Embraer SA (ERJ) 2021 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the audio conference call that will review Embraer's First Quarter 2021 Results. Thank you for standing by. (Operator Instructions) As a reminder, this conference is being recorded and webcasted at ri.embraer.com.br.

This conference call includes forward-looking statements or statements about events or circumstances which have not occurred. Embraer has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the business and its future financial performance.

These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things, general economic, political and business conditions in Brazil and in other markets where the company is present. The words believes, may, will, estimates, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements. Embraer undertakes no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed on this conference call might not occur. The company actual results could differ substantially from those anticipated in the forward-looking statements.

Participants on today's conference call are Mr. Francisco Gomes Neto, President and CEO; Mr. Antonio Carlos Garcia, Executive Vice President, Finance and Investor Relations and CFO; and Mr. Eduardo Couto, Director of Investor Relations.

I would now like to turn the conference over to Mr. Antonio Carlos Garcia. Please go ahead, sir.

Hi, everyone, and thanks for attending Embraer's First Quarter '21 Earnings Call. This is Antonio Garcia, Embraer's Chief Financial Officer. Before I start the presentation, I just want to highlight that first quarter of 2021 was strong in terms of sales activity, and we believe this trend will continue during the rest of the year. We also presented better delivers that combined with cost control and lower investment resulted in a much lower cash consumption than in previous years. Our margins though were weaker than expected, especially in defense and executive jets, mostly affected by events that we will detail during the presentation and that we don't expect to reoccur in the rest of the year. With all that said, it's important to highlight that we continue to deal with high levels of uncertainty in the context of the pandemic and recovering our business that have been mostly impacted will depend on the vaccination improvement worldwide. Given this uncertainty, we will not provide formal financial and delivering guidance. So we are hopeful that we will be able to update you regarding our expectation for 2021 in the coming months.

Now moving the presentation at Slide 4. Highlights in Commercial Aviation. We announced today a new firm order for 30 E195-E2 jets from an undisclosed customer. This large order will be added in the second quarter backlog. It reiterates the continuous interest in the E-Jet family as we emerge from the pandemic. The deliveries for this new order will start in 2022.

It's important to highlight that we also have several other active campaigns in different regions and anticipate a book-to-bill above 1 for the Commercial Aviation this year. In terms of deliveries, we delivered 9 E-Jets during the first quarter, which was 4 units above the 5 E-Jets delivered in the first quarter of last year.

We had a good start of 2020 on Commercial Aviation, and we expected more balanced deliveries throughout the year versus 2020 when our deliveries were highly concentrated in the fourth quarter. Among our deliveries, we had the KLM that received its first 195-E2 this quarter. And KLM now operates 50 E-Jets in its fleet. We also delivered our first E195-E2 in the African continent for Air Peace, another important achievement.

Finally, an update on the E2 program. We rescheduled the entry into service of the 175-E2 for 2024 from 2022 previously as we don't expect short-term scope clause changes in the United States, and we continue to optimize our cash investment and assess the market conditions.

In Executive Aviation, we had a very strong quarter with record sales and production sold out until the fourth quarter of 2021. In terms of deliveries, we delivered 13 jets, 4 planes more than the first quarter of 2020, and we expected higher single-digit growth this year. We maintain our price discipline strategy and also had a solid backlog growth across the entire portfolio with a book-to-bill exceeding 1.75x. Finally, the small and midsized business jet segment continued their robust recovery, driven by bottom-up customer demand, including first-time buyers.

Moving to Slide 5. In Defense and Security, The KC-390 Millennium continues to perform additional missions related to its full operating capability certification. During the first quarter, its concluded the cold weather and air-to-air refueling tests. The KC-390 also attended a joint air exercise with U.S. Army, call it culminating for paratroops operation.

Regarding the Super Tucano. We delivered the first 2 Super Tucanos to U.S. Air Force Special Ops program and the 7 Super Tucano to Nigeria. In terms of new programs, Embraer and the Brazilian Air Force signed a Memorandum of Understanding for the study of an advanced unmanned aircraft system, UAV.

In Services & Support, Embraer had strong new sales in their quarter, closing around $360 million in new contracts despite the market being still in recovery from the ongoing pandemic. Our Services team also performed a workshop with the airline customer to discuss sanitization and a healthy journey. They also launched a new digital platform for aircraft technical publication. Finally, Embraer has been supporting the Brazilian Air Force in their KC-390 missions to combat the pandemic with more than 500 hours flight and 99.7% mission completion rate, which shows the outstanding reliability of these aircrafts.

Slide #6. Moving to the financial highlights of the quarter. We show the backlog. The company consolidated backlog finished the quarter -- the first quarter at $14.2 billion, which was mostly in line with the end of 2020. We are optimistic with our recovery in the backlog has progressed through 2021, especially after we sign a new firm order with undisclosed customer for 30 E195-E2s that will enter in the backlog in the second quarter.

We are particularly happy with the performance of the Executive Aviation segment, which have one of its best sales performance in the recent years in the first quarter, which is typically a lower quarter. It's also important to note that we had no cancellations of commercial aviation or executive jet orders in 2021.

On the next slide, slide 7, we show our commercial jets and executive jet delivery. We had a nice recovery in both segments in the first quarter of 2021 as compared to last year, with 9 commercial jets delivered in the period and 13 executive jets delivered. We see a more balanced quarterly split of deliveries in Commercial Aviation for 2021 than we saw in 2020.

On Slide 8, we show our consolidated net revenue in the first quarter, which were $807 million, as compared to the $634 million in the last year first quarter. This represents year-over-year growth of 27% with improvements in Commercial Aviation, Executive Aviation and Defense & Security segment in the period.

Defense & Security revenue would have been even better than the quarter but we had some Super Tucanos delivery slip into the second quarter and also lower revenue with the Brazilian government at this year, but it was still under approval by the Congress.

On Slide 9, I'm pleased to show the evolution of the Embraer SG&A expenses over the last few quarters. We recognized $80 million of SG&A expenses in 2021 first quarter, which compares to $160 million in the first quarter of 2020 which represents a decline of 30% year-over-year, resulting from our working on generating cost efficiency and the restructuring actions implemented last year.

On Slide 10 which shows both adjusted EBIT and adjusted EBITDA figures for the quarter and previous periods. The company had a consolidated adjusted EBIT of negative $30 million in the first quarter of 2021 versus a positive $9 million in the first quarter of last year. And our adjusted EBIT margin was minus 3.7%. The decline in adjusted EBIT in the quarter occurred despite the improvements in Commercial Aviation segment profitability, with most decline coming out of the Executive Aviation and Defense & Security segment.

The Executive Aviation business had higher production costs in the quarter, mostly related to the older programs obsolescence, hetero fitted and old quality costs that we do not expect to repeat in the upcoming quarters. With respect to Defense & Security, we had FX impact in delays in the Brazilian budget approval that impacts fixed cost absorption as well less favorable mix of revenues with the Super Tucano deliveries in the upcoming quarters.

The Services & Support margins in the first quarter were also slightly affected by the pandemic. With respect to adjusted EBITDA, in the first quarter, we generated $18 million positive, representing an adjusted EBITDA margin of 2.2%. We expect both adjusted EBIT and adjusted EBITDA to improve as the year progresses.

On Slide 11, our adjusted net income for the quarter was a loss of $96 million, representing a net margin negative of 11.9%. The net loss was largely as a result of the lower operating income, combined with higher financial expenses as we increased our overall debt levels to improve liquidity last year. We will maintain a stronger liquidity level. But we are optimistic that an improved visibility of our financial performance beyond 2021 will give us the opportunity to reduce certain higher-cost bank debt to lower our financial expenses.

On Slide 12, we show our investment and free cash flow. First, with respect to investment, the company had a total of $39 million, including CapEx, development and research expenses in the period. We continue to control our cash outflows via investments in the context of the new portfolio of products and uncertainty caused by the pandemic. And our level of investment now is adequate for the programs. We are currently undertaking in their respective updated timelines.

Now moving to free cash flow. We did a much better job of controlling the cash outflows in the first quarter of 2021 comparing with the first quarter of 2020. And in the prior year's first quarter, in which seasonally Embraer burns cash, we had a free cash flow usage of $227 million in the first quarter of '21, which compared to the $677 million in free cash flow usage in the last year first quarter. The major improvement to the free cash flow coming from the work we have done to better match our production rates and the supply chain to our currency rates of delivery for the year, as well ongoing process we are undertaking to be much more efficient with the working capital.

For instance, our inventories in the first quarter 2021 are hopefully $500 million lower than they were in the first quarter of 2020 and also in 2019. We have much more work to do with respect to working capital, but we are confident that we achieve more savings over the next quarters and years.

Finally, on Slide 13, we have our liquidity position at the end of the quarter. We finished with a total cash of almost $2.5 billion. Total debt is around $4.4 billion and net debt of $1.9 billion. Our maturity schedule is very manageable with a little short-term debt. And our overall average maturity is now 4.2 years.

With that, I conclude my presentation. Now I will turn it to -- the call over to Francisco for his final remarks. Thank you very much.

Good morning to you all. Thank you for your participation in our conference call. And after Antonio's presentation, I would like to highlight a few points. Recently, we passed the 1-year mark from the beginning of the pandemic, and we are very pleased to now see increases in the number of vaccinated people in different regions around the world. This vaccination progress is fundamental for the recovery of the aerospace sector and, consequently, for an increase in new orders coming from our major customers, especially in our Commercial Aviation.

We're continuing to be focused on our strategic plan, which aims to increase the revenues and profitability in the short and medium terms. As Antonio presented, we had revenue growth and a strong control of expenses and investments which led to a significantly better result in cash consumption in the beginning of 2021. This is the new management philosophy of Embraer, based on efficiency and profitable growth.

And to reinforce this vision, we are naming our strategic plan Fit for Growth. Fit for Growth express in a simple and direct manner what we are doing, generating more efficiency and competitiveness to grow in a sustainable way.

On the front of efficiency gains, we have already seen a reduction of $500 million in currency inventory levels at Embraer when comparing to previous years and had even higher goals of reducing the production cycle of our aircrafts by more than 40% in 2022, leading to a substantial impact on our working capital and production cost reduction.

Regarding new sales coming from our current portfolio of products, we announced today the excellent news of a return of sales in Commercial Aviation with a new firm order contract for 30 E195-E2 aircraft. And we still have various other sales campaigns in progress, not just for commercial jets but also for the C-390 Millennium and the Super Tucano. Also, in Executive Aviation, we are currently experiencing a book-to-bill in excess of 1.75. And our current business jets portfolio is sold out until the fourth quarter of this year.

On the front of innovation projects, diversification and strategic partnerships, we continue to advance with potential partnerships to open markets for our commercial jets for the KC-390 Millennium and for the development of a turboprop aircraft. We have also assumed control of Tempest, a cybersecurity company, and we fully incorporated Savis, our radar business, resulting in better synergies in our Defense & Security segment.

Moreover, we continue to make progress in investments to triple our engine maintenance revenues in the next few years in Portugal in partnership with Pratt Whitney. The development of the (inaudible) is another project that is moving forward quickly with the performance of new tests of our prototypes in reduced scale and fully scale as well, in addition to the valuation of potential investors in the project.

Finally, we continue to make progress in our ESG agenda, investing in projects for more sustainable technologies such as electrification, biofuels and energy efficiency. We are also implementing programs to guarantee more diversity in our company, including in the Board of Directors.

In summary, we are very confident in our strategy and in the actions currently being taken. Now is the time to be more efficient and grow in a profitable way. There are many opportunities in our sites. And we will be pleased to share with you all more good news as the year progresses.

Thank you very much for your attention and for your interest in our company.

(Operator Instructions) Our first question comes from Myles Walton, UBS.

I was hoping you could pick up where you left off, Francisco, with respect to the order. And if you can give us any color in terms of the region that it's coming from? And also, you hinted that there were further orders in the pipeline, both for the KC-390 and on the Commercial Aviation side in particular. I'm just curious, can you point again to maybe the region where the KC-390 might be making some penetration? You mentioned the joint exercise with the U.S. Are these NATO countries that could be coming down the pike? So maybe just color on the pipeline.

Thank you, Myles, for your question. I mean at this point of time, unfortunately, I cannot disclose more details on this order. It is -- it's really an excellent news, a great progress in our E2 program. And what I can tell you is that we have many other campaigns, sales campaigns. And not only for commercial jets, but also for the C-390 in different regions, in Super Tucanos as well. But I cannot disclose more information to you at this point of time. Sorry.

Our next question comes from Josh Milberg, Morgan Stanley.

Congrats on those efficiency strides that you highlighted and also on the 30 E2 order. With those orders and with the first quarter result, could you touch on how you even mix between E2s and E175s both for this year and for 2022? And also, maybe talk about how the margins compare on the 2 aircraft? A past concern of ours have been that your high dependence on the E175 would continue and that the economics on it could deteriorate just because of issues with fuel efficiencies and other factors. So it would be great to deter your perspective on those points.

Josh -- yes, go ahead.

Josh, just regards to the mix, you just mentioned in regards to the 2022 mix is something around 40% E2 and 60% E1 on the mix more or less. It can be changed. It likely change, but it's more or less what we have in the pipe.

Yes. And the sales campaign is about -- half for E1s and half for E2s, Josh.

Just one point, Josh.

That's great. So next for 2022 -- sorry.

Go ahead, Josh. Sorry.

Go ahead, Eduardo. Sorry.

No, I was just going to add that...

Go ahead, Eduardo. We have a little bit of a delay here. Sorry about that.

Yes, no prob. Yes, I was just going to add that the -- you mentioned about the mix, right, saying that you want profitability is lower. It's not really the case. I think we are doing -- we have a lot of initiatives to reduce costs. And also, we have good campaigns for the E175-E1. And we are not seeing a big difference in terms of profitability. We believe we're going to be profitable on both the E175-E1 as well as the E2, okay?

Okay. That's great, Eduardo. And then just on -- I think you mentioned in your release that the 30 E2 orders would start delivering in 2022. Can you give us an idea of how many you might deliver next year of that particular order?

For this order, we are going to deliver the first 12 in 2022, Josh.

Our next question comes from Robert Spingarn, Credit Suisse.

I have a couple of questions for you. I don't know if this is for Francisco or Antonio, but you had the stock repurchase in the quarter. Should this signal to us confidence that you could be free cash flow positive this year? I know you're not guiding, but I want to think about how to interpret that.

No. We had a minor repurchase, right, that we launched last year. But we're not -- you mean buying back shares, we're not actively buying back shares at the moment, Rob.

Okay. Okay. And then just on your upcoming projects, the Turboprop and Urban Air Mobility, have you made any progress on the partnership search? Is there any update that we could have there?

Rob, we have had progress. We -- actually, we see -- we are advancing very well in those fronts. The fronts for the TP, for the C-390, for the E-Jets. But as we don't have anything concrete at this moment, I cannot disclose more information to you now. But I just can confirm that we are progressing very well on those fronts.

Okay. And then just, I think in the press release, you talked about how expected retrofit non-quality costs negatively impacted the gross margin in the quarter at Executive Aviation. And I was wondering if you could provide some more color or specifics around the size of the impact there.

Rob, just from my side here, Antonio speaking. We were expecting a kind of black zero, and we could take the $30 million as I would say, additional cost. Part of it is going to be compensated acquirers to come. And again, something like $30 million to $40 million. That was what we saw and part of it is going to recover in the coming quarters.

Okay. And...

And just to add, Antonio. Sorry, Rob, Eduardo here. Now just to add that the retrofit cost now, we sold and deliver some demo aircraft during the quarter. Sometimes when you're delivering a demo, you have some additional costs, right, to bring that demo to the normal conditions. So it's really a one-off type of cost. The prices were very good. Now we are really positive in terms of pricing for our business jets. But we had those extra costs related to those demos that end up affecting the margins, but it's really nonrecurring.

Okay. And then just as a final question -- go ahead.

No, no, Rob, I was just complementing what Eduardo just said that we -- another front we have is a strong focus on improving quality and reduce the non-quality costs in the company. So we do expect good improvements in that front as well.

Okay. Okay. And then just last. Antonio, you mentioned strength in the light mid-sized orders in Executive Jet, in that category. And you mentioned there are some first-time buyers. Is there a way to -- you had, I think, a 1.75 book-to-bill? So maybe 2022 orders in the quarter. What percentage of those were first-time buyers?

That's really a good question. I really do not have a clue about this. I can tell you afterwards. But we are seeing this at the entry level because we do not have used -- or prewarn aircraft available in this category, in the secondhand market. That's improving, and I needed to confirm you later on.

Our next question comes from Ron Epstein, Bank of America.

You talked a little bit about this on the call. If you could elaborate on the sales campaigns you're seeing. I know the customer for the 30 aircraft that you sold is undisclosed, but are they sort of a truck carrier or are they start-up carriers? Any color you can give us there? And I've got some other questions after that.

Rob, we also are anxious to disclose you that information. But I think you need to -- I recommended that we wait maybe another month that we will give you more details about that order maybe to everyone. Sorry.

And then on the other campaign activity that's going on, if you can give us a feel for that. I mean why do you feel so good about a book-to-bill better than 1 this year?

Yes. We do have many other active sales campaigns going on. I mean in North America, Europe and other regions. And yes, as I said, we do believe that with the progress in the vaccination we will -- our -- the airlines will be more I mean motivated to close the deals with us. And we have -- we are confident we have the best option, the most efficient product in the regional aviation that is the E2. So we are very well positioned to this market rebound at this point of time. So again, we expect to have more good news during the rest of the year in terms of new deals.

Got it. Got it. And can you guys -- I'm not sure if you did -- you don't typically -- are you comfortable breaking out the margins for the Business Aviation segment?

Yes. We -- in terms of margins, Ron, Antonio here, we had this negative margins around 5% negative for Executive. But as I said, we had this retrofit and nonquality costs. Probably removing that, the margins would have been positive. So the way we're seeing now, the current sales that we are performing, they are doing quite well on Executive Jets in terms of profitability. So we are feeling good about margins. And are you asking about Executive Jets or Commercial? Sorry.

Yes, Executive, yes. So...

Okay. So we're feeling really good. The book-to-bill is strong. And the profitability for these new sales that we are getting are looking really, I would say, interesting.

Okay. Got it. Got it. And then maybe shifting gears to the turboprop discussion. Are you guys -- if you can say, going at that alone? Or are you thinking about risk sharing partners? Can you share maybe from a broader strategic perspective? Are you going to take all that risk yourself? Or do you want to share that risk with maybe an engine provider and some other folks?

Thank you again. So our primary strategy is to really to find partners to help us to fund the project and accelerate the project. That -- what we are doing -- what we have done, working in partnerships, strategic partnerships for the -- to help us to fund the turboprop.

Got it. Got it. And then maybe one last question, and then I'll give up the line. Investors have been focusing a lot on your ESG concerns and one area as a team. We've been focusing a lot more on this, the governance side of things. And something we've noticed over the years is Embraer's Board doesn't have a lot of aerospace folks on it. Is there any move going forward to maybe diversify the board, have more aerospace people on it and maybe have a board that's a little more international?

Thanks for this question. Again, Ron. Yes, I mean, we had some changes in our board recently. So we have now another woman, Claudia Sender, and she came from -- she used to work in the aerospace sector in Brazil as CFO of LATAM. This was a good movement. And also, we are now -- we announced recently our Chairman that we are looking for 2 people, 2 foreigners to be part of our strategy committee, in the first moment, in the first step. In the second step, to be part of our Board of Directors. So this is also a good movement in the direction of we have more internationalization and aerospace knowledge in our Board.

Just one point, going back to Rob's question about the mix on Executive Jets. It's around 50%. It depends on the aircraft. But on business jet, around 50% of the sales are for first-time buyers, okay?

Our next question comes from Victor Mizusaki, Bradesco BBI.

I have 2 questions here. The first one, Francisco, you mentioned I think, that in the opening remarks that basically -- I mean that the company sold -- did the full production capacity for Executive Jets in the year. So my first question is, if you can disclose this number, I mean what do you expect to sell for 2021? And my second question is with regards to Commercial Aviation. When you take a look on VR, I can see a negative gross margin in Commercial Aviation for the first quarter. So I think that part of it is because of a production scale. But can you comment a little bit more about these?

Well, regarding the executive, I mean what I said is that, yes, we are sold out in our business jet portfolio until the fourth quarter this year. And which is great for us. The book-to-bill is the 1.75, another great news for us. And we expect a growth of just below 10% compared to the last year levels in the Executive Jets.

In the Commercial Aviation, yes, we are suffering with the margins because of the still low volumes. We are still working with low volumes compared to the previous years. And we expect the situation to improve substantially from 2022 onwards as the market will recover. And in parallel, we are working very strongly to reduce the cost of our products with many, many initiatives as the cycle time, the production cycle reduction or actions to reduce their cost properly in order to combine it with the sales growth, then we see an important improvement in the margins of our business, but especially Commercial Aviation.

Our next question comes from John Kumar, JPMorgan.

Actually, Jonathan Gucci from JP. A question I have was still on margins. Looking at the Defense & Security segment, Antonio had mentioned at the beginning of the call that it was impacted because of a delay related to the approval of the government's budget. So my question is, has this seems to be normalized? And secondly, Coimbra changed its opinion by the end of the year to probably release the guidance or at least something for the second semester for 2021?

So John, yes, thanks for the question. In regards to the Defense & Security, the government budget was approved late March, and the situation should become normal in the Defense & Security side. And we expect to give you guys a guidance in the middle of the year. That's our best guess today.

Our next question comes from Myles Walton, UBS.

Sorry my phone cutoff. Francisco, I was hoping you could give some color on the KC-390 campaigns? And if the testing that's ongoing now and completing is basically a catalyst for orders to take place. These cold weather and air-to-air refueling testing. Are there customers who are waiting to see these results, which would then manifest into orders?

Yes, Myles, we are really working hard to conclude the certification or the certification process for the KC with all tests, some of them you just mentioned, with refueling and the other ones. And for sure, this will help us to open new markets for the KC-390. And as I said before, we are working in several campaigns for the KC and also looking for other partnerships to help us to open new markets for the KC-390. This is what I can share with you at this point of time, Myles.

What is the timeline for the completion of all the testing? When does it...

We hope to think together it's still this year.

Okay. Very good. And I think you gave the Executive Aviation margins, Eduardo, but could you give the Commercial and Defense & Security while you're there?

Yes, sure. As I said, the Executive had this retrofit and non-quality cost impact, so it was around minus 5%. In Commercial -- actually, Services, on Services was positive at 10%. On commercial, around minus 10%, but it comes from a very low base. And as we are recovering volumes and as Francisco described, the margins should continue to trend up. In Defense, we were also affected by some Super Tucanos that sleep for the upcoming quarters, and they have good margins. And also the budget, right, as there was all that discussion on the budget. We end up having lower revenues in Defense than what we were anticipating, which affected fixed cost dilution and affected the margin as well. So Defense was also around minus 5%.

Okay. And Antonio, just one on cash flow. So you came in probably better than you'd expect in the cash flow in the first quarter. And does that get better sequentially to the point where you know that you'll be positive cash flow for the year yet?

Myles, thanks for the good question. We are not there with our planning -- for sure, we will be much better than last year, no question mark. And we are revising our forecast here. We are trying to do everything to be really close to 0. But I cannot give you the precise number right now. But it will be much better than last year because we do not have any liability management, that the load that we needed to pass through this year here, we are just managing our bank debt, and this means we have the situation under control. But I promise you guys, we are going to get our guidance in the coming months.

Our next question comes from Mathias, Blue Bay Asset Management.

I'm really sorry, the -- my questions have been answered.

Our next question comes from Ron Epstein, Bank of America.

I already asked my question. I don't know. I got into twice. Sorry about that.

Our next question comes from Paul Anson, Lumis SA.

Most have been answered. But on the short-term debt, how do you expect to manage that this year, pay it down?

Yes. Most of our liability management was done last year, right, when we issued new bonds, when we raised money with private banks. So this year, we have very few amortizations. And even for 2022 and 2023, the amortizations are also low. So we are checking. We want to reduce our financial expenses. We are being, I would say, very mindful on how we do our liability management to reduce those financial expenses, but probably you're going to be paying down some debt going forward.

Okay. The amount on the balance sheet is listed at $357 million. Is that -- is that amount that would be...

The big chunk is that, that we have in Portugal. It's a bank debt and probably we're going to pay down that one.

(Operator Instructions) Our next question comes from Ron Epstein, Bank of America.

I'm back actually. Thought of one, so my apologies for that. What response are you seeing from airlines on the GTF, right? Because the new aircraft are powered by the Pratt engine. And what's the feedback you're getting from the airlines on the GTF?

Well, Ron, first of all, feel free to make all the questions you want. It's a pleasure for us to have this interaction with you. I mean, what we can say, I mean that we have gotten very positive feedbacks from Azul, from (inaudible), for example, in KLM for -- regard the performance of our E2s, I mean, with the performance even better than we promised, even better than expected. And I think the feedbacks have been very positive.

And on the new campaigns, has it kind of how do I say, helped move the aircraft?

No, absolutely, absolutely. We are using this as a strong argument. It's not the mark to potential customers. And they are seeing this. We did -- there's more focus on the reduction of emissions. Our E2s, I mean, are showing 25% emission reduction compared to the previous generation. It's really a great performance.

This concludes today's question-and-answer session. That does conclude Embraer's audio conference for today. Thank you very much for your participation. Have a good day.