SAO PAULO, Jan 22 (Reuters) – Avianca Brasil, which filed for bankruptcy protection in December, is looking for a cash injection and has hired Brazilian consulting firm Galeazzi & Associados to help in talks with investors and creditors, the airline said.
Galeazzi’s executives are already visiting the carrier’s creditors to discuss options, a source said, asking for anonymity to disclose private talks. Reuters first reported the news of the Galeazzi hire, citing sources.
Avianca shareholders are discussing a potential cash injection with different investors, including hedge fund Elliott Management Corp, two sources said. Any investment now would need to happen within the bankruptcy protection process, likely in the form of debtor-in-possession financing.
Elliott and Galeazzi did not immediately reply to requests for comment.
Any capital injection or loan would need authorization from the bankruptcy judge.
Avianca is battling two of its main aircraft lessors, Aircastle Ltd and General Electric Co’s unit GE Capital Aviation Services, who have tried so far unsuccessfully to ground or repossess 40 percent of its fleet.
Avianca also said in the statement it continues to operate normally.
The escalating legal battle has added to the uncertainty surrounding Avianca Brasil’s ability to maintain its current flight schedule.
(Reporting by Tatiana Bautzer Editing by Susan Thomas and Alistair Bell)
São José dos Campos, Brazil, January 16, 2019 – Embraer today presents its preliminary forecast for 2019 and 2020 at a meeting with investors at the New York Stock Exchange (NYSE). For 2019, Embraer expects to deliver between 85 and 95 commercial jets, 90 to 110 executive jets, including light and large jets, 10 A-29 Super Tucano aircraft and two multi-mission KC390 aircraft. Total consolidated revenues should be between US$ 5.3 billion and US$ 5.7 billion.
The Company expects to achieve a consolidated EBIT margin of breakeven (approximately zero) for the year 2019. It is important to highlight that 2019 guidance includes potential costs and expenses associated with the creation of the Commercial Aviation JV in a strategic partnership between the Company and The Boeing Co. (“Boeing”) under the terms of the associated material facts published by Embraer.
With the finalization and closure of the partnership operation described above, tentatively expected to occur by the end of 2019, Embraer anticipates a capital structure without leverage, with a net cash position of approximately US$ 1.0 billion after the payment of a special dividend to shareholders of roughly US$ 1.6 billion (which remains subject to the confirmation of certain requirements, including the fiscal year results).
During the event in New York, Embraer also presents its guidance for the year 2020, the first year after the potential closure of the operation creating the strategic partnership between Embraer and Boeing in Commercial Aviation, as mentioned above. The guidance presented for 2020 includes 100% of the expected results of the Executive Jets and Defense & Security segments (and the results of their respective services and support businesses) and exclude expected financial results coming from the 20% stake Embraer will have in the Commercial Aviation JV in partnership with Boeing.
Embraer expects to have net revenues of between US$ 2.5 billion and US$ 2.8 billion, EBIT margin of between 2% and 5% and roughly breakeven free cash flow for the year 2020.
2018 Estimates Revision Embraer is revising its 2018 guidance for executive jet deliveries, Revenues, Executive Jet revenues, Defense & Security revenues, consolidated and adjusted EBIT, consolidated and adjusted EBIT margin, consolidated and adjusted EBITDA, consolidated and adjusted EBITDA margin, Free Cash Flow and Investments.
Global market conditions for executive jets, although gradually improving, continue to recover more slowly than expected. In combination, Embraer’s increased focus on improving profitability and price preservation, as well as the recent launch of the new midsize/super midsize executive jets (“Praetors”), which will begin delivering in 2019, led the Company to adopt a more cautious approach towards deliveries in 2018. As a result, Embraer delivered 91 total executive jets in 2018 (compared to guidance of 105-125 jets previously).
As a result of the reduction in executive jet deliveries, the Company now expects revenues in the executive jets segment to be approximately US$ 1.1 billion (previously US$ 1.35 billion – US$ 1.50 billion). In addition, the cost base revision for the KC-390 contract in the second quarter of 2018, resulting from the incident involving prototype 001 in May 2018, negatively impacted revenues for the Defense & Security segment. This impact led to a new projection for revenues for the segment, of approximately US$ 0.6 billion (US$ 0.8 billion – US$ 0.9 billion previously). As a result, Embraer’s consolidated revenues for 2018 are now expected to be approximately US$ 5.1 billion, a reduction from the previous range of US$ 5.4 billion – US$ 5.9 billion.
Guidance for consolidated and adjusted EBIT, consolidated and adjusted EBIT margin, consolidated and adjusted EBITDA, and consolidated and adjusted EBITDA margin for 2018 were lowered due largely to lower fixed cost dilution of the Company as a function of lower executive jet volumes and a decline in Defense & Security revenues. The adjusted values for 2018 exclude the impact of US$ 127.2 million related to the cost base revision of the KC-390 contract in the second quarter of 2018, following the incident involving prototype 001 in May 2018.
Embraer also estimates that its spending on investments for 2018 will be roughly US$ 300 million, below its previous expectation for a total of US$ 550 million. It is important to note that the lower spending on investments has not negatively impacted the Company’s ongoing development projects.
As a result of the lower executive jet deliveries, partially offset by the lower spending on investments in 2018, the Company expects that 2018 Free cash flow will be a use of cash of roughly US$ 200 million (versus a use of no more than US$ 100 million in its previous guidance).
SAO PAULO, Jan 11 (Reuters) – Lessor Aircastle is set to repossess 10 jets from Avianca Brasil, the country’s No. 4 airline, after a bankruptcy hearing on Monday, a source familiar with the matter said, potentially disrupting flights for thousands of passengers.
The 10 Airbus A320 planes represent more than 20 percent of Avianca Brasil’s current fleet, according to data provided by Brazil’s aviation regulator, raising doubts about the carrier’s ability to fly its full flight schedule if the aircraft are seized.
And it could lose more planes in the future. Lessor GE Capital Aviation Services and an affiliate are seeking to repossess 12 Airbus A320s from Avianca Brasil, according to James Luton, a GE spokesman.
When the airline filed for bankruptcy protections last month, the airline discussed the possible loss of 14 planes, which it said would affect 77,000 passengers over a three-week period.
A representative for Avianca Brasil declined to comment. The bankruptcy filing came after years of mounting losses and late aircraft payments.
Bankruptcy filings, while providing protection from creditors, do not cover leases, the source of the carrier’s entire 46-aircraft fleet.
Between the end of 2016 and September 2018, Avianca Brasil’s liabilities to aircraft lessors quintupled to 415 million reais ($112 million), according to the carrier’s financial statements.
Still, a Brazilian bankruptcy judge stayed a decision that would have allowed Aircastle to repossess the planes last month. That stay, however, expires on Monday.
Since the stay was issued, the source said, Avianca Brasil has not made any proposal to Aircastle that would have allowed the carrier to keep the planes. Avianca Brasil owes Aircastle more than $30 million, the source added.
The stakes are also high for Aircastle, as Avianca Brasil is its largest single customer, representing some 7 percent of its net book value, according to the lessor’s financial disclosures.
Avianca Brasil is separate from the better-known Avianca Holdings SA, which is based in Colombia. But they share the same owner, a family company owned in part by Bolivian-born airline entrepreneur German Efromovich.
United Continental Holdings gave the family company a $500 million loan last November.
Neither party has revealed why the loan was needed, but Efromovich has been sued for failure to repay his debts in the United States and Brazil in recent years.
São Paulo and Chicago, January, 10, 2019 – Embraer [B3: EMBR3, NYSE: ERJ] and Boeing [NYSE: BA] have welcomed approval by Government of Brazil of the strategic partnership that will position both companies to accelerate growth in global aerospace markets.
The government’s approval comes after the two companies last month approved terms for the joint venture that will be made up of the commercial aircraft and services operations of Embraer. Boeing will hold an 80 percent ownership stake in the new company and Embraer will hold the remaining 20 percent.
The companies have also agreed to the terms of another joint venture to promote and develop new markets for the multi-mission medium airlift KC-390. Under the terms of this proposed partnership, Embraer will own a 51 percent stake in the joint venture, with Boeing owning the remaining 49 percent.
Once Embraer’s Board of Directors ratifies its prior approval, the two companies will then execute definitive transaction documents. The closing of the transaction will be subject to shareholder and regulatory approvals and customary closing conditions. Assuming the approvals are received in a timely manner, the transaction is intended to close by the end of 2019.
Forward-Looking Information Is Subject to Risk and Uncertainty Certain statements in this release may be “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the proposed terms of the transaction, the ability of the parties to satisfy the conditions to executing or closing the transaction and the timing thereof, and the benefits and synergies of the proposed transaction, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on current assumptions about future events that may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially from these forward-looking statements. As a result, these statements speak only as of the date they are made and neither party undertakes an obligation to update or revise any forward-looking statement, except as required by law. Specific factors that could cause actual results to differ materially from these forward-looking statements include the effect of global economic conditions, the ability of the parties to reach final agreement on a transaction, consummate such a transaction and realize anticipated synergies, and other important factors disclosed previously and from time to time in the filings of The Boeing Company and/or Embraer with the Securities and Exchange Commission.
São José dos Campos, Brazil, December 19th, 2018 – Embraer and Azul Linhas Aéreas Brasileiras S.A. have signed a contract for a firm order for a previously announced 21 E195-E2 jets. This agreement was revealed as a Letter of Intent (LoI) at the Farnborough Airshow, in July. This contract has a value of USD 1.4 billion, based on current list prices, and will be included in Embraer’s 2018 fourth-quarter backlog.
This contract is in addition to the 30 E195-E2 jets ordered by the airline in 2015, raising Azul’s total order to 51 Embraer E2 aircraft. Azul is the launch operator of the E195-E2 and will receive the first aircraft in 2019.
Embraer is the world’s leading manufacturer of commercial jets with up to 150 seats. The Company has 100 customers from all over the world operating the ERJ and E-Jet families of aircraft. For the E-Jets program alone, Embraer has logged almost 1,800 orders and 1,500 deliveries, redefining the traditional concept of regional aircraft.
SAO PAULO and CHICAGO, Dec. 17, 2018 /PRNewswire/ — Embraer [B3: EMBR3, NYSE: ERJ] and Boeing [NYSE: BA] have approved to the terms of a strategic partnership that would position both companies to accelerate growth in global aerospace markets.
The approved terms define the joint venture comprising the commercial aircraft and services operations of Embraer, in which Boeing will hold an 80 percent ownership stake and Embraer will hold the remaining 20 percent. The transaction remains subject to approval by the Government of Brazil, after which Embraer and Boeing intend to execute definitive transaction documents. The closing of the transaction will then be subject to shareholder and regulatory approvals and customary closing conditions.
Under the terms of the proposed partnership, Boeing will acquire an 80 percent ownership stake in the joint venture for $4.2 billion. The partnership is expected to be neutral to Boeing’s earnings per share in 2020 and accretive thereafter. Estimated annual pre-tax cost synergies of approximately $150 million are anticipated by the third year of operations.
Once the transaction has closed, the commercial aviation joint venture will be led by Brazil-based management, including a president and chief executive officer. Boeing will have operational and management control of the new company, which will report directly to Dennis Muilenburg, Boeing chairman, president and chief executive officer. Embraer will retain consent rights for certain strategic decisions, such as transfer of operations from Brazil.
“Boeing and Embraer know each other well through more than two decades of collaboration, and the respect we have for each other and the value we see in this partnership has only increased since we announced our joint efforts earlier this year,” said Dennis Muilenburg, Boeing chairman, president and chief executive officer.
“We are confident that this partnership will deliver great value to Brazil and the Brazilian aerospace industry as a whole. This alliance will strengthen both companies in the global market and is aligned with our long-term sustainable growth strategy,” said Paulo Cesar de Souza e Silva, Embraer president and chief executive officer.
The companies have also agreed to the terms of another joint venture to promote and develop new markets for the multi-mission medium airlift KC-390. Under the terms of this proposed partnership, Embraer will own a 51 percent stake in the joint venture, with Boeing owning the remaining 49 percent.
The transaction is subject to approval by the Government of Brazil, ratification by the Embraer Board of Directors and its further authorization to execute the definitive transaction documents. Once the parties have executed the definitive transaction agreements, the strategic partnership will then be subject to shareholder and regulatory approvals, as well as other customary closing conditions. Assuming the approvals are received in a timely manner, the transaction is intended to close by the end of 2019.
Forward-Looking Information Is Subject to Risk and Uncertainty Certain statements in this release may be “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the proposed terms of the transaction, the ability of the parties to satisfy the conditions to executing or closing the transaction and the timing thereof, and the benefits and synergies of the proposed transaction, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on current assumptions about future events that may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially from these forward-looking statements. As a result, these statements speak only as of the date they are made and neither party undertakes an obligation to update or revise any forward-looking statement, except as required by law. Specific factors that could cause actual results to differ materially from these forward-looking statements include the effect of global economic conditions, the ability of the parties to reach final agreement on a transaction, consummate such a transaction and realize anticipated synergies, and other important factors disclosed previously and from time to time in the filings of The Boeing Company and/or Embraer with the Securities and Exchange Commission.
BRASILIA, Dec 10 (Reuters) – A Brazilian federal court has overturned an injunction that blocked a proposed tie-up between planemakers Embraer and Boeing, Embraer said on Monday in a securities filing.
Embraer announced in July its intention to sell 80 percent of its commercial aviation business to Boeing for $3.8 billion. Embraer has said the deal is crucial for its survival. The injunction brought by four congressmen from Brazil’s left-wing Workers Party had been granted on Thursday.
Brazil’s solicitor general’s office confirmed the injunction that halted Embraer’s negotiations with Boeing had been thrown out.
The government’s top lawyer had asked the court to overturn the injunction, arguing that it violated the constitutional right to freedom of enterprise by interfering in the negotiations between two private companies.
Trading of Embraer ADRs on the New York Stock Exchange was halted pending news. (Reporting by Anthony Boadle Editing by Phil Berlowitz and Bill Berkrot)
BRASILIA (Reuters) – A Brazilian federal court on Thursday granted an injunction blocking the proposed tie-up between planemakers Boeing Co (BA.N) and Embraer SA (EMBR3.SA), according to a court document seen by Reuters.
The decision, which can be appealed, forbids Embraer’s board of directors from signing the deal with Boeing. Boeing and Embraer did not immediately reply to requests for comment.
The legal action was brought by four congressmen with Brazil’s leftwing Workers Party, which is opposed to the deal.
The companies announced in July that Brazilian planemaker Embraer would sell 80 percent of its commercial aviation business to Boeing.
But the deal has stalled, partly because the Brazilian government, which has the power to veto important decisions at the planemaker, has been reluctant to give it a greenlight.
President Michel Temer said he would leave the decision to the future administration, which takes office Jan. 1. President-elect Jair Bolsonaro has said he is in favor of the deal.
(Reporting by Ricardo Brito; Editing by Lisa Shumaker and David Gregorio)
SAO PAULO, Dec 3 (Reuters) – Two Brazilian airlines, Azul SA and Avianca Brasil, are targets for expansion in the wide-ranging alliance between United Continental Holdings Inc , Colombia’s Avianca Holdings and Panama’s Copa Airlines on U.S.-Latin America routes, Avianca Holdings’ Chief Financial Officer, Gerardo Grajales, told Reuters on Monday.
There was little reference to Brazil, by far the region’s largest market, when the alliance was announced on Friday, but Grajales said the parties to the agreement already had in mind Azul and Avianca Brasil, which operates independently of Colombia-based Avianca Holdings.
“The two airlines complement each other in the Brazilian market,” Grajales said. “From the beginning we thought that Brazil should be covered by our agreement, however, no partnership would be authorized if it did not have an Open Skies agreement.”
The Open Skies agreement between Brazil and the United States was signed into law in May, when discussions among the three airlines were already advanced, he explained.
The airline agreement mimics a partnership between American Airlines and Chile’s Latam Airlines which has been mired in regulatory scrutiny.
The announcement between the United Airlines parent, Avianca and Copa capped off almost two years of negotiations. United will loan Avianca’s majority shareholder almost $500 million to be spent on ventures outside of the airline.
Depending on how it is repaid, United could end up owning a large chunk of the Colombian carrier. United is making no monetary investment in Copa or its affiliates.
United already owns an 8 percent stake in Azul, and has a codesharing agreement with Avianca Brasil, formerly known as Ocean Air.
Shares in Azul were down almost 5 percent on Monday afternoon in Sao Paulo. The world’s largest asset manager BlackRock disclosed late on Friday that it had sold an almost 10 percent stake in Azul’s preferred shares. Hours earlier, the carrier disclosed in another securities filing that it sought to double in size in the next five years.
Azul did not immediately respond to a request for comment. (Reporting by Marcelo Rochabrun; Editing by David Gregorio)
SANTIAGO (Reuters) – LATAM Airlines (LTM.SN), the biggest airline group in Latin America, reported a steep fall in third-quarter profit due to lower passenger demand in Argentina and Brazil as well as higher fuel prices and competition from low-cost airlines.
LATAM reported a net profit of $53 million for the quarter, down from $160 million a year earlier, according to a securities filing.
But it said it was maintaining its guidance for the year, expecting an overall operating margin for 2018 of between 6.5 and 8 percent. It is focused on cost-cutting to offset higher expenses.
“We are transporting more passengers with a leaner organization,” a company executive told analysts on a conference call.
Morgan Stanley raised its target price for LATAM shares traded in the New York stock exchange to $9 following the earnings release, from a previous target price of $8.80.
Shares were up 3.4 percent at $9.26 on Wednesday morning.
Demand in the quarter slowed in Brazil due to a weaker local currency, and demand fell significantly in Argentina, where the local currency faced an abrupt devaluation during the quarter, reducing passengers’ purchasing power.
“We carried more passengers in all our markets except Argentina, where we cut capacity this year,” an executive said.
Lower demand and increased fuel expenses due to higher oil prices has slashed profits across regional airlines. One of LATAM’s biggest competitors, Brazil’s Gol Linhas Aereas Inteligentes SA (GOLL4.SA), reported a loss of $110 million during the quarter.
Market conditions prompted LATAM to renegotiate commitments for future aircraft purchases, achieving a reduction of $2.3 billion in fleet expenses through 2021, the company said.
The airline will also boost the number of available seats in some of its aircraft by 3 percent as improving utilization and seat count may allow it to grow with fewer aircraft.
Revenue declined by 5 percent to $2.5 billion in the quarter compared with the same period in 2017.
In the quarter, LATAM spent the equivalent of 30 percent of its revenue on fuel, compared with 21 percent a year earlier.
In comparison, Gol spent 37 percent of its revenue on fuel in the same quarter, up from 26 percent a year earlier.
(Reporting by Antonio de la Jara in Santiago and Marcelo Rochabrun in Sao Paulo; Writing by Marcelo Rochabrun; Editing by Bernadette Baum)
