Morning, ladies and gentlemen, and welcome to the audio conference call that we will review Embraer's First Quarter 2021 Results. Thank you for standing by. As a reminder, this conference is being recorded and webcasted atri.imbriair.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 The 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, We expect similar words are intended to identify forward looking statements. Embraer undertakes no obligations to update public like 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's actual results could differ substantially from those anticipated in the forward looking statements. Participants on today's conference call are Mr.
Francisco Gomesnato, President and CEO Mr. Antonio Carlos Garcia, Executive Vice President, Finance and Investor Relations and CFO and Mr. Eduardo Coto, 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 Q1 'twenty one earnings call. This is Antonio Garcia, Embraer's Chief Financial Officer. Before I start the presentation, I just want to highlight that Q1 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 investments resulted in a much lower cash consumption than in previous years. Our margins though were weaker than expected, especially in defense and executive, mostly affected by events that We will detail during the presentation and that we don't expect to occur 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 has been mostly impacted will depend on the vaccination improvement worldwide. Given this uncertainty, we will not provide formal financial and delivery 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 E195E2 Jets from an undisclosed customer. This large order will be added in the 2nd quarter backlog and reiterates the continuous interest in the Ijet 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 activity 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 ejets during the Q1, which was 4 units above The 5 e Jets delivered in the Q1 of last year. We had a good start of 2020 on the commercial aviation, And we expected more balanced deliveries throughout the year versus 2020 when our deliveries were highly concentrated in the Q4.
Among our deliveries, we had the KLM that received its first 195 E2 this quarter and KLM now operates 50 jets in its fleet. We also delivered our first EU1 and EU5 EU2 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 2023 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 Q4 of 2021.
In terms of deliveries, we delivered 13 jets, 4 planes more than the Q1 of 2020, and we We maintained our price discipline strategy and also had a solid backlog Growth across the entire portfolio with the book to bill exceeding 1.75 times. 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-three ninety million continues To perform additional missions relating to its full operating capability certification. During the Q1, It concluded the cold weather and air to air refueling tests.
The KC-three ninety also attended A joint exercise with the U. S. Army, called, Cabineting for Paratroops Operation. Regarding the Super Tucano, we delivered the first 2 Super Tucano to U. S.
Air Force Special Ops In terms of new programs, EBR and the Brazilian Air Force Signed a memorandum of understanding for the study of 1 advanced unmanned aircraft system, UAV. In service and support, Embraer had Strong new sales in their quarter closing around $360,000,000 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 the KC-three ninety missions to combat the pandemic With more than 500 hours flight and 90.7 percent mission completion rate, which shows The outstanding real liability of this aircraft.
Slide number 6. Moving to the financial highlights of the quarter. We show the backlog. The company consolidated backlog finished the quarter, the Q1 at $14,200,000,000 We chose mostly in line with the end of 2020. We are optimistic with our recovery in the backlog as progress through 2021, especially after we signed a firm order with undisclosed customer for 30 E1 and 5 E2s That we will enter in the backlog in the Q2.
We are particularly happy with the performance of the Executive Aviation segment, Which has one of its best sales performance in the recent years in the Q1, which is typically a slower quarter. It's also important to note that we had no cancellations of commercial aviation or executive debt orders in 2021. On the next slide, Slide 7, we show our commercial jets and executive jets delivery. We had a nice recovery in both segments in the Q1 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 the Slide 8, we show our consolidated net revenue in the Q1, Which were $807,000,000 as compared to the $634,000,000 in the last year Q1. This represents year over year growth of 27% with improvements in Commercial Aviation, Executive Aviation and Defense and Security segment in the period. Defense and Security revenue would have been even better than the quarter, but We had some Super Tucano's delivery slip into the 2nd quarter and also lower revenue with the Brazilian government at this year, but it Was still under approval by the Congress. On the Slide 9, I'm pleased to show the evolution of Embraer SG and A Over the last few quarters, we recognized DKK80 1,000,000 of SG and A expenses in 2021 Q1, which compares $216,000,000 in the Q1 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 the 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 €30,000,000 in the Q1 of 2021 versus A positive BRL9 1,000,000 in the Q1 of last year and our adjusted EBIT margin was minus 3.7%. The decline in adjusted EBIT in the quarter occurred despite an improvement in commercial vehicle segment profitability, With most decline coming out of the Executive Aviation, Defense and Security segment. The Executive Aviation business had Higher production costs in the quarter, mostly related to the old programs, obsolescence, heterophyte and all quality costs That we do not expect to repeat in the upcoming quarters. With respect to defense and security, we had FX Impacting delays in the Brazilian budget approval that impacts fixed cost absorption as well less favorable mix of revenues with the Zippet Super Tucano deliveries in the upcoming quarters. The service and support margins in the Q1 We're also slightly affected by the pandemic.
With respect to adjusted EBITDA, in the Q1, we generated BRL 80,000,000 positive, Representing an adjusted EBITDA margin of 2.2%. We expect both adjusted EBIT And adjusted EBITDA to improve as the year progresses. On the Slide 11, our adjusted net income for the quarter was a loss of $96,000,000,000 represents 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 We will maintain a strong liquidity level, but we are optimistic that an improved Visibility of our financial performance beyond 2021 will give you the opportunity to reduce certain high cost bank debts 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 BRL39 1,000,000 including CapEx, Development and research expenses in the period. We continue to control our cash outflows by investments in the context of the new portfolio of products and uncertainties caused by the pandemic. And our level of investment now is adequate for the programs we are currently undertaking in their Now moving to free cash flow. We did a much better job Of controlling the cash outflows in the Q1 of 2021 comparing with the Q1 of 2020 and even prior year's Q1, In which seasonally Embraer burns cash? We had a free cash flow usage of $227,000,000 in the Q1 of 20 'twenty one, which compared to the BRL677 1,000,000 in free cash flow usage in the last year Q1.
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 current 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 Q1 2021 Our hopefully R500 $1,000,000 lower than they were in the Q1 of 2020 and also in 2019. We have much more work to do with respect to working capital, but we are confident that we will achieve more savings over the next quarters years. Finally, on the Slide 13, we have our liquidity position at the end of the quarter. We finished with a total cash of Almost $2,500,000,000 total debt around $4,400,000,000 and net debt of $1,900,000,000 Our maturity schedule is very manageable with a little short term debt and overall With that, I conclude my presentation. Now I will turn 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 continue to be focused on our strategic plan, which aims To increase 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 $500,000,000 In current inventory levels at Embraer when comparing to previous years and have 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 E195E2 aircraft. And we still have various other sales campaigns in progress, not just for commercial jets, But also for the C390 Millennium and the Super Tucano. Also in Executive Aviation, we are currently experiencing The book to bill in excess of 1.75 and our current business jets portfolio is sold out until the Q4 of this year.
On the front of innovation projects, diversification and the strategic partnerships, We continue to advance with potential partnerships to open markets for our commercial jets For the C300-nineteen millennial and for the development of a turboprop aircraft, we have also assumed Control of Tempest, a cybersecurity company, and we fully incorporated Savvis, our radar business, Resulting in better synergies in our Defense and Security segment. Moreover, we continued to make Progress in investments to triple our engine maintenance revenues in the next few years in Portugal in partnership with The development of the eVTOL is another project that is moving forward quickly With the performance of new tests of our prototypes in reduced scale and full scale as well. In addition to the evaluation of potential investors in the project. Finally, we continue to make progress in our ESG 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 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 sights, 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.
Thank you. We will now start the Q and A session. Our first question comes from Myles Walton, UBS.
Thanks. Good morning. 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-three ninety And on the commercial aviation side in particular, I'm just curious, can you point again to maybe the region where the KC-three ninety 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.
Thank you, Marius, for your question. I mean, at this point of time, unfortunately, I cannot disclosure more details on this order. It is really an excellent news and great progress in our E2 program. And what I can tell you is that we have many other campaigns, sales campaigns, not only For commercial jets, but also for the C390 in different regions in Super Tucano as well. But I cannot disclose more information to you at this point of time.
Sorry.
Operator, can we take the next question? Thanks.
Our next question comes from Josh Milberg, Morgan
Stanley.
Hey, good morning, everyone. Thank you for the call and congrats on those Efficiency strides that you highlighted and also on the 30 E2 order. With those orders and with the Q1 results, could you touch on how you The mix between E-2s and E-175s both for this year and for 2022. And also, maybe talk about how the margin Compare all the 2 aircrafts, a past concern of ours has been that your high dependence on the E175 We're continuing that the economics on it could deteriorate just because of issues of fuel efficiencies and other factors. It would be great to deter your perspective on those points.
So Josh, yes, go ahead, Anton. Go ahead.
Sorry. Just in regards to the mix, we 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, slightly changed, but It's more or less what you have in the pipe.
Yes. And the sales campaign is about F4E1s and F4E2s, Josh.
Just one point, Josh.
Okay, that's great. Next for 2022
sorry. Go ahead, Josh. Sorry.
Go
ahead, Eduardo. Sorry.
No, I was just going to add that
I was just going to say, so I was going to ask you. Go ahead, Eduardo. We have a little bit of a delay here. Sorry about that.
Yes. No problem. No, just going to add that the you mentioned about the mix, right, saying that Ewan's 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. That's great, Eduardo. And then just on I think you mentioned in your release that the 30 E2 Two orders would start delivering in 2022. Can you give us an idea of how many you might deliver next year Of that particular order?
From this order, we are going to deliver the first 12 in 2022, Josh. Welcome.
Our next question comes from Robert Spiegard, Credit Suisse.
Hi. I have a couple of questions for you. I don't know if this is for Francisco or Antonio, but you have 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, Rod.
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. Yes. Actually, we see we are advancing very well in those fronts. The front for the TP, for the C390, for the E Jets, but as we don't have anything concrete Concrete at this moment, I cannot disclose more information to you. But I just can confirm that we are progressing very well
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 EUR 30,000,000 as I would say. Additional cost part of it is going to be compensated the quarters to come. Again, something like €30,000,000 to €40,000,000 that was what we saw and part of it is going to recover in the coming quarters.
Okay. And just to add, Antonio sorry, Rob, I do hear. No, just to add that the retrofit cost now, we sold And deliver some demo aircraft during the quarter. I see. And 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 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 Complement what Edu just said that we are another front we have is strong focus on improving Quality and reduce the non quality costs in the company. So we do expect good improvement in that front as well.
Okay. Okay. And then just last, Antonio, you mentioned strength in the light midsize 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 20, 22 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 send you afterwards, but we are seeing this at the entry level because we do not have Use our pre-one aircraft available in this category in the secondhand market. That's improving, and I needed to confirm you later on.
Okay. Thank you very much. Thank you.
Our next question comes from Ron Epstein, Bank of America.
Hey, Good morning, guys. You talked a little bit about this on the call. If you could elaborate The sales campaigns you're seeing, I know the customer for the 30 aircraft that you sold is undisclosed, What are they sort of a truck carrier, are they a start up carriers, any color you can give us there? And then I've got some other questions after that.
Ron, we also are anxious to disclose 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 in mid-twenty months. 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'm motivated to close the deals with us. And we have we are confident we have The best option, the most efficient product in the region of aviation that is the E2. So we are very well positioned So this market rebound at this point of time.
So again, we do 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. In terms of margins, Ron, it will here. We had these Margins around 5% negative for Exactive. But as I said, we had these retrofits And on quality costs, probably removing that, the margins would have been positive. So the way we are seeing now on The current sales that we are performing, they are doing quite well on Active Jet in terms of profitability.
So we are feeling good about margins. And are you asking about Executive Jet or Commercial? Sorry.
Yes, Executive, yes. So Yes.
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 Thank you.
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 firms?
Thank you again. So our primary strategy is really to find partners to help us to fund The project and accelerate the project. That's what we are doing, by the way, 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 Investors have been focusing a lot on ESG concerns. And one area as a team, we've been focusing a lot more on is The government 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, the more aerospace people on it and maybe have a Board that's a little more international?
Thanks for this question again, Ro. Yes, I mean, We had some changes in our board recently. So we have now another woman, Claudia Zehnder, And she came from she used to work in 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 Two people, two 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 in aerospace and knowledge in our board.
Great.
Thank
you very much.
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. Thanks, Edu.
Thank you. Our next question comes from Victor Mizusaki, Bradesco BBI.
Thank you. I have two questions here. The first one, Francisco, you mentioned I think that in the opening remarks That's basically I mean, the company already sold the full production capacity for executive jets in the year. So my first question is if you can disclose this number, I mean, what to expect to sell for 2021? And my second question is with regards to Commercial Aviation.
When I take a look on the business in VR GAAP, I can see a negative gross margin in Commercial Aviation for the Q1. So I think that part of it is because of production scale. But can you comment a little bit more about this?
Well, regarding the Exactive, I mean, what I said is that, yes, we are sold out in our business jet portfolio Until the Q4 this year and we which is great for us. The book to bill It's 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. And the commercial aviation, yes, we are suffering with 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 initiatives as The cycle time the production cycle reduction or actions to reduce the costs properly in order to Combined with the sales growth, there we see an important improvement in the margins of our business, but especially commercial aviation.
Our next question comes from John Cooper, JPMorgan.
Yes. Hi, everyone. Actually, Jonathan Couture SMGP. Question I have was still on margins. Looking at the Defense and Security segment, Antonio had mentioned at the beginning of the call that it was in fact because of a delay related to the approval of the government's budget.
So my question is, have this since been normalized? And secondly, Corningbra had changed its opinion by the end of the year to Probably release the guidance or at least something for the 2nd semester of 2021. Thank you.
So John, thanks In regards to the defense and security, the government budget was approved late March, and The situation should become normal in the defense and security side, and we expect to give you guys a guidance in the mid of the year. That's our best guess today.
Okay. Thank you. Welcome.
Our next question comes from Myles Walton, UBS.
Thanks for letting me back in. Sorry, my phone cut off. Francisco, I was hoping you could give some color on the KC-three ninety 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 refueling testing, are there customers who are waiting to see these results, Which would then manifest into orders?
Well, Mayers, we are really working hard To conclude the certification or the certification process for the KAC with the old tests, some of them you just mentioned There's refueling in the order ones and for sure this will help us To open new markets for the KC-three ninety. 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-three ninety. This is what I can share with you at this
What is the timeline for the completion of all the testing? When does it
We hope to include everything still this year.
Okay. Very good. And I think you gave the Executive Aviation margins, Edu, but could you give the commercial and defense and services while you're there?
Yes, sure. As I said, the XTACTIVE had this retrofit and non quality cost impacts. It was around minus 5%. In commercial actually services on service was positive 10%. On commercial, around minus 10, but it comes from a Very low base and as we are recovering volumes and as Francisco described it, the margins should continue to trend up.
In defense, we are 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 1 on cash flow. So you came in probably better than you'd expect on the cash flow in the Q1. 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 it's a good question. We are not there with our planning. For sure, it 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 or loan that we needed to pass through this year here. We are just managing our bank debt, which means we We have the situation on the control. But I promise you guys are going to get our guidance
Our next question comes from Matthias Van Meel, Bouygues Asset Management.
Hi, thank you very much. I'm really sorry my questions have been answered. Thank you.
Okay. Thank you. Welcome.
Our next question comes from Ron Epstein, Bank of America.
Hey, guys. I already asked my question. I don't know. I got in twice. Sorry about that.
Okay. We like to talk to you, Ron.
I like to talk
Our next Question comes from Paul Edson, LumiSees.
Hi, thanks for Taking the question, most have been answered. But on the short term debt, how do you expect to manage that
Yes. Most of our liability management was done last year, right, when we To the new bonds when we raise 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 BRL357,000,000 is that like that amount that would be
The big chunk is That we have in Portugal, it's a bank debt and probably we're going to pay down that one.
All right, great. Thank you.
Our next question comes from Ron Epstein, Bank of America.
Hey guys, I'm back. I 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 Elvestic, for example, in KLM Regarding the performance of our E2, E2s, I mean, with performance even better Then 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 airplane?
Absolutely, absolutely. We are using this as a stronger A strong argument, a strong mark to potential customers and they are seeing this with the there's more focus On the reduction of emissions, our E2s, I mean, are showing 25% Initial reduction compared to the previous generation. It's really a great performance.
Yes, that's great. Thank you very much,
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.