, and we're going to go up to 480 units per year. And last but not least, and we're in New York, I like this picture. It was taken on the 10th of May 2022. Some of you will recognize yourself right on the Embraer side also. okay? And so as you can see, we had the $4 million raised for the first IPO. In 2024, we raised $236 million. We have a pro forma of $445 million. This is giving us a solid, very solid and robust cash position, give us the runway so we can go throughout to the certification, and this is so important as we know. And I'd like to call up on stage, Sheila and also Ehtisham of BAE Systems, please.

Thank you, Johann, for allowing me to moderate this session. So it is on Eve Mobility, not on the pronunciation of all three of our names, which are equally difficult. So Ehtisham, I'll start with you. Thank you for being here. Maybe given BAE is a key supplier for Eve, how do you think about BAE's decision to enter the urban air mobility market as a supplier? And how do you think about Eve's positioning and its synergies with Embraer?

Let me stand back and talk a little bit about BAE Systems for a while. That will put it in perspective on why we joined up with Embraer. We are a leading provider of controls and avionics. Many of the airplanes that you saw presented today, even on the Eve side, the flyby wire comes from us. And as Mr. Turnbull was talking about how easy it is to fly the C390, we also provide the active control side stick, which makes it very, very easy. So about 5 decades of experience on the fly by wire side and over 2 decades of experience on lithium-ion batteries for very tough applications like intracity buses. Like if you stand here in New York and you see all of those hybrid vehicles going by, they all have our propulsion system. And AAM is a combination of both of these capabilities. You've got to have a very safe, very safe propulsion system that will get you to the other end. So a lot of companies approached us in terms of working with them, and we were very methodical about picking the prime that we wanted to work with. Our criteria was very simple. Do they have the pedigree? Do they have the resources, both people and money? Do they have the capability to produce it? And more importantly, do they have the capability to certify an airplane? And when you put all of this perspective or criteria in place, Eve clearly bubbles up at the top for us because of what they have been able to deliver in terms of both development and production. And in addition to the C390, we work very closely with them on the executive aviation, a shout out to Carlos Luis Carlos, who's here. When you look at the last few developments in the commercial market, there's none that has gone as flawlessly as the E2. So that's why we approached Eve. AAM in general is a market of great interest to us. But if you were to ask me, is that the end? It's not the end. But it's a means to what's going to come later, which is all the electrification entering the single-aisle jet, which is where our primary focus is. So very, very glad to be on Eve as a major supplier, but looking at this as a way of developing our capabilities for the future.

So just to touch upon that, maybe if you could go over your key -- what you supply? Is it just the energy storage? And you touched upon it a little bit about BAE's history with energy storage. Can you talk about how you expect that to be implemented on urban air mobility and then future aircraft?

So as you can imagine, energy storage is the key enabler for an electric aircraft. Now just for the audience, there's a little bit of difference between an electric vehicle that you drive around and an EV AAM that you fly around. You can park your car or a bus if something goes wrong. You unfortunately can't do that when you're up 5,000 feet in the air. That's one thing. The second part is the performance of the battery for an aviation market, especially eVTOL is very different because you've got to have the right energy storage, but also the right power density. It's like when you're hovering, both taking off and landing, you consume a lot of power very, very quickly. So we are one of the few companies that can actually provide an energy storage system that would balance both of these aspects along with the safety parameters that I talked about. So very challenging development. But that's one of the reasons why we picked to work with Embraer because this is a partnership that you have to take through certification. And if you don't have the right pedigree, you're not going to get to the end. So we're joined at the hip when it comes to discussions with ANAC and FAA in how our energy storage system will be certified.

Great. And Johann, maybe on Eva's aircraft design, it's mostly complete, as you mentioned, entry into service potentially in 2027 as you look to certify the aircraft. Can you discuss Eve's advantages of its lifting cruise design and how you landed on it given your customer prospects?

That's good, good. Yes, lift and cruise, actually, when we started the project back in 2017, but then we created the company in 2020, we always put the customer in the center of this decision. I mean, we call it the co-creation. We have an advisory board. And ever since its inception of the project, we had a base of customers. Whether they were going for -- going to sign LOI or not, that was not the question. We want to make sure that was the right vehicle. And having done this with the Eve engineering, but also more important with also Embraer engineering, we decided to go for this lift and cruise configuration. We could have gone for others, whether it's tilt, whether it's multi-rotor. There's various initiative out there, probably at 200. This is what we last count that we had initiative. But we believe that this one was the right one for quite obvious reasons. The first one is on the design, keep it simple. I mean, we're entering -- we're creating a new segment. You want to keep it simple from its design, right? It makes it way easier also for certification. We saw it, and I'm sure we'll talk about it later on when it comes to certification organ. I mean the world coming and getting the best of what is existing and creating a new category. So keep it simple, it just helps also the authority to feel comfortable with what we're doing. It helps also on the production, the same thing and the lead time, right, make sure that afterwards, you don't have those complex parts and actuators, dozen of actuators and pieces, moving pieces. And definitely -- and to me, dear, the last reason why we went for this configuration, and I think it really makes a lot of sense is for the customers. And I heard a lot of customers here of Embraer, and they said it, it's dispatchability. You want to make sure that with the lift and cruise, it's simple. You got 8 lifters that will just do the vertical and takeoff landing, right? And then afterwards, you will just go and transition over to wing-borne cruise flight with the pusher with 2 electrical motors for the redundancy. And while your lifters and the blades are actually going in the same direction. Again, it's simple. When those -- this will keep it simple. When you have the other technology or configuration, then you're inducing a lot of complexity. That means that you'll have to have more spare parts close to you. It will break because this is the Law of Murphy. It will break eventually, those are complex machine. And you'll have to have the specialist, the mechanic that can really go and fix it. So dispatchability and lower operating cost is the final reason why we selected this lift and cruise configuration.

Maybe if you could talk about the next milestones to the certification process as well.

Next milestone for the certification process is definitely on the -- what we saw this year, Farnborough, we rolled out the engineering prototype. We want to fly it, right? If you make a prototype is because you want to fly it. This one is not conforming. This is engineering prototype. That means that we want to confirm our computerized model, one of the flight laws, we want to see also the battery and Ehtisham already delivered the battery to us. This is also on the noise. We want to confirm on the models that we've done. And then the next one is starting to building the 5 conforming prototype, will start next year in 2025. In 2026, we'll start to fly the first conforming prototype. And then along with the process with ANAC as ANAC is our primary certification organ, then '27 will be the certification.

Understood. So lots of key milestones for us to keep track of and guide you on. Maybe if you could talk about ANAC. You mentioned that you're seeking ANAC, FAA and ESA certification all at the same time, I believe. And if there's a change, please let me know. And then given your deep connections to Brazil, where do you expect the aircraft to be certified first? And in the long run, how many markets do you expect to be certified in?

All right. Yes. Primary organization certification is ANAC. We've started this application about 3 years ago. We've been discussing ever since with them, so we could get to the first important milestone, which is the issuance of the basis of certification requirement. And this is what it was issued about a month ago. So now we know we have a clear path of what it takes to get the certification. The certification plan is the next step, like I said, also the missile compliance. This is going to be quite important and the actual testing will happen. And now you mentioned, yes, we do have -- ANAC has a bilateral agreement with FAA. So definitely, those 2 markets are the primary market that we'll have. We'll have launch customer. We'll start the operation in Brazil and in the United States of America. Both markets represent 2/3 of the LOI and the backlog that we have. But we actually -- we've been presenting our solution to the world. This is why we have the biggest LOI backlog nowadays, 2,900 vehicles, not only the vehicle, but also very dear to me because it also has the vector where the customers understand that they need to have this scalability and at least start with the possibility to have a better and optimized operation on the ground before we can go to the ANAC piece, but customer support and services.

So just to clarify, ANAC and FAA would be at the same time in 2027?

Yes, it's in the sequence.

And then you've had some big steps in 2024. You rolled out the prototype. You started ground test, I believe, as well. So can you maybe fill us in where you are on the ground test and any intermediate steps as we get to first flight in the first half of '25?

Yes. Yes, I gave those milestones in the presentation, as you could see. This is important. We want the in-ground effect. We want the out-of-ground effect also. Do we have to go with the prototype? I think it's -- this is important. This is a novel aircraft. We're just bringing a lot of knowledge of Embraer, but Embraer also is learning with this new aircraft around the world. Some of the other contendents have been flying prototype for 10 years. Certification is another game. We know this. What we've done at Embraer and Eve is we designed the aircraft to be certified, and then we fly the prototype. Others have decided to just build, design the prototype and then try to see how we can certify it. I think it's just what we call the blockchain. We test the system individually to this limit. And then when we put it together, we already have all the models that will allow us to go with those blockchain and the 5 different stages that I gave you for certification.

Let's also talk about your customer types because I think it's quite unique. You have an order book of almost 3,000. You have 30 customers across multiple operators, including helicopter operators, fixed-wing operators and lessors. How do you think about the major applications of your vehicle?

Yes, it is -- yes, ever since we started, I mean, we -- like I said, we wanted to make the customer in the center of this project. And as we grew and then we did the IPO and customers proved to us that they are also partners -- proved to us that we're in the right direction. And this is what we built over the last 4 years now, this backlog of 2,900 aircraft under LOI. Don't get me wrong, those are LOI, okay. I think now the challenge for us is definitely just to go and convert as you could see in the Francisco presentation. This is exactly what we need to do. We have engaged with our customers, making sure that the aircraft fly on the prototype is differently a super important milestone for them to see the vehicle flying as a matter of fact. And I think it's just -- it's a vote of confidence that we have the right product. Basically, what the customers are telling us is like, look, we need a solution for urban mobility. We believe in you, you have the right approach. The configuration is right. The model -- the business model is right. It's going to go first. As you said, there's multi-customers, type of operation, helicopter. It will go from the shuttle from downtown to an airport. We mentioned about this, how congested all the big cities in the world are, but also from point to point, site seeing, special medical carrier, also transportation, you name it. I mean it's multi-mission. This is what the customers see in the Eve 100.

You clarified they are LOIs not orders yet. So that means you haven't taken deposits. How do we think about the PDP process starting up?

We're not discussing PDPs yet, at least till here disclosing the PDPs, but...

It was in the questions I received.

No, I like that question. That's a good one. We do today have some deposit for the LOI, but they are obviously refundable. We're now entering in a new discussion level, discussion with the customers, and continue to the contract and performance views.

Maybe that brings us to your balance sheet then. Let's talk about that, if you don't mind. You raised debt with favorable terms, including a 3-year grace period on interest expense. How do we think about the capital structure going forward? And your free cash flow -- ability to generate free cash flow?

Yes. Yes, absolutely. I think we made the right choice to go for the second round of capitalization at $236 million up to now in '24. We have a very robust cash position. This is what you need, obviously, to go through the certification. As of today, most of this money that we're spending, which is about between $150 million and $170 million will be at the lower end by the end of this year because we were very conscious of the culture of the Embraer and Francisco mentioned early on. I mean we're applying it to the same level, the same methodology at Eve, and the bulk of it is definitely the R&D, the development of the product. We now have about 800 FTE engineers dedicated to Eve right now on top of the 200 employees of Embraer, so you're talking about now Eve. So you talk about 1,000 people dedicated for the development and certification of this aircraft.

Maybe if we could touch upon the R&D a little bit more if we could elaborate. The cash usage is a little bit higher due to about R&D. How do you envision the trajectory of R&D costs over the next few years as you approach entry into service?

Yes. We could be doing this R&D until certification, obviously, then afterwards, just like any aircraft program, you need to maintain the sustainability. You have the ramp-up of the vehicle. But then we'll transfer also this investment that we have will kick in for the plant, right? As I said, it's a brownfield. We're hoping for the worst, but preparing -- hoping for the best, but preparing for the worst, we have a modular factory. And this is -- as of starting next year, we'll start to adapt the plant, which is based in Taubaté for this 120 vehicles per year. And then we'll move on. And then we'll -- as it goes and we ramp up the production and the sales, we'll be able to increase the shift, more asset into it and with a full capacity of 480, and this is mainly what the rest of the -- will be for the R&D.

And that's clearly why BAE you've decided to partner with Eve, given that's 1 of the 4 vectors that Eve chose the ability to produce that scale at 480 per year. Well, thank you so much. Thank you both for answering all our questions.

Thanks. Thank you very much for the panel, and we're going to move now for the last fireside chat of the day, which is going to be one of my personal favorites, which is about technology innovation. So it's my pleasure to invite to stage, our VP of Engineering; Luís Carlos Affonso, he will do a brief presentation. And after his presentation, we're going to have a fireside chat, which will be a conversation with Ron Epstein from Bank of America. Welcome, Luis.

Thank you, Guil. Good afternoon. It's a big pleasure for me to take part of this Investors Day and present to you a little bit of engineering and technology development. As Guil mentioned, I have a very, very short presentation, and then we will jump for a fireside chat with Ron Epstein. First of all, let me thank Ehtisham from BAE Systems that was here just a moment ago for his kind words about Embraer and engineering. It makes my life much easier. So in this chart, the message here is that we have an engineer, which is back to back. So very few companies really have very competent engineering that will start in customer requirements, up to service and support, and even retirement and reuse of airplanes. So engineering excellence has been a big competitive advantage of Embraer since its creation. We were born from an engineering school and a research center. So innovation is in our DNA. And as you can see, safety first and quality always. This is our motto. You have seen that in Francisco's presentation, and we are going to see that in Antonio's presentation. So we like a company where this is a strong part of our culture. So the CFO will talk about safety first and quality always. We do that first and foremost, because that's the right thing to do, but also because it's very important for the business longevity. So this is very strong, and we want to make it continue to be strong. One thing that is incredible at Embraer is the amount of new designs, new platforms that we have developed in the last 25 years. I don't know any other company that has developed so many airplanes in this time frame. This is super important with that our engineers, and by the way, we have one central engineering team that serves commercial, defense, business aviation, Eve and all other products we have, including services and support. So by developing so many airplanes, our teams, they are always up to speed up with the new technologies, very trained. It's not uncommon to find many people that have gone through 2, 3 complete cycles of full development. It's very rare. You see some of our competitors, they develop a new platform every 15 years or 20 years. So how you keep a team very up to speed. But what I like the most about this chart is really to see that from all these airplanes, you don't find one single airplane, which is a copy or a derivative or an airplane that is very similar to a competitor airplane. And this is our DNA, really with lots of customer empathy, understanding customer requirements, understanding technologies that are available, understanding the competitive scenario, come up with very innovative, differentiated successful products. You will recognize that when you look at the E-Jets with our innovative cross-section, for instance, very comfortable here in the U.S., our 175 airplane is the most comfortable regional jet. You see that in our business jets, the Phenoms, for instance, and operators as well as on the KC. So they are different, they are not equal to anything that existed in the market. They are very differentiated. So we believe this is a key competence of Embraer. And of course, we want to continue to do that. We want to continue to produce, develop very competitive airplanes. Today, the scenario is, there are so many new technologies arising as well as the imperative of sustainability. And so it's important to focus. It's important to strategize where we apply our development dollars and our resources. So we have decided to apply in the, what we call innovation verticals. Francisco has shown those to you already, and we can detail this more in the fireside chat. But basically, zero emissions. Here, we talk about hydrogen, hybrids, SAF, 100% electric, autonomous flights in the future, right? But we can have spin-offs in the short term. AI data science, we can talk more about that. I don't need to explain that to you. Industry 4.0 today, we're very efficient in our operations, but we continue to be so. Airframe competitiveness. This is something that we have always done, a more efficient wing, lighter structures and things like that and passenger experience, okay? To conclude, I would like to show you this. [Presentation]

Okay. So just a few words about this. We have presented this in the Farnborough Air Show. So Embraer is the very first in the industry to develop an auto take off. This is basically what it is. We have auto landing for several years in the industry, but no one has ever done even the big 2 guys never developed an auto takeoff. This improves safety as well as payload range. So with this system, out of limited runways, we can fly further or take more payload. This is well advanced for entry into service in the future years. So it shows that, in some cases, in several cases, we are really leading. In other cases, we are fast followers, but we have the ability to develop very competitive airplanes, and this is our mission in technology and innovation. Okay. With that, let me invite my friend Ron Epstein for a quick chat here. Thank you, Ron.

So thank you. I've been looking forward to this.

Pleasure.

So Luis Carlos is a very humble person. So I just wanted to start with saying, he was the winner of the Inaugural Pathfinder award this year from Aviation Week. It's one of the Laureate awards they have. You've been working for Embraer for 40, 41 years.

41.

41 years. You were an engineer on the Brasilia, Chief Engineer on the 145. And then pretty much led the development of everything we saw on that chart. So it -- I think nobody in this room's life has not been somehow impacted or touched by Luis Carlos. So I'll say -- I'll start -- one more thing and then we'll get into this. I do believe he is the most premier active airplane designer and engineer in the world today across Boeing and Airbus.

Thank you. Thank you very much, Ron. You're too kind. It's always a teamwork. There's always been a teamwork.

Like I said, very humble. So yes, a couple of thoughts here. 20 aircraft in 25 years, forgive me, I'm going to take an American Express and then translate it to Portuguese. What's the mão secreto? What's the secret sauce to get that done, to keep the engineers engaged and involved and around, the engineering culture of Embraer since I've known the company since it went public has never compromised.

Yes. Good question, Ron. Well, first of all, I believe Embraer is a company that likes its engineering, values it's engineering. So it's a company that sees engineering as a competitive advantage and not as a cost. So this is number one in terms of the environment. And with engineers, you have to give them challenges, right? We have to give them challenges and value their accomplishments. And we have been so fortunate that we have that many projects. This is what the engineers love, and we value them, recognize them. And people are very loyal, very motivated, lots of grit to get it done. So it's -- as I said, we have other competitive advantages, but I believe that the grit, the willingness to make a difference is really what moves us.

So on the E2, correct me if I'm wrong, it got certified by ANAC, EASA, and the FAA on the same day. Embraer in world today where certification is a bit of a more open question in the wake of what happened with the MAX. How are you thinking about the certification challenge broadly across new products? Has it changed? And has Embraer evolved because the environment may have changed?

Yes. The environment has changed first, because there are so many new -- so many start-ups presenting projects. So the workload has gone up, especially in the FAA, but also at EASA, much less in ANAC, which is the Brazilian certification. This is number one. Number two, there were accidents, right? And so big questions about how strong was the oversight that was -- that the authorities were devoting to the companies. So this has caused the authorities to be more hands-on and to deep dive more, and this obviously takes more time. At Embraer, we're very fortunate that we work with ANAC, which is less loaded. Not only our engineering is very up to speed because of that many projects, but our authority as well. So ANAC today is a very strong authority with lots of experienced people, and we believe that's a differential for us, certified ANAC, bilateral agreements with FAA and EASA. We expect the FAA and EASA to participate more because that's what they are doing. So it will probably take a little bit more effort, but fundamentally, I believe we will continue to be very agile, very efficient in the certification timelines we have.

That's great. How do you think, if we look at one of the technical verticals, how are you thinking about zero emission? I mean is that -- not to put you on the spot, but I will. Is that a realistic goal for the industry? How do we think about it? And is it an incremental path? Is it -- we go from today's engines to unducted, to hybrid to electric or something? I mean how do you broadly think about it?

Well, first of all, we believe that Embraer that we have to invest in sustainable aviation, we have to earn our right to exist, our right to grow. All the other industries, they are reducing their emissions. And so proportionally or percentage-wise, our emissions, the industry emission will go up. So we really have to do our part in this challenge. We believe for sure, for bigger airplanes, above 100 seats, SAF is the answer. New airplanes are the answer because today, the E2 is 25% more efficient on a per seat basis, fuel burn per seat 25%. So if you adopt new airplanes, you're making a huge improvement in terms of CO2 emissions. And SAF being dropping, of course, you can affect the entire population of airplanes, right? So SAF is the most efficient. It's not carbon-neutral, but it's the biggest impact. So SAF production is very important that is being incentivized, and we have availability and good cost point. But we -- of course, we have to continue to work on 100% electric, like Eve, hydrogen, fuel cell, direct burn because these are 100% carbon neutral. But these technologies have proven to be, let's say, tougher than previously expected, right? So batteries did not evolve as fast as easily thought. Same way hydrogen. So it may delay a bit the appearance of -- with the exception of a very short range like Eve. Beyond that, 19, 30, 50, 70 seaters, it will probably take a bit longer, but we have to continue to work hard on this direction. 2050 is a big challenge, but it's our mission. We have to try and deliver that.

And we saw the E2 automatically take off, auto takeoff, and it has an auto landing. So how far are we away from just autonomy all together? If you can take off by itself, and it can land by itself, I would imagine the cruise isn't too hard. So when do we get to autonomy?

No, it's many -- you know that Dr. Ron, but just to clarify, autonomy is very different from automatic. We are developing this automatic take off. We have automatic landing for a long time, but this is very different from autonomy. Autonomy is cognitive, is making decisions. Piloting an airplane, the autopilot flies the airplane much better than the human pilot. But it does not take decisions. So if there is a truck in the runway, the pilots will have to disconnect the auto landing and go around, otherwise it will land on top of the truck. That's a very simple example. So -- but to your question, autonomous will take long. We cannot be precise when exactly. But I can tell you that there are spin-offs of autonomy that can add value in the short term. Things like human machine simplification that will make airplanes safer. You can think of reducing training because now the airplane is much simpler to learn. So training will be reduced. So lots of things that add value to the customers, which are not yet autonomy. Autonomy will take some more time given the technology. But technology is probably not the limiting factor. It's really passenger acceptance, unions, regulations and things like that. So we are not putting a date on autonomy to avoid problems and because we really don't know, but we have dates for earlier spinoffs that will add value.

And then a topic that's come up a lot in, I guess, the popular press, AI. How do you see AI impacting the industry?

Well, I believe it will have a huge impact overall, right, in humanity, in our daily lives, the ChatGPT was a big wake up call, right? But artificial intelligence is there for, I don't know, more than 50 years, 60 years, what really changed were fast computers and lots of memory capability that allowed for these higher-level functions, larger language models and things like that. But it will affect significantly for instance, the way we develop airplanes, Naufel was mentioning things related to services, right? But the same way, the way we develop airplanes, we believe it can be faster and more optimized. So intelligence artificial can propose designs, can propose solutions. There will always be at least at this stage, the human engineer looking and comparing and optimizing. But it will add efficiency, cycle time and better let's say, results, better quality of whatever we do. And it goes across the board, not only in engineering, services, but also if you think in terms of G&A and many things that we do that intelligent -- artificial intelligence will do faster.

So here's a fun one, big question, airframes. Will we forever be flying around in wings and tubes? Or will it change? I mean is there a real argument for a blended wing or some other tech?

Well, your first option to fly in a non-winged and tube is to buy a ticket with Johann and fly the eVTOL. But yes, this drive for sustainability is really making us all, including ourselves, analyze different configurations, right? And so blending wing body, trust -- transonic trust brace wings, these are things that aerodynamical. So from their dynamic point of view, they make lots of sense, right, less vetted area, less drag, less fuel burn. The question that everybody is studying is the other elements associated with these designs, the cost blended wing body. So what's the cost point of those fancy surfaces all in composites, carbon probably. So how about the cost point. How about other requirements, for instance, crashworthiness, evacuation requirements, so in case of an accident, how people get out of the airplane. So there are pros and cons, which the industry is analyzing, but I believe that if there is a moment of one of these technologies to succeed, it's now, with all the new technologies available as well as the sustainability imperative.

And we have time maybe for, I think, one more question and I'll leave it kind of open-ended. What's -- what are you most excited about today? When you think about all of the things you get to look at and think about, what excites you the most right now?

Well, first of all, I said I'm with Embraer for 41 years. I'm very excited to see the present moment we are living, I see Francisco, Michael, Antonio, so the leadership team here, I believe we're living a very nice moment at Embraer after the pandemic and other things...

Distraction.

Other distraction. Thank you. So it's great to see where we are. The harvest season doing good in our view, great place to work, and thinking about the future, having -- we are investing the highest amount in technology development this year and the next few years so that we build our future. So this first excites me a lot. But -- and I would say, the -- what excites me a lot really is to think about the next step. What's the next step, and to take care of the people, right, because it's part of my job with all the engineers reporting to me, also take care of the people that will take the business and the company forward. So these two things. I think the future, make sure we develop the people that will make it happen.

Great. Thank you. I think we're just out of time.

Thank you very much, Ron.

Thank you very much for, Johann. So as we approach the end of the formal session, it's my pleasure to invite to the stage now our Executive VP and CFO; Antonio Carlos Garcia to deliver his closing remarks. So welcome to the stage, Antonio?

Hi, everyone. It's a great pleasure to be here. By the way, I always face the same organizational issue. I am happy to entertain you 10 minutes after Luis Carlos, which, again, is not an easy task, by the way, for all of us. Guys, it's really a great pleasure to see a lot of faces here, a lot of friends. I hope you have patience for 10 minutes before we join the light lunch. But I have also a special thanks for those who I was interacting in the last 5 years, like you know, Ron, Myles and the other sell-side analysts. In the beginning, we trust in the words, now you see the results coming and really special thing off for the bankers that we are today after 5 years different where we were 45 years ago, where we are today and where we are going to. And I learned from it, we are committed with the present success, but also the success for the new generation. I saw one of his speech. So doing a recap here, you saw by Francisco about -- we start -- all of us, we are going to listen the same safe first and quality always. But there are 2 additional words means delivery and cost means if you do safety first, quality always, you deliver the aircraft and you have a best cost position. You saw how many times he speaks about efficiency. And by the way, we continued in the crisis mode since 2020 in some areas. And the vision for 2030, where we are and where we want to go. And you saw capabilities of our commercial aviation products, amazing business for Executive Aviation, how the C390 changed the word for us, and for the forces, the nice organic growth for service, where we prefer to invest by ourselves in order to pay less and get more returns, and our emerging business unit that's going to flow to our numbers later on. And by the way, finish with our unique selling point, our engineers and thanks for our guru, Luis Carlos. What we commit with our stakeholders. We are harvesting a sustainable growth story. That's our commitment. You don't need to ask me. We are a matrix organization. Everybody knows about each other. Sometimes we have a feel we are a small company. We are not a small company, but we behave like this because you know everything as a matrix organization. And Guilherme says it's more or less like cross-pollinization of resources. It is one of the enablers we have been together, a premium of being together. So let's see the sum of the parts. You see the net revenue development, just pass to the present moment, you see the last 12 months, third quarter, we are already above BRL 6 billion, probably are going to break the record of the company revenue this year, I hope. We are guiding BRL 6 billion to BRL 6.4 billion this year, and we have no chance to continue to grow. The same path you see double-digit to grow every year, we are seeing the same in the backlog, means when he said 2030, we are, potential is BRL 10 billion. By the way, it was without eVTOL. That's, I would say, our backlog is accretive for this continuous growth in a sustainable way. Why that? We are also offering a nice -- not top line development, but also bottom line. You see the adjusted EBIT and EBITDA. Let's take the EBIT for a moment. You see that we are coming from 0 minus, we just revised our estimates for 9% to 10%. If we want to improve the calculation here because we have some, I would say, Luis, some money we receive this year, take 0.70 basis points, including '22 and '23 and get rid of 2024, you see how we continue to develop the -- our profitability, new backlog, accretive for higher margins. We have already today Service and Support and Executive in single digits margin. Service and support mid-teens, by the way. We are seeing defense growing to a higher single digit and luckily mid term single digit, and we are seeing also the margin expansion for Commercial Aviation in 3 years reaching almost mid-single digit. Put altogether, I would say, when you see Embraer with 8%, 9%, 10% should be not a surprise in this -- in our numbers, it's more or less our commitment as a whole team, continues to quality and safety, but also boost the company value and also create value for the shareholders. And also, it's important to generate cash. We just revised our numbers for 2024. If you see the last 12 months, we are already above BRL 300 million, probably are going to be BRL 300 million, probably better this year means top line and bottom line and also with cash generation. Return on invested capital. We are paying the cost of capital. Maybe the good news by doing that, we were able to exhaust the accumulated losses of the past in the local currency. We are a dollar currency company, but for the regulators in Brazil is in Brazilian Reals, means starting Q4 onwards, we are back entitled to be dividend payers. That has not been the case since 2018, okay? That's also good news in terms of value creation. And again, we have the guard rails in our plan, continues to improve profitability. We have really dedicated amount of investment, even that we are investing more in research and development is okay, but it's part of our planning to continue to pay the cost of capital for the midterm perspective. So we are back to investment grade, if you see our numbers today, but we have some friends from the rating agencies. Thank you very much for trust in your projections. But probably we did a mistake in our projection. I'll tell you in a moment. Gross debt, BRL 2.5 billion. Take our cash today, BRL 1.5 billion, our net debt BRL 1 billion and it's more or less the size of our revolving credit facility for 5 years. We celebrated yesterday night. Thanks for some friends here. Thanks for the support. And the current net debt-to-EBITDA ratio, 1.3x, probably we are going to close this year with 0.5. That was maybe the mistake in the projections here. Probably we are going to be 0.5. That's more or less what we are seeing that. That's why Standard & Poor's and Fitch, we are investment grade, and let's see if Moody's they move themselves and give us an upgrade. So our backlog is also growing in the same average growth of the revenue of the top line. You see 58% since 2020. And if you take it by division, you see growth in all divisions. Then you could ask me, Antonio, what about if we face 0. But in 2020, 80% of backlog was dedicated to Brazil. Now it is the opposite. The backlog that we just rebuilt is 2/3 export business means accretive for a much better margin that we are seeing today. And you see Commercial Aviation, 50%. Executive Aviation, 4.4%, Michael. And you see also service and support, very nice growth means we have no chance to continue to grow and generate profit and generating cash. That's our commitment here. That's why I do believe that's my personal opinion. We are still too cheap. If you see the enterprise value for the forward-looking EBITDA, we still have 30% discount compared with the peer groups. And guys, I do not see any reason. You deliver quality and cost. We pay the cost of capital, you generate cash, you are in Brazil. Very stable situation in Brazil and provides us additional competitive advantage by the cost in Brazil, given that we are a dollar company, that's my hope that the market, they recognize our efforts, and we can increase by the way, we talked about that half an hour ago. It's still too cheap, and there is no reason to have a 30% discount. And the opposite, you have a premium for being together, and I'm sure that market and shareholders, investors will continue to appreciate what we are doing in the industry. So to finalize my speech here, I use this phrase here. I like really for one of our friends from the sell side, saying an emerging global growth play. I love that. I just want to explain in a different way this chart here. Safety, first, quality always with everything we do, also presentation, by the way, yours was wonderful. You see the backlog, the highest in the last 9 years means our stakeholders, the customers, they are trusting our products. They are buying, putting their purchase orders to our products. You see the financial community. We are an investment-grade company. You see the New York Stock Exchange, 150% this year. If you take 2023, it's 250. If you take January 2021, 5x. Forget about 2020, maybe 7, 8x. Means also our shareholders, they are quite happy with us, all business unit moving the right way and our people make us fly and you see the results, they are quite happy to work with this company means on the stakeholder treatment, we are doing pretty well. That's why we do believe we have a right to exist, a right to win. Thanks for that.

Thank you Antonio. Thank you all for participating in the panel today. Thank you all for joining us here at the New York Stock Exchange or through the webcast all around the world. Safe travels. We're looking forward to seeing you in the next event. And now this concludes our program today, and I want to invite the press members, and our top management to transition to Siebert Hall in the sixth floor, we're going to hold a press conference. Thank you.