ERJ Embraer SA

Part I

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The following tables present a summary of our operational data as of the dates and for the periods indicated.

Not applicable.

Not applicable.

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Risks Relating to Embraer

The outbreak of communicable diseases around the world, including COVID-19, may lead to higher volatility in the global capital markets and recessionary pressure on the global economy, which could adversely and materially affect us.

The outbreak of communicable diseases on a global scale has affected investment sentiment and resulted in sporadic volatility in global capital markets and may have a recessionary effect on the global economy, including in Brazil.

The outbreak of the novel coronavirus, known as COVID-19, was first identified in December 2019 in Wuhan, China, and has since spread globally. The COVID-19 outbreak has compelled governments around the world to adopt measures to contain the spread of COVID-19 by means such as lockdowns of cities, restrictions on travel and public transportation, business and store closures, and emergency quarantines, among others. Other measures were taken by companies and individuals to reduce the risk of exposure to infection, including reduced travel, cancellation of meetings and events, and implementation of work-at-home policies, among others, which has caused significant disruptions to the global economy and normal business operations across a growing list of sectors and countries. The COVID-19 pandemic adversely affected business confidence and consumer sentiment, and has been, and may continue to be, accompanied by significant volatility in financial and commodity markets. The spread of COVID-19, especially if the measures to curb the spread of the virus last for longer than expected, may have broader macro-economic implications, including reduced levels of economic growth and possibly a global recession, the effects of which could be felt well beyond the time the spread of infection is contained.

According to the International Air Transport Association (“IATA”), global commercial airline traffic volume in 2020 decreased by approximately 66%. IATA expects that traffic volume in 2021 will be 38% lower as compared to traffic volume in 2020. As of December 2020, 18% of the fleet with up to 100 seats and 36% of the fleet with 100-150 seats was in storage. As a result, we expect that traffic disruption and decreased demand affecting will continue to affect customers demand globally and may continue to materially and adversely affect our deliveries in 2021.

The reduction in the demand for travel combined with government-imposed travel restrictions is materially and adversely affecting the aerospace industry, causing some airlines to suspend, cancel or reduce flights. As a consequence, demand for new aircraft has declined as airlines are wary of the COVID-19 air travel restrictions and its consequences.

We have been monitoring the impacts of the COVID-19 pandemic not only on the global economy but also on our workforce, operations, as well as on the supply and demand mechanics for our products and services. Since the beginning of the pandemic, we have adopted several initiatives focused on health and safety of our employees. Our operations were interrupted for a few days to adjust our facilities and implement health and safety measures, including social distancing measures, remote work for some employees, reduction of working hours and wages, collective vacations and paid leaves.

Additionally, as a result of the COVID-19 pandemic, on March 17, 2020, our Brazilian corporate employees responsible for critical functions started to work from home and, on March 22, 2020, we decided to put our Brazilian employees that could not work remotely on paid leave until March 31, 2020. Until March 31, 2020, we were only carrying out essential activities at our facilities, including customer support, aircraft maintenance and manufacturing. On March 30, 2020, we further decided to put our Brazilian employees responsible for non-critical functions on collective vacation from April 1 to April 9, 2020. During this temporary shutdown of our facilities, we implemented safety measures to adapt our facilities to the World Health Organization (“WHO”) guidelines. On April 10, 2020, we implemented a job preservation plan that included temporary furloughs, reduction in working hours and pay cuts to certain of our employees, as a means of guaranteeing their employment upon completion of the plan. On April 13, 2020, all of our Brazilian employees that could not work remotely and were not included in the job preservation plan returned to work at our adapted facilities.

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In 2020, we have also implemented three voluntary dismissal programs for specific groups of employees in Brazil, with the participation of approximately 1,600 employees. On September 3, 2020, we announced a reduction in our workforce, dismissing approximately 900 employees. Considering both participation in the voluntary dismissal programs and non-voluntary dismissals, our workforce was reduced by approximately 2,500 employees in Brazil (approximately 12.5% of our total global workforce). The aggregate expenses in connection with this workforce reduction were approximately US$69.2 million in the year ended December 31, 2020. Our or other companies’ operations may be suspended again or remain suspended for a longer time. On March 26, 2020, due to the uncertainty related to the spread of COVID-19, we have also suspended the projections relating to our expected results for 2020, last updated on November 12, 2019.

We also adopted certain measures to preserve our cash flow, including reduction in working hours and pay cuts, extension of suppliers payment terms, extension of tax payment deadlines, negotiation of new bank credit facilities, and adjustments to the production chain.

As of the date of this annual report, only one of our executive jets customer cancelled its firm order as a result of the COVID-19 pandemic. Most of the delivery postponements attributed to the effects of the pandemic were already delivered in 2020. With respect to our Commercial Aviation business unit, some of our customers rescheduled aircraft deliveries for 2021, but no cancellation has occurred as of the date of this annual report. We have also granted interim financing for certain deliveries of commercial jets held during the third and fourth quarters of 2020.

The reduction in our workforce, as a result of the COVID-19 pandemic, along with the absence of easing of scope clauses negotiated between the pilots unions and the airlines, has slowed down the pace of certification activities for the E175-E2 aircraft. For additional information on the impacts of COVID-19, see “Item 5. Operating and Financial Review and Prospects—5A. Operating Results—Current Conditions and Trends in our Industry—COVID-19.”

With pending uncertainties regarding global vaccination and other virus variants, we cannot yet determine the full impact that COVID-19 pandemic will have on our business and results of operation in the short-to-medium term. Customers may continue to postpone their scheduled aircraft deliveries and may cancel some of their orders. In addition, delays in payment cycles by significant customers may have an impact on our cash position and working capital.

To date, no fully effective vaccines or treatments have been developed and effective vaccines or treatments may not be discovered in time to protect against a further spread of the virus. The effects of the COVID-19 pandemic on our business will depend on, among other factors, the ultimate geographic spread of the virus, the duration of the outbreak and the extent and overall economic effects of the governmental response to the pandemic. In addition, the effects of the COVID-19 pandemic may exacerbate the effects of the other risk factors disclosed in this section of the annual report.

A downturn in our key markets may reduce our sales and revenue, and, consequently, our profitability.

We expect that a substantial portion of our results will be affected, directly or indirectly, from sales of aircraft, which have historically been cyclical due to a variety of factors that are both external and internal to the air travel industry, including general economic conditions, and, most recently and importantly, the effects of COVID 19 on our operations and financial condition, which we cannot fully foresee as of the date of this Annual Report. For additional information on the impacts of COVID-19, see “Item 3. Key Information—3D. Risk Factors—Risks Relating to Embraer—The outbreak of communicable diseases around the world, including COVID-19, may lead to higher volatility in the global capital markets and recessionary pressure on the global economy, which could adversely and materially affect us.”

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Economic downturns in our industry, such as the one caused by the COVID-19 pandemic, may reduce air travel demand and corporate and personal spending, which may negatively impact our Commercial Aviation, Executive Aviation, Defense and Security and Services and Support business units. These downturns have led in the past and may also lead in the future, to a decrease in the volume of financing available to our customers for aircraft purchases, particularly in the aforementioned business units. A continued downturn in general economic conditions could result in further reductions in air travel and decreased orders for our aircraft. Our customers could also continue to defer or to cancel their purchases of our aircraft. We cannot predict the magnitude or duration of the impact that the aforementioned events could not only have on the air transport industry as a whole, but also on our business in particular.

We depend on key customers.

In our Commercial Aviation business unit, as of December 31, 2020, over 90% of our firm orders in backlog for the current EMBRAER 170/190 jet family were from Republic Airlines and SkyWest. Our E-Jets E2 family backlog mainly comprises orders from the companies Azul, AerCap, AirCastle and AirPeace, which represent approximately 83% of our E-Jets E2 family orders. We believe we will continue to depend on a select number of key customers, and the loss of or difficulty in maintaining the relationship with any one of them would significantly reduce our sales and market share.

In the Executive Aviation business unit, we have been increasingly relying on individual orders as the share of fleet orders in the backlog has been diminishing. Despite the fact that we sold Praetors and Phenoms to a large fractional operator in 2019, and which corresponding deliveries will continue to occur in the short-term we believe that fleet renewal demand will occur at a more moderate rate over a longer period as the current operator’s fleet ages.

In our Defense and Security business unit, the Brazilian government is our largest customer of defense aircraft products. Revenue from sales to the Brazilian government accounted for 44.5% of the business unit revenue for the year ended December 31, 2020. A decrease in defense investments by the Brazilian government due to budgetary constraints or other factors that are out of our control could decrease our Defense and Security revenue. We cannot assure you that the Brazilian government will continue to acquire defense products and services from us in the future at the same rate or at the same level.

Our aircraft sales are subject to cancellation and rescheduled delivery provisions that may reduce our future income, profitability, backlog and cash flow.

A portion of our aircraft firm orders is subject to significant contingencies before delivery. Prior to delivery, some of our purchase contracts may be terminated, or all or a portion of a particular firm order may be canceled, for different reasons, including (i) extended delays in delivering aircraft or failure to obtain certification of the aircraft or otherwise meet performance milestones and other requirements, (ii) the failure of a customer to honor its aircraft purchases or (iii) production rate shortfalls.

Our customers may also reschedule deliveries or cancel orders, particularly during an economic downturn. In 2020, we had income of US$15.1 million related to contractual fines paid by customers due to contract cancellations compared to contractual fine income of US$31.0 million in 2019 and US$35.4 million in 2018. Material cancellations, delays or decreases in the number of aircraft delivered in any year would reduce our sales and revenue, and, consequently, our profitability, cash flow and backlog.

Legal proceedings pertaining to the now terminated strategic partnership with Boeing, including arbitration proceedings related to Boeing’s termination of and failure to close the MTA and/or the Contribution Agreement, may adversely impact our business, financial condition and results of operations.

We have incurred and continue to incur additional costs in connection with the prosecution, defense or settlement of the currently pending and any future legal proceedings relating to the Boeing Transaction and/or Boeing’s termination of and failure to close the Boeing Transaction. Such legal proceedings include, among other matters, the ongoing arbitration proceedings between Embraer and Boeing that have commenced

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in connection with the wrongful termination of the MTA and/or the Contribution Agreement by Boeing. Both Embraer and Boeing have commenced arbitrations in connection with the termination. Such legal proceedings may also include litigation brought by our stockholders and holders of our ADRs related to the Boeing Transaction and/or Boeing’s termination of, and failure to consummate the transactions contemplated by, the MTA and the Contribution Agreement. We continue to strongly believe that Boeing wrongfully terminated the MTA and the Contribution Agreement, that Boeing was under an obligation to continue to comply with the terms of the MTA and the Contribution Agreement, that Embraer was in full compliance with its obligations under the MTA and the Contribution Agreement and that our pending arbitration proceedings against Boeing and its affiliates are a valid enforcement of our rights under the MTA and the Contribution Agreement. We cannot predict the outcome of any such legal proceedings. Such legal proceedings may also create a distraction for our management team and board of directors and require time and attention. In the case of an adverse determination in the arbitration proceedings, we may not recover any damages from Boeing and we may be required to pay significant monetary damages to Boeing. In addition, even if we ultimately succeed in such legal proceedings, there may be negative publicity attached to such legal proceedings, which may materially and adversely affect our reputation and brand names. As a result, any legal proceedings relating to the Boeing Transaction or Boeing’s termination of and failure to close the Boeing Transaction could, among other things, adversely affect our business, financial condition and results of operations.

We may face a number of challenges resulting from the development of new products and the possible pursuit of strategic opportunities and transactions.

We cannot assure you that our products will be accepted by our customers and the market, and if any of our new products do not meet customer expectations or market demand, our business would be adversely affected. In addition, as we continue to develop new products, we may need to reallocate existing resources and coordinate with new suppliers and risk-sharing partners. Finally, cost overruns and delays in the development and delivery of new products would adversely affect us.

We may pursue strategic opportunities and transactions, just as we have in the past, including joint ventures, partnerships, acquisitions or divestitures. We may face a number of challenges, including difficulties in identifying appropriate partners, assimilating with or adjusting to our partners’ or targets’ operations and personnel, maintaining internal standards and controls, as well as the diversion of our management’s focus from our ongoing business. We cannot assure you that we will be able to meet these challenges and that our business or the trading price of our common shares or ADSs will not face disruptions as a result of such opportunities or transactions or the markets’ perception thereof.

We may be required to refund cash contributions in connection with the production or development of our aircraft if certain milestones for our aircraft are not reached.

We have arrangements with our risk-sharing partners, pursuant to which they have contributed to us, in cash over the years, a total of US$1,369.5 million since the beginning of the development of the EMBRAER 170/190, Phenom 100/300, Legacy 450/500 jet families and the E2 jet family through December 31, 2020. Cash contributions would have to be refunded by us to the risk-sharing partners to the extent that we had failed to fulfill certain agreed-upon milestones. In 2020, we met all the required milestones, and as a result, the full amount of the cash contributions was nonrefundable.

Although, currently, no cash contributions from our risk-sharing partners are refundable, we may enter into similar arrangements, and if we are unable to meet certain milestones agreed upon with our risk-sharing partners, we may be required to refund cash contributions for which we have not established provisions.

We face significant international competition, which may adversely affect us.

The worldwide commercial aircraft manufacturing industry is highly competitive. Along with the large international companies Boeing and Airbus, we are one of the world’s leading manufacturers of commercial aircraft. Additionally, Chinese, Russian and Japanese companies are developing regional jets and already have firm orders in backlog. Although we have attained a significant market share for our commercial

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aircraft products, we cannot assure you that we will be able to maintain it. In order to remain competitive in the commercial aircraft manufacturing market in the long-term, we must continue to make technological, efficiency and performance enhancements to our aircraft. The competitive landscape has become increasingly aggressive, for example, in light of deals such as the Airbus acquisition of a majority stake in Bombardier’s C-Series Program, rebranded A220s in July 2018.

As a relatively new entrant to the executive jets market, we face significant competition from companies with longer operating histories and established reputations in the industry. Some of our competitors in the executive jets market have a longer track record and a more established customer base. In addition, the level of pre-owned aircraft for sale in the market may continue to pressure the demand for new aircraft. This may impact the value of the pre-owned aircraft in our portfolio, despite a recent decrease in the level of pre-owned aircraft for sale in the market. We cannot assure you that we will increase our market share in the executive jets market business unit, or that we will not experience a reduction in our current market share of this business unit, especially taking into account an unstable and contracting market demand scenario that we expect in 2021.

Protectionist measures adopted by the governments of specific countries could adversely affect us. Our production is spread globally, with parts manufactured in one or more countries and assembled in another, and as a result any limitations to trade, including quotas, tariffs, subsidies or local content requirements, may increase our production costs and affect our capacity to compete in equal terms in the market for our products.

We work with a limited number of key suppliers.

We do not manufacture all of the parts and components used in the production of our aircraft. Approximately 75.0% of our consolidated production costs in our Commercial Aviation, Executive Aviation and Defense and Security business units consist of materials and equipment purchased from our risk-sharing partners and other major suppliers. Risk-sharing arrangements are those in which suppliers are responsible for the design, development and manufacture of major components or systems of our aircraft. In some cases, the aircraft are designed specifically to accommodate a particular component, which cannot be substituted by another manufacturer without significant delays and expense. In addition, there exist only a limited number of suppliers of certain key components of aircraft globally. We work closely with our main suppliers in order to mitigate any potential supply chain risk, but we cannot assure you that these risks, which could negatively and adversely affect our operating and financial performance, will not materialize.

Intellectual property violations may adversely affect us.

We rely on patent, copyright, trademark and trade secret laws, and agreements with our employees, customers, suppliers and other parties, to establish and maintain our intellectual property rights in technology and products used in our operations. Despite these efforts to protect our intellectual property rights, any of our direct or indirect intellectual property rights could be challenged, invalidated or circumvented. In addition, although we believe that we lawfully comply with the intellectual property rights granted to others, we may be accused of infringement on occasion and could have claims asserted against us in the future. These claims could harm our reputation, lead to fines and penalties and prevent us from offering certain products or services. Any claims or litigation in this area, whether we ultimately win or lose, could be time-consuming and costly, hurt our reputation and/or require us to enter into licensing arrangements. We may not be able to enter into these licensing arrangements on acceptable terms. If any infringement brought against us is successful, an injunction may also be ordered against us to stop infringing the alleged rights, which could adversely affect us, our research and/or production.

Unauthorized access to, or release or violation of our, our customers’ or our business partners’ systems and data could materially and adversely affect our business and reputation.

We, like all business organizations in the digital world, are subject to a broad range of cyber threats, including attacks, with varying levels of sophistication. These cyber threats are related to the confidentiality, availability and integrity of our systems and data, including our customers’ confidential, classified or personal information. In addition, because we have access to certain information technology systems of some of our customers, our systems may be subject to attacks aimed at accessing, tampering with or exposing our customers’ systems and their data.

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We maintain extensive technical security controls, policy enforcement mechanisms, monitoring systems and management oversight in order to address these threats. While these measures are designed to prevent, detect and respond to unauthorized activity in our systems, certain types of attacks, including cyber-attacks, could materially and adversely affect our business and reputation.

Furthermore, some of our business partners, such as our suppliers, have significant access to confidential and strategic information regarding our projects and engineering data. Many of these suppliers face similar security threats and any attacks on their systems could result in unauthorized access to our systems or data. Any unauthorized access to, or release or violation of our systems and data or those of our customers or business partners could materially and adversely affect our business and reputation.

On November 24, 2020, we suffered a cybersecurity incident in our IT systems, which was later identified as a ransomware attack. The attack resulted in the encryption of an environment of virtual servers hosted in Brazil, prevented access to certain files and resulted in the inadvertent disclosure of data, some of which were made available on the dark web. We have reported the incident to law enforcement authorities.

Immediately after the incident, we employed significant IT resources, took measures to protect and strengthen the security of our systems, isolated the affected environment and repaired our network. As part of our reaction, we hired Tempest Security Intelligence, a leading cybersecurity firm, to investigate the incident and supplement our remediation efforts.

Despite our extensive security controls and measures to prevent the violation of our systems and data storage, we cannot guarantee that other cyberattacks or similar breaches will not happen in the future.

We may suffer from a lack of qualified personnel.

From time to time, there is significant competition within the aviation industry for skilled personnel in general and engineers in particular. To the extent this competition re-emerges, we may be unable to recruit and retain the necessary number of highly skilled engineers and other personnel we require. Failure to coordinate our resources in a timely manner or to attract and retain skilled personnel could slow down our development efforts and cause delays in production and deliveries of our aircraft, which would adversely affect us.

We are subject to environmental, health and safety risks.

Our products, as well as our manufacturing and service activities, are subject to environmental laws and regulations in each of the jurisdictions in which we operate. These laws regulate product performance or content, energy use, greenhouse gas emissions, air quality, water and noise pollution, hazardous substance management, human health risks arising from the exposure to hazardous or toxic materials and the remediation of soil and groundwater contamination.

In addition, environmental regulations related to climate change, including CO₂ emissions standards adopted by the International Civil Aviation Organization, or the ICAO, are one of the main drivers of global aerospace industry research and development investments since they may affect customer preferences. We may incur additional costs to improve or create new compliance programs to meet environmental regulatory requirements. We currently have several comprehensive programs in place to reduce the effects of our operations on the environment. For additional information, see “Item 4. Information on the Company—4D. Property, Plant and Equipment.”

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Moreover, our services and products must comply with health and safety laws and regulations, as well as substances and preparations. We strive to maintain the highest quality standards and closely follow potential and confirmed changes in laws and regulations to adapt, redesign, redevelop, recertify or eliminate our products to remain compliant with those claims. Seizures of non-compliant products may occur, and we may incur administrative, civil or criminal penalties. In the event of an accident or other serious incident involving a product, we may be required to conduct investigations and undertake remedial activities.

We benefit from certain tax and other government-granted benefits and the suspension, cancellation or non-renewal of those benefits would have a material adverse effect on us.

Similarly to other Brazilian companies across multiple industries, we receive certain tax and other government-granted benefits, including incentives related to our export and research and development activities. For additional information, see “Item 5. Operating and Financial Review and Prospects—5A. Operating Results—Tax Incentives.”

We cannot assure you that these incentives will be maintained or renewed or that we will be able to obtain new incentives. We could be materially adversely affected in the event our existing benefits are canceled or not renewed.

Scope clause restrictions in airline pilot contracts may limit demand for commercial aircraft in the U.S. market.

A key limiting factor in demand for regional jets is the existence of scope clauses contained in airline pilot contracts. These scope clauses, which are more prevalent in North America, but also exist in other important regions, including Europe, are negotiated between the airlines and the pilot unions, usually every three years, for purposes of imposing restrictions relating to the (i) number of aircraft that a regional carrier may operate; (ii) number of seats in an aircraft that a regional carrier may operate; and (iii) the weight of the aircraft that a particular regional carrier may operate. A round of negotiations between the major airlines and the pilot unions started at the end of 2019 and, as of the date of this annual report, still ongoing. As a result, our opportunities for near-term growth in the U.S. regional jets market in the 76 seat jet category may be limited. The U.S. is the most important market for the E175 aircraft. We cannot assure that current restrictions will be reduced, or that they will not be expanded, including by amending these scope clauses to cover larger-sized commercial aircraft.

The supply of pilots to the airline industry may be limited.

U.S. Federal Aviation Administration, or FAA, regulations may negatively impact the supply of qualified pilot candidates eligible to be hired in the airline industry. A first officer in U.S. domestic operations must hold an airline transport pilot certificate and an aircraft type rating to fly the aircraft. An airline transport pilot certificate requires that a pilot be 23 years of age and have 1,500 hours total time as a pilot. Due to these requirements, there may be a growing scarcity of new entrant pilots who meet the experience qualifications, mainly affecting regional carriers which are the usual entry airlines for new pilots (major airlines are expected to hire many of their experienced pilots).

In order to mitigate this issue, certain airlines, for example American Airlines and Jet Blue especially in the United States, have adopted internal measures, including but not limited to creating professional pilot programs and providing financing alternatives. However, any inability to recruit, train and retain qualified pilots may materially affect our customers’ operations.

As a result of the COVID-19 pandemic, many professional pilots were laid-off and may choose to pursue another career. Additionally, the uncertainty related to the future development of the aviation industry, may decrease newcomers’ interest for the profession.

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We are subject to stringent certification and regulatory requirements, which may adversely affect us.

Our civil aviation products are subject to regulation in Brazil and in each jurisdiction where our customers are located. The aviation authority in Brazil, known as the National Civil Aviation Agency (Agência Nacional de Aviação Civil – ANAC), or the Brazilian Aviation Authority, as well as authorities in other countries in which our customers are located, most notably the FAA and the European Aviation Safety Agency, or the EASA, must certify our civil aviation products before we can deliver them to our customers. We cannot assure you that we will be able to obtain certification of our aircraft on a timely basis or at all. In addition, complying with the requirements of regulatory authorities can be both expensive and time-consuming. If we fail to obtain a required certification from an aviation authority for any of our aircraft, that aviation authority can prohibit the registration of that aircraft within its jurisdiction until certification has been obtained. Changes in government regulations and certification procedures could also delay our start of production as well as entry of a new product into a new market. Despite our continuous efforts to strictly observe and comply with all aviation certification and other regulatory requirements, we cannot predict how future laws or changes in the interpretation, administration or enforcement of those laws will affect us. We may be required to incur significantly more costs to comply with these laws and/or to respond to these changes.

Any accidents or catastrophic events involving our aircraft could adversely affect us.

We believe that our reputation and the safety record of our aircraft are important selling points for our products. However, the safe operation of our aircraft depends to a significant degree on a number of factors largely outside our control, including our customers’ proper maintenance and repair of our aircraft and pilot skill. The occurrence of one or more accidents or catastrophic events involving one of our aircraft could adversely affect our reputation and future sales, as well as the market price of our common shares and the ADSs.

Some of our aircraft sales may be subject to financial and residual value guarantees and trade-in options that may require us to make significant cash disbursements.

For certain aircraft sales contracts, we guarantee a portion of the financial value and the residual value for aircraft that we have already delivered. Financial guarantees are provided to financing parties to support a portion of the payment obligations of purchasers of our aircraft under their financing arrangements to mitigate default-related losses. These guarantees are secured by the financed aircraft.

Residual value guarantees typically ensure that, at the exercise date (between six and 19 years after the aircraft delivery date), the relevant aircraft will have a residual market value equal to a percentage of the original sale price. Most of our residual value guarantees are subject to a limitation (a “cap”) and, therefore, on average, our residual value guarantee exposure is limited to 11% of the original sale price. In the event of an exercise by a purchaser of its residual value guarantee, we will bear the difference, if any, between the guaranteed residual value and the market value of the aircraft at the time of exercise, limited to the cap.

Assuming all customers who are supported by off-balance sheet financial guarantees defaulted on their aircraft financing arrangements, and also assuming we were required to pay the full aggregate amount of outstanding financial and residual value guarantees and were unable to remarket any of the aircraft to offset our obligations, our maximum exposure would have been US$183.3 million (or US$92.7 million, net of provisions of residual value guarantee and financial guarantee already recorded in the amount of US$90.6 million as reflected in Note 36.2 to our 2020 audited consolidated financial statements) under these guarantees as of December 31, 2020. As a result, we would be obligated to make substantial payments that may not be recoverable through proceeds from aircraft sales or leases, particularly if we are not able to remarket any of the aircraft to offset our obligations or financing defaults occur with respect to a significant portion of our aircraft. The value of the underlying aircraft are more likely to decrease and third parties are more likely to default during economic downturns. For additional discussion see our exposure to these guarantees in Note 36.2 to our 2020 audited consolidated financial statements and “Item 5. Operating and Financial Review and Prospects—5E. Off-Balance Sheet Agreements.”

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In addition, we sometimes provide trade-in options to our customers in purchase agreements for new aircraft. These options provide customers with the right to trade in aircraft upon the purchase and acceptance of a new aircraft. In 2020, we accepted seven aircraft, with a total invoiced value of US$43.4 million, for trade-in pursuant to trade-in options, as compared to 17 aircraft, with a total invoiced value of US$84.9 million, in 2019, and 11 aircraft, with a total invoiced value of US$110.5 million, in 2018. The trade-in price is determined based on the new aircraft sold, as well as other factors, including a market value assessment performed by independent third-party appraisers. We may be required to accept trade-ins at prices that could result in financial loss for us when we receive the aircraft.

We continuously re-evaluate our risk related to financial guarantees and trade-in obligations based on a number of factors, including the estimated future market value of our aircraft based on third-party appraisals, information on similar aircraft remarketing in the secondary market and the credit rating of the customers.

In 2020, 2019 and 2018, we maintained provisions and contract liabilities on financial guarantees and residual value guarantees of US$125.2 million (including accounts payable of US$34.6 million in relation to financial guarantees and residual value guarantees claimed by the counterparties in 2020), US$140.3 million and US$152.1 million (including provision for Chapter 11 filled by Republic Airways of US$15.1 million in 2018), respectively, related to exposure from financial guarantees offered to the main financing agent of the ERJ 140/145 aircraft and Embraer 170/190 aircraft acquired by and delivered to this customer.

Any unexpected decrease in the market value of the aircraft covered by trade-in rights or financial guarantees would decrease our ability to recover the amounts payable to satisfy our obligations and cause us to incur additional charges to income. If we are required to pay amounts related to the guarantees, we may not have sufficient cash or other financial resources available to do so and may need to seek financing to fund these payments. We cannot assure you that the prevailing market conditions at the time would allow us to resell or lease the underlying aircraft at its anticipated fair value or in a timely manner. Consequently, honoring our financial guarantee or trade-in obligations could require us to make significant cash disbursements in a given year, which, in turn, would reduce our cash flow in that year.

Any decrease in Brazilian government-sponsored customer financing, or increases in government-sponsored financing that benefits our competitors, may decrease the competitiveness of our aircraft.

Traditionally, aircraft original equipment manufacturers, or OEMs, from time to time, have received support from governments through governmental export credit agencies, or ECAs, in order to offer competitive financing conditions to their customers, especially in periods of credit tightening from the traditional lending market.

Official government support may constitute unofficial subsidies causing market distortions, which may rise to disputes among governments at the World Trade Organization, or WTO. Since 2007, an agreement known as the Aircraft Sector Understanding, or ASU, developed by the Organization for Economic Co-operation and Development, or OECD, has provided guidelines for the predictable, consistent and transparent use of government-supported export financing for the sale or lease of civil aircraft, in order to establish a “level-playing field.” ECAs from signatory countries are required to offer terms and conditions no more favorable than those contained in the ASU’s base financial agreement when financing sales of aircraft that compete with those produced by the OEMs of their respective countries. The effect of the agreement is to encourage aircraft purchasers to focus on the price and quality of aircraft products offered by OEMs rather than on the financial packages offered by their respective governments.

The Brazilian ECA, Brazilian Social and Economic Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), or BNDES, together with the Brazilian National Treasury Export Guarantee Fund, offer financing and export credit insurance to our customers under terms and conditions required by the ASU. Any reduction or restriction to the Brazilian export financing program, and any increase in our customers’ financing costs for participation in this program, above those provided in the ASU’s base financial agreement, may cause the cost-competitiveness of our aircraft to decline. Other external factors may also impact our competitiveness in the market, including, but not limited to, aircraft OEMs from countries which are not signatories to the ASU agreement offering attractive financing packages, or any new government subsidies supporting any of our major competitors.

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From 2005, when we first delivered EMBRAER 170/190 jet family, through 2020, approximately 29% of our Commercial Aviation deliveries was subject to official export credits. In 2019 and 2020, approximately 16% and 80%, respectively, of our Commercial Aviation deliveries were supported by the Brazilian export financing program, and this significant increase was due to the COVID-19 pandemic in 2020. We cannot assure that the Brazilian government, for policy reasons or otherwise, will not reduce or discontinue this type of funding for the financing of our aircraft or that other sources of funding will be available to our customers. The loss or significant reduction of funds available to our customers, without an adequate substitute, could lead to a reduction in sales of our aircraft or to an increase of eventual aircraft financing arrangements.

Risks Relating to Brazil

Brazilian political and economic conditions have a direct impact on our business and the trading price of our common shares and ADSs.

The Brazilian government has frequently intervened in the Brazilian economy and occasionally has made drastic changes in policy and regulations. The Brazilian government’s actions to control inflation and affect other policies and regulations have involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency exchange and remittance controls, devaluations, capital controls and limits on imports. Our business, financial condition, results of operations and the trading price of the common shares and the ADSs may be adversely affected by changes in policy or regulations at the federal, state or municipal level involving or affecting factors, such as:

Uncertainty over whether the Brazilian government would implement changes in policy, regulation or legislation creates instability in the Brazilian economy, increasing the volatility of the Brazilian securities markets. These uncertainties and other future developments in the Brazilian economy may adversely affect our activities, and consequently our operating results, and may also adversely affect the trading price of our common shares and ADSs. We cannot predict which policies the Brazilian government will adopt or if these policies or changes in current policies may have an adverse effect on us or the Brazilian economy. These factors are compounded as Brazil emerges from a prolonged recession after a period of a slow recovery, with only meager GDP growth in 2019 and contraction again in 2020.

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Since 2011, Brazil’s economy has been weak. The Gross Domestic Product, or GDP, had a contraction rate of (4.1)% in 2020, driven by the COVID-19 pandemic, and growth rates of 1.1% in 2019, 1.3% in 2018, 1.3% in 2017, compared to contraction rates of 3.3% in 2016 and 3.5% in 2015, and GDP growth was 0.5% in 2014, 3.0% in 2013, 1.9% in 2012 and 4.0% in 2011, compared to a GDP growth of 7.5% in 2010. According to the Focus bulletin dated April 1, 2021, the consensus of Brazilian economists was for expectations of Brazilian GDP to increase 3.2% in 2021.

Our results of operations and financial condition have been, and will continue to be, affected by the growth rate of the Brazilian GDP. Developments in the Brazilian economy may affect Brazil’s growth rates and, consequently, the use of our products and services.

Political instability may adversely affect our business and results of operations, the price of our common shares and our debt instruments.

Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected, and continue to affect, the confidence of investors and that of the public in general, resulting in economic downturn and heightened volatility of securities issued by Brazilian companies.

Brazilian markets have experienced heightened volatility due to uncertainties derived from ongoing investigations on money laundering and corruption conducted by the Brazilian Federal Police and the Federal Prosecutor’s Office, and the impact of these investigations on the Brazilian economy and political environment.

The ultimate outcome of these investigations is uncertain, but they had an adverse impact on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. We cannot predict the effects of further political developments on the Brazilian economy, including the policies that the Brazilian government may adopt or the outcome and development of any of these investigations, which has affected and may continue to adversely affect the Brazilian economy and may adversely affect the trading price of our common shares and ADSs.

Inflation and government efforts to combat inflation may contribute significantly to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and, consequently, may adversely affect the market value of our common shares.

Historically, Brazil has experienced high inflation rates. Inflation and certain actions taken by the Central Bank to curb it have had significant negative effects on the Brazilian economy. After the implementation of the Plano Real in 1994, the annual rate of inflation in Brazil decreased significantly, as measured by the National Broad Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo), or IPCA and Brazil’s General Price Index (Índice Geral de Preços – Mercado), or IGP-M. Inflation measured by the IPCA index was 4.5%, 4.3% and 3.8% in 2020, 2019 and 2018, respectively. Inflation measured by IGP-M index was 23.1% in 2020, 7.3% in 2019 and 7.5% in 2018.

Inflation and the Brazilian government’s measures to fight it, principally the Central Bank monetary policy, have had and may have significant effects on the Brazilian economy and us. Among the effects of such inflationary pressure is a rise in labor costs. Contracts in U.S. dollars, which represent the majority of our Executive Aviation and Services and Support business units, are adjusted for U.S. inflation, through the application of the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers index when delivery is not in the same year of the sale and depending upon the specific commercial terms negotiated in the contracts. While contracts in Brazilian real represent a small portion of the Executive Aviation business unit, the same price adjustment mechanism concept applies using national index, typically the IGP-M. Major contracts in our Defense and Security business unit are adjusted for Brazilian inflation. If Brazil experiences high inflation again, our operating expenses and borrowing costs may increase, our operating and net margins may decrease and, if investor confidence decreases, the price of our common shares and ADSs may fall.

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Tight monetary policies with high interest rates have restricted and may restrict Brazil’s growth and the availability of credit. Conversely, more lenient government and Central Bank policies and interest rate decreases have triggered and may trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could adversely affect us. Increases in interest rates could adversely affect our ability to incur additional debt and increase the cost of service of debt, resulting in an increase in our financial costs, which may reduce our liquidity, thereby adversely affecting our ability to meet our financial obligations. As of December 31, 2020, approximately 2.9% of our consolidated cash and cash equivalents were indexed to the variation of the SELIC and CDI rates. Therefore, fluctuations in Brazilian interest rates and inflation may adversely affect us. On the other hand, a significant decrease in the CDI or inflation rates may adversely affect the revenue we receive from our financial investments.

Exchange rate volatility may adversely affect us.

The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. In 2018, the real depreciated against the U.S. dollar in comparison to December 31, 2017, reaching R$3.8748 per US$1.00 as of December 31, 2018. In 2019, the real depreciated against the U.S. dollar in comparison to December 31, 2018, reaching R$4.0307 per US$1.00 as of December 31, 2019. In 2020, the real depreciated against the U.S. dollar in comparison to December 31, 2019, reaching R$5.1967 per US$1.00 as of December 31, 2020. There can be no assurance that the real will not depreciate further against the U.S. dollar.

Depreciation of the real against the U.S. dollar creates inflationary pressures in Brazil and causes increases in interest rates, which negatively affects the growth of the Brazilian economy as a whole, curtails access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciation of the real against the U.S. dollar has also, including in the context of an economic slowdown, led to decreased consumer spending, deflationary pressures and reduced growth of the economy as a whole. On the other hand, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real may materially and adversely affect us.

Although most of our revenue and debt is U.S. dollar-denominated, the relationship of the real to the value of the U.S. dollar, and the rate of depreciation of the real relative to the prevailing rate of inflation, may adversely affect us, mainly due to the following factors:

Depreciations of the real relative to the U.S. dollar could also reduce the U.S. dollar value of distributions and dividends on our ADSs and may also reduce the market value of our common shares and ADSs. While our functional currency is the U.S. dollar our shareholders’ equity is required under Brazilian Corporate Law to be accounted and maintained in Brazilian reais, including amounts to be distributed to shareholders (dividends and interest on own capital). In 2020, while we had retained earnings recorded in U.S. dollars, the foreign exchange losses absorbed these earnings in Brazilian reais, causing a loss, which restricted our ability to pay dividends. For more information, see “8A. Consolidated Statements and Other Financial Information—Dividends and Dividends Policy.”

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As a result, we may be materially and adversely affected by exchange rate variations.

Developments and the perception of risk in other countries, especially other emerging markets, may adversely affect the market price of Brazilian securities, including our ADSs, our common shares and our debt instruments.

The market value of securities of Brazilian issuers, including securities issued by us, may be affected by economic and market conditions in other countries, including the United States, European Union and Latin American countries and other emerging market countries. Although economic conditions in those countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in other countries may have an adverse effect on the market value of securities of Brazilian issuers. Crises elsewhere may diminish investor interest in securities of Brazilian issuers, including ours. This could adversely affect the trading price of our securities and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms, or at all.

Any further downgrading of Brazil’s could adversely affect the market price of our common shares, ADSs and debt instruments.

Credit ratings affect investors’ perceptions of risk and, as a result, the yields required on debt issuances in the financial markets. Rating agencies regularly evaluate Brazil and its sovereign ratings, taking into account a number of factors including macroeconomic trends, fiscal and budgetary conditions, indebtedness and the prospect of change in these factors.

In January 2018, Standard & Poor’s downgraded Brazil’s sovereign debt credit rating from BB to BB-minus with a stable outlook in light of doubts regarding the presidential election and social security reform efforts. In February 2019, Standard & Poor’s affirmed Brazil’s sovereign credit rating at BB-minus with a stable outlook. In December 2019, Standard & Poor’s affirmed Brazil’s sovereign credit rating at BB-minus with a positive outlook. In April 2020, Standard & Poor’s maintained Brazil’s sovereign credit rating at BB-minus and revised the outlook on this rating to stable.

In April 2018, Moody’s maintained Brazil’s sovereign debt credit rating at Ba2, but changed its prospect from negative to stable, maintaining it in September 2018, citing the expected new government spending cuts. In May 2019, Moody’s affirmed Brazil’s sovereign credit rating at Ba2 and changed the outlook to stable. In May 2020, Moody’s reaffirmed Brazil’s sovereign credit rating at Ba2 with a stable outlook.

In February 2018, Fitch downgraded Brazil’s sovereign credit rating again to BB-negative, citing, among other reasons, fiscal deficits, the increasing burden of public debt and an inability to implement reforms that would structurally improve Brazil’s public finances. In November 2019, Fitch maintained Brazil’s sovereign credit rating at BB-minus, citing the risk of tax and economic reforms and political instability. In May 2020, Fitch reaffirmed Brazil’s sovereign credit rating at BB- and revised the outlook on this rating to negative.

As of the date of this annual report, Brazil’s credit rating was classified as BB-, Ba2 and BB- by Standard & Poor’s, Moody’s and Fitch, respectively. Any further downgrading in Brazil’s sovereign credit ratings or our rating may increase the perception of risk of investors and, as a result, increase the future cost of debt issuances, adversely affecting us.

We cannot guarantee that the rating agencies will maintain these classifications in relation to Brazilian credit and any further downgrade in Brazil’s sovereign credit ratings could materially adversely affect the trading price of our debt and equity securities.

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Risks Relating to Our Common Shares and ADSs

If holders of our ADSs exchange the ADSs for common shares, they risk losing the ability to remit foreign currency abroad and Brazilian tax advantages.

The Brazilian custodian for the common shares has obtained an electronic certificate of registration from the Central Bank permitting it to remit foreign currency abroad for payments of dividends and other distributions relating to the common shares or upon the disposition of the common shares. These remittances under an ADR program are subject to a specific tax treatment in Brazil that may be more favorable to a foreign investor if compared to remitting gains originated from securities directly acquired by the investor in the Brazilian regulated stock markets. Therefore, an investor who opts to surrender ADSs in exchange for the underlying common share may be subject to less favorable tax treatment on gains with respect to these investments.

Pursuant to CMN Resolution No. 4,373, in order for the investor to surrender ADSs for the purpose of withdrawing the common shares represented thereby, the investor is required to appoint a Brazilian financial institution duly authorized by the Central Bank of Brazil and CVM to act as its legal representative, who shall be responsible, among other things, for keeping and updating the investors’ certificates of registrations with the Central Bank of Brazil, which entitles registered foreign investors to buy and sell directly on the B3 – Brasil, Bolsa, Balcão, or B3. These arrangements may require additional expenses from the foreign investor. Moreover, if the representatives fail to obtain or update the relevant certificates of registration, investors may incur additional expenses or be subject to operational delays which could affect their ability to receive dividends or distributions relating to the common shares or the return of their capital in a timely manner.

The custodian’s certificate of registration or any foreign capital registration directly obtained by the holders may be affected by future legislative or regulatory changes, and we cannot assure the holders that additional restrictions applicable to them, the disposition of the underlying common or preferred shares, or the repatriation of the proceeds from the process will not be imposed in the future.

The Brazilian government has veto power over the change in our corporate control, and of our name, trademark or corporate purpose and over the creation or alteration of our Defense and Security programs, and its interests could conflict with the interests of the holders of our common shares and ADSs.

The Brazilian government holds one share of a special class of our common stock called a “golden share,” which carries veto power over our change of control, name, trademark or corporate purpose and over the creation or alteration of our Defense and Security programs (whether or not the Brazilian government participates in those programs). For example, in 2010, we changed our corporate name to Embraer S.A. and altered our bylaws to allow us to enter the defense and security market, which required the approval of the Brazilian government. The Brazilian government may veto transactions that may be in the interest of the holders of our common shares or ADSs. We cannot assure you that we will be able to obtain approvals from the Brazilian government in the future to effect important corporate changes or transactions, or other important corporate changes that may be required.

Our bylaws contain provisions that could discourage our acquisition or prevent or delay transactions that you may favor.

Our bylaws contain provisions that have the effect of avoiding the concentration of our common shares in the hands of a small group of investors to promote the dispersed ownership of those shares. These provisions require any shareholder or group of shareholders that acquires or becomes the holder of (i) 35% or more of the total shares issued by us or (ii) other rights over shares issued by us that represent more than 35% of our capital, to submit to the Brazilian government a request for making a public tender offer to purchase all of our shares on the terms specified in our bylaws. If the request is approved, the shareholder or group of shareholders must commence the public tender offer to purchase all of our shares within 60 days of the date of approval. If the request is refused, the shareholder or group of shareholders must sell all of their shares that exceed the 35% limit within 30 days, so that the holding of this shareholder or group of shareholders falls

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below 35% of our capital stock. These provisions may have anti-takeover effects and may discourage, delay or prevent a merger or acquisition, including transactions in which our shareholders might otherwise receive a premium for their common shares and ADSs. These provisions can only be altered or overridden with the approval of our board of directors and our shareholders in a shareholders’ meeting convened for this purpose and with the consent of the Brazilian government, as holder of the golden share.

Our bylaws contain provisions that limit the voting rights of certain shareholders, including non-Brazilian shareholders.

Our bylaws contain provisions that limit the rights of a shareholder or group of shareholders, including brokers acting on behalf of one or more holders of ADSs, to exercise voting rights in respect of more than 5% of the outstanding shares of our capital stock at any general meeting of shareholders. See “Item 10. Additional Information—10B. Memorandum and Articles of Association—Voting Rights of Shares—Limitations on the Voting Rights of Certain Holders of Common Shares.”

Our bylaws also contain provisions that limit the right of non-Brazilian shareholders to exercise voting rights in respect of more than two-thirds of the voting rights that may be exercised by Brazilian shareholders present at any general meeting of shareholders. This limitation will effectively prevent our takeover by non-Brazilian shareholders and limit the ability of non-Brazilian shareholders to effect control over us. For additional information on our voting rights, see “Item 10. Additional Information—10B. Memorandum and Articles of Association—Voting Rights of Shares—Limitation on the Voting Rights of Non-Brazilian Shareholders.”

The absence of a single, controlling shareholder or group of controlling shareholders may render us susceptible to shareholder disputes or other unanticipated developments.

The absence of a single, controlling shareholder or group of controlling shareholders may create difficulties for our shareholders to approve certain transactions, because, among other things, the minimum quorum required by law for the approval of certain matters may not be reached. We and our shareholders may not be afforded the same protections provided by the Brazilian Corporate Law against abusive measures taken by other shareholders and, as a result, may not be compensated for any losses incurred. Any sudden and unexpected changes in our management, changes in our corporate policies or strategic direction, takeover attempts or any disputes among shareholders regarding their respective rights may adversely affect our business and results of operations.

Holders of ADSs may not be able to exercise their voting rights.

Holders of ADSs may only exercise their voting rights with respect to the underlying common shares in accordance with the provisions of the deposit agreement governing our ADSs. Under the deposit agreement, ADS holders must vote the common shares underlying their ADSs by giving voting instructions to the depositary. Upon receipt of the voting instructions from the ADS holder, the depositary will vote the underlying common shares in accordance with these instructions. Otherwise, ADS holders will not be able to exercise their voting right unless they surrender the ADS for cancellation in exchange for the common shares.

Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 30 days in advance of the meeting and the second call must be published at least 15 days in advance of the meeting. When a shareholders’ meeting is convened, holders of ADSs may not receive sufficient advance notice to surrender the ADSs in exchange for the underlying common shares to allow them to vote with respect to any specific matter. In addition, the depositary has no obligation to notify ADS holders of an upcoming vote or distribute voting cards and related materials to ADS holders, unless we specifically instruct the depositary to do so. If we ask the depositary to seek voting instructions from ADS holders, the depositary will notify ADS holders of the upcoming vote and will arrange to deliver proxy cards to those holders. We cannot assure you that ADS holders will receive proxy cards in time to allow them to instruct the depositary to vote the shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for an untimely solicitation of voting instructions. As a result, holders of ADSs may not be able to fully exercise their voting rights.

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The relative illiquidity and volatility of the Brazilian securities markets may substantially limit the ability of holders of our common shares or the ADSs to sell the common shares underlying ADSs at the price and time they desire.

Investing in securities, including our common shares or the ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investing in securities of issuers from more developed countries.

The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States and other jurisdictions and are not as highly regulated or supervised as some other markets. The relatively small market capitalization and illiquidity of the Brazilian equity markets may substantially limit the ability of holders of our common shares or ADSs to sell the common shares or the ADSs at the price and time desired. For additional information on the B3, see “Item 9. The Offer and Listing—9C. Markets—Trading on the B3.”

Holders of our ADSs might be unable to exercise preemptive rights with respect to the common shares.

Holders of our ADSs may not be able to exercise the preemptive rights relating to the common shares underlying their ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares or other securities relating to these preemptive rights, and we cannot assure holders of our ADSs that we will file any registration statement. Unless we file a registration statement or an exemption from registration applies, holders of our ADSs may receive only the net proceeds from the sale of their preemptive rights by the depositary or, if the preemptive rights cannot be sold, the rights will lapse.

Judgments of Brazilian courts with respect to our common shares will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the common shares, we will not be required to discharge our obligations in a currency other than reais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than reais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and those amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not provide non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the common shares or the ADSs.

In 2000, we registered with the SEC and listed our American Depositary Receipts in the New York Stock Exchange.

In 2006, we promoted a corporate restructuring process focused on simplifying our capital structure, which since then is comprised of only common shares, and we also joined a special listing segment of the B3 known as Novo Mercado, enhancing our corporate governance standards. Since then we do not have a controlling shareholder or controlling shareholder group.

In 2010, our shareholders approved a change of our corporate name from “Embraer – Empresa Brasileira de Aeronáutica S.A.” to “Embraer S.A.,” as well as the addition of capabilities and the broadening of the scope of our Defense and Security business unit to allow this business unit to manufacture and trade equipment, materials, systems, software, accessories and components for the defense, security and energy industries, as well as to perform technical activities and services related to these areas. As a result, our bylaws were amended to reflect the addition of these activities to our corporate purposes.

In 2011 and 2012, we made acquisitions and entered into partnerships in the Defense and Security business unit, including the acquisition of Atech Negócios em Tecnologias S.A. and Bradar Indústria S.A., or Bradar (which was merged into Embraer in 2018), Savis Tecnologia e Sistemas S.A. and Visiona Tecnologia Espacial S.A.

Business Development

We have grown from a government-controlled company, established to develop and produce aircraft for the Brazilian Air Force, into a publicly held company that produces aircraft for commercial and executive aviation and for defense and security purposes and related services.

As part of our evolution, we have obtained, developed and enhanced our engineering and technological capabilities through our own development of products for the Brazilian Air Force and through joint product development with foreign companies on specific projects. We have applied these capabilities that we gained from our Defense and Security business unit to further develop our Commercial Aviation business unit.

Our first regional aircraft was the Bandeirante, a 19-passenger twin-engine non-pressurized turboprop aircraft initially designed to service the transport needs of the Brazilian Air Force. This aircraft was certified in 1973. The Bandeirante was followed by the EMB 120 Brasília, which was certified in 1985. The EMB 120 Brasília is a high performance, pressurized turboprop commercial aircraft seating up to 30 passengers and was designed to serve the longer routes and higher passenger traffic of the growing regional aircraft market. Drawing upon the design of the EMB 120 Brasília and the jet technology acquired in our development of the AM-X, a jet strike bomber for the Brazilian Air Force, we developed the ERJ 145 regional aircraft family, our first jet product for commercial use. This family comprises three aircraft, which seat up to 37, 44 and 50 passengers. The first member of the ERJ 145 family, the ERJ 145, was certified in 1996. We have expanded our jet product line with the development of the EMBRAER 170/190 jet family, which has the capacity to seat between 70 and 118 passengers and was designed to serve the aircraft market’s trend towards larger, higher volume and longer-range jets. The first member of this family, the EMBRAER 170, was certified in February 2004, and its derivatives, the EMBRAER 175 and the EMBRAER 190, were certified in December 2004 and August 2005, respectively. The certification of the EMBRAER 195 was granted in June 2006. In June 2013, Embraer launched the second generation of its E-Jets family of commercial aircraft, the E-Jets E2, comprising three new aircraft, the E175-E2, E190-E2 and E195-E2. The E190-E2 and the E195-E2 entered into service in April of 2018 and September of 2019, respectively. Our Commercial Aviation business unit accounted for 29.6%, 40.9% and 46.5% of our total revenue for the years ended December 31, 2020, 2019 and 2018, respectively.

We developed a line of executive jets throughout time, first the Legacy 600, which was discontinued in 2016 to focus on the success of its longer-range successor, the Legacy 650, followed by the Phenom 100, an entry-level jet, and the Phenom 300, a light jet, both launched in 2005. The Lineage 1000, an ultra-large jet, was added in 2006 as the largest executive jet in our executive jets portfolio and an enhanced version was

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introduced in 2013, the Lineage 1000E. In 2008, we launched the Legacy 450 and Legacy 500, both medium cabin jets. In 2009, we presented the Legacy 650, a large executive jet that is positioned in our portfolio between the Legacy 500 and the Lineage 1000E. The Legacy 500 and the Legacy 450 entered into service in October of 2014 and December 2015, respectively. In 2016, we launched the Phenom 100EV and the Legacy 650E. In 2017, the Phenom 100EV entered into service and we also launched the Phenom 300E, an enhanced version of our Phenom 300, with a revolutionary interior design, which entered into service in October 2017 with a demonstration aircraft. In our latest development, we introduced the new Praetor 500 midsize and Praetor 600 super-midsize business jets in 2018, during a company event in the Orlando Executive Airport. The Praetor 600 and Praetor 500 entered into service in June and in December 2019, respectively. In 2019, we successfully implemented the sunset strategy of the Legacy 650 and Lineage 1000E. In 2020 we concentrated our business efforts on the renewed and highly competitive Phenom and Praetor product lines, sunsetting the Legacy 450 and 500 models. Our Executive Aviation business unit accounted for 28.4%, 25.6% and 21.8% of our total revenue for the years ended December 31, 2020, 2019 and 2018, respectively.

We are the leading supplier of defense aircraft for the Brazilian Air Force, based on number of aircraft sold, and have sold aircraft to armed forces in the U.S., Europe, Asia and Latin America. In the defense and security market, we offer a line of intelligence, surveillance and reconnaissance aircraft, services, systems and solutions, ground radar, transportation of authorities, tactical military transport and aerial refueling (KC-390 Millennium), basic and advanced training and light attack and training aircraft (Super Tucano) and satellite solutions. Using our commercial aircraft platforms, we are able to offer a comprehensive range of aircraft dedicated to transportation of officials, medical evacuation and general transportation missions for the defense and security market.

In 2018, Embraer entered into a consortium with Thyssenkrupp Marine Systems, named Águas Azuis, and, in 2019, this consortium was chosen as preferred supplier to build four new Tamandaré Class Frigates. In 2020, SPE Águas Azuis entered into an agreement providing for the manufacturing of these Class Tamandaré Ships with the Company for Naval Projects (Empresa Gerencial de Projetos Navais – EMGEPRON), a Brazilian government-owned company linked to the Brazilian Ministry of Defense, and the Brazilian Navy. In 2019, Embraer and Elta System formalized a strategic cooperation agreement to develop and sell a comprehensive airborne early warning, or AEW, solution based on Praetor 600 super midsize bizjet. This solution provides an affordable AEW solution comprising extended coverage and situational picture for air surveillance, air defense, and homeland security missions, law enforcement enabling monitoring of aerial activity outside ground radar detection coverage. Additionally, in 2019, Embraer delivered the first two KC-390 Millennium multi-mission transport aircraft to the Brazilian Air Force. In December 2019, we and the Brazilian Air Force signed a Memorandum of Understanding (MoU) that formalizes our intention to develop a light aircraft for cargo, personnel and troops transportation, counting with the contribution of the Brazilian Air Force in connection to operational, global military expertise and needs for aircraft of this class.

Our Defense and Security business unit accounted for 17.3%, 10.5% and 9.1% of our total revenue for the years ended December 31, 2020, 2019 and 2018 respectively. Revenues from sales to the Brazilian government accounted for 44.5%, 54.4% and 48.1% of this business unit’s revenue for the years ended December 31, 2020, 2019 and 2018, respectively.

On December 20, 2016, we announced the creation of Embraer Services and Support, a business unit focused on services and customer support, which brings together capabilities that were previously allocated to each business area, and is responsible for developing solutions in support of current and new products and services, as well as for managing the associated processes and resources. This represents an opportunity to obtain greater operational efficiency and recurring revenues. Currently there are approximately 2,270 Embraer commercial aircraft and over 1,460 Embraer executive jets, as well as more than 620 defense aircraft, in operation. During 2017, the new Service and Support business unit consolidated the services and customer support processes previously allocated to each of our business units to identify synergies and quantify our expertise in our Commercial Aviation, Executive Aviation and Defense and Security business units regarding services and support. Since the first quarter of 2018, we have reported the Services and Support business as a separate business unit in our financial statements. For additional information, see Note 38.4 to our 2020 audited consolidated financial statements included elsewhere in this annual report. Our Services and Support business unit accounted for 24.4%, 22.8% and 22.3% of our revenue for the years ended December 31, 2020, 2019 and 2018, respectively. For a description of our capital expenditures, see “Item 5. Operating and Financial Review and Prospects—5C. Research and Development, Patents and Licenses, etc.—Capital Expenditures.”

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We also provide fuel systems, structural parts, and mechanical and hydraulic systems to Sikorsky Aircraft Corporation, or Sikorsky, a Lockheed Martin Company, for its production of helicopters. We provide to Sikorsky the services of development and manufacture of the landing gear, fuel system and fuel tanks for the S-92 and H-92 Helibus helicopters. We also act as a risk-sharing partner for Sikorsky. These contracts were renewed in 2015 and are under renewal negotiation after the expiration in December, 2020. In addition, we developed the Ipanema, a crop duster aircraft pursuant to specifications of the Brazilian Ministry of Agriculture. These aircraft are produced only on demand. Through December 31, 2020, we had delivered a total of 1,444 of these aircraft. Our Other Related business unit accounted for 0.3%, 0.2% and 0.3% of our revenue for the years ended December 31, 2020, 2019 and 2018 respectively.

We are the leading manufacturer of jets with up to 150 seats in the world, based on the number of deliveries over the last decade, and we have a franchise footprint represented by our global customer base. Our focus is to achieve customer satisfaction with a range of products and services addressing the commercial airline, executive jets and defense and security markets. We have grown from a government-controlled company established to develop and produce products for the Brazilian Armed Forces into a publicly held company that produces aircraft for commercial and executive aviation, and for defense and security purposes and related services. Providing high quality customer support is a key element of our customer focus and is critical to our ability to maintain customers with whom we have a long-term relationship.

For the year ended December 31, 2020, we generated revenue of US$3,771.1 million, of which approximately 93.0% was U.S. dollar denominated. Of our revenue in 2020, 29.6% was from our Commercial Aviation business unit, 28.4% was from our Executive Aviation business unit, 17.3% was from our Defense and Security business unit, 24.4% was from Services and Support business unit and 0.3% was from our Other Related business unit. As of December 31, 2020, we had a total firm order backlog of US$14.4 billion.

Our Strengths

We believe that our primary strengths are:

Aircraft design and technology; cost and operating efficiency. We conceive, develop and manufacture clean sheet design aircraft with cutting edge technology to provide our customers with reduced operating, maintenance and training costs due to the similarity and efficiency in design and the commonality of parts within a jet family. As an example, the all-new Praetor 500 and Praetor 600 jets share characteristics and technologies that enhance our value proposition for the midsize and super-midsize business units. These similarities enable us to significantly reduce our design, development and production costs and pass these savings along to our customers in our competitive sale prices, reducing the development time of our aircraft. Our investments in innovative technologies, such as design for automation, enable us to increase operational efficiency by reducing engineering and production costs as well as lowering customers’ maintenance costs.

Leading commercial aircraft manufacturer with a global customer base. Based on the number of aircraft delivered, we are the leading manufacturer of jets with up to 150 seats, with a strong global customer base. Around 180 airlines from over 90 countries are flying our commercial aircraft on five continents. Our customers include some of the largest and most significant network, regional and low-cost carriers in the world.

Strategic risk-sharing partners. With respect to our commercial and business aircraft, we developed strategic relationships with key risk-sharing partners. These risk-sharing partners develop and manufacture significant portions of the systems and components of our aircraft with their own funds, thereby reducing our development expenses. These risk-sharing partners also fund a portion of our research and development expenses through direct contributions of cash or materials. These strategic relationships enable us to reduce our development expenses and risks, improve our operating efficiency, enhance the quality of our products and reduce the number of our suppliers, thereby providing us with flexibility in our production process.

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Flexibility of production to meet market demands. We believe the flexibility of our production processes and our operating structure, including our risk-sharing partnerships, allow us to adjust our production in response to market demand.

Funded development of defense products. Historically, development expenditures related to defense aircraft have been funded in large part by our Defense and Security business unit customers, which mainly comprise governments. These customers have had an important role in our engineering and industrial development. In addition, we use well-proven civil platforms as a solution for certain defense products.

High skilled engineering for defense application and development of market leading products for our Defense and Security business unit. The Super Tucano and C-390 Millennium are the main products of our Defense and Security business unit. We believe the Super Tucano is the market benchmark for its class, as it combines a rugged and reliable turboprop platform with a high precision weapons delivery system. It is the only combat-proven light attack aircraft currently in production. On the other hand, the C-390 Millennium is a multi-role military transport aircraft developed to become a market leader in its category as it is appropriate for several uses, including adverse situations such as firefighting, and features flexibility, strength, mobility, easy maintenance and new technology. Our workforce is highly capable of understanding our customers’ operational needs and their requirements with regards to our defense products and services portfolio, and are able to provide our customers with flexible and lower lifecycle cost products with global applications. We also count with a strong ability to engage with several stakeholders in partnerships, enabling the development of state-of-the-art defense and space solutions with reduced cycles.

Experienced and highly skilled workforce. Our employees are experienced and highly skilled. As of December 31, 2020, engineers comprised approximately one-fifth of our workforce. Due to the high level of knowledge and skill of our employees, and our continuous training and incentive programs, we are able to efficiently pursue new programs and provide our customers with differentiated technical expertise and guidance.

Business Strategies

With a view to continue growth of our business and increasing our profitability, we intend to continue to offer our customers cost-effective, high quality, and reliable aircraft and services. The key elements of our strategy are the following:

Market our commercial aircraft. We are fully committed to marketing our jets of up to 150 seats. As of March 2021, we had 346 units in the ERJ family and 1,175 units in the 170/190 jet family and 24 units in the E2 generation in active service, according to Cirium. As of December 31, 2020, 29 units of E190/E195 E2 have been delivered to customers worldwide. The 175-E2 jet had its first flight in 2019, and is engaged in a certification process to ensure compliance with regulatory requirements. We believe there are market opportunities for the 170/190 jet family and for the E2 generation, especially for airlines seeking to expand their fleet in the mid-density segment and substitute aging aircraft in the below-150 seat category. Additionally, commercial jets will have opportunities with mainline and low-cost carriers that are right sizing their fleets to adjust capacity, especially in the context of the COVID-19 pandemic, and will provide us with significant opportunities to increase our competitiveness by offering a full range of jets of up to 150 seats to our customers.

Maintain the market leadership of our commercial jets up to 150 seats. Our new generation of commercial aircraft, the E2s, reinforces our commitment to maintain our market leadership in the segment of commercial jets up to 150 seats. Our commercial aircraft have state-of-the-art engines, which, combined with aerodynamically advanced wings, full fly-by-wire flight controls and improvements to other systems, increase efficiency by delivering significant reductions in fuel burn, maintenance costs, emissions and external noise.

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Strengthen our position in the executive aviation market. We believe we are well positioned to grow in the small and medium cabin jet classes. We have streamlined our portfolio to feature the Phenom 100EV, an entry-level jet, the Phenom 300E, a light jet, and the Praetor 500 and Praetor 600, midsize and super-midsize jets, respectively. This renewed portfolio is industry-leading in performance, comfort and technology. We have endeavored to understand and respond to market and customer needs and to continuously improve the product and customer support for our executive jets. For over a decade, we have introduced disruptive clean sheet design aircraft to the market. In 2020, the Phenom 300E was the most delivered light jet for the ninth consecutive year.

Provide complete and integrated services to the customers of our Defense and Security business unit. In our Defense and Security business unit, we offer a broad range of services covering air, land, sea, space and cyber security environments. For example, Atech, one of our wholly-owned subsidiaries, develops products and services in the area of command and control, communications, computer and intelligence, cyber defense, air defense and air traffic control for defense, security and other civil applications, and Visiona Tecnologia Espacial S.A. develops satellites and was the prime contractor for the Brazilian Strategic and Defense Communications Geostationary Satellite (Satélite Geoestacionário de Defesa e Comunicações Estratégicas). We are constantly evaluating, developing and efficiently integrating new opportunities to meet our clients’ needs.

Continue to pursue market niche opportunities in the defense and space market. We offer products for transportation, light attack, training, intelligence, surveillance and reconnaissance. With our products, we have been able to provide enhanced capabilities through a portfolio of defense-integrated solutions, meeting the needs of a wide range of governments to address their military assignments.

Consolidate our key position with the Brazilian Ministry of Defense. We are fully committed to consolidate our position as a key partner of the Brazilian Armed Forces. We believe that our state-of-art engineering, operations capability and supply chain management knowledge will continue to address the needs of our most strategic customers, including the Brazilian Ministry of Defense (Ministério da Defesa), providing them with personalized solutions. The use by the Brazilian Armed Forces of the products in our Defense and Security business unit provides us an opportunity to market our products to other governments around the world, thereby increasing their demand.

Focus on customer satisfaction through our established and respected services and support. We believe that our focus on customer satisfaction is fundamental to our entrepreneurial success and our business strategy. Providing high quality customer service and support is a key element of our customer focus and it is critical to our ability to maintain long-term relationships with our customers and keep our products competitive in the market. As the number of our aircraft in operation continues to grow, and our business expands, we have further increased our commitment to providing our customers with an appropriate level of after-sale support, including technical assistance, training, maintenance, spare parts, product modifications and other related services. We own and manage several service centers, strategically located in various parts of the world. In addition, our customers can rely on many authorized third-party maintenance service centers around the world to comply with their maintenance needs. On December 20, 2016, we announced the creation of Embraer Services and Support. In 2017, the new business unit completed the consolidation of all services and customer processes previously allocated to each of our other business areas. Since the first quarter of 2018, we have reported the services and support business as a separate business unit in our financial statements. For additional information on our services and support network, see “—Services and Support” and “4A. History and Development of the Company—Business Development.”

Motivate our employees and improve our production processes and managerial practices. We are constantly seeking to exceed our customers’ expectations. In order to achieve this goal, we must, on a daily basis, continuously seek to implement the most efficient production processes and best managerial practices. Because the success of our products and services is ultimately a combination of the contribution of our employees and the production processes we have developed over the years, we recognize that we must continue to motivate our employees and refine our production processes. To that effect, we have implemented, and intend to further develop, corporate programs based on a “lean manufacturing” philosophy, such as the Embraer Enterprise Excellence Program, or P3E.

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Evolution in Business Management – Passion for Excellence and P3E Programs

Launched in 2007, the Embraer Enterprise Excellence Program, or P3E, promotes excellence in corporate management, processes and products. P3E is comprised of four pillars: (i) the development of Embraer’s organizational culture; (ii) personnel development; (iii) continuous training; and (iv) the pursuit of excellence and efficiency in all processes.

Based on continuous improvement, P3E encompasses all of Embraer’s businesses, operating locations and processes. In addition, it generates value for stakeholders by connecting each area to value streams with resulting strategies. P3E uses the Kaizen concept as a tool to optimize processes with a particular focus on productivity gains and the elimination of waste.

In 2017, Embraer launched the Passion for Excellence Program with the goal of transforming Embraer into the best and most efficient aerospace and defense company in the world, creating value for our stakeholders. The transformation office, launched shortly thereafter, is a department that is responsible for the management of priority working areas and workstreams. The workstreams comprising this program are direct procurement, indirect procurement, design to value, inventory, engineering, manufacturing, services and support, support functions, zero-base budgeting, organizational design, digital transformation, industrial intelligence, culture and investment forum.

In addition, our transformation office monitors project execution and adherence to expected results, while reinforcing the “lean manufacturing” and excellence concepts which have been fundamental to our Company’s management since the launch of P3E in 2007.

P3E is a valuable component of the Passion for Excellence Program, both of which are managed by our transformation office.

Commercial Aviation Business Unit

We design, develop and manufacture a variety of commercial aircraft. Our Commercial Aviation business unit accounted for 29.6%, 40.9% and 46.5% of our total revenue for the years ended December 31, 2020, 2019 and 2018, respectively.

Products

ERJ Jet Family

We developed the ERJ family, our 37-50-passenger twin jet-powered regional jet, introduced in 1996, to address the growing demand among regional airlines for medium-range, jet-powered aircraft. Until the launch of the EMBRAER 170/190 Jet Family, the ERJ was our most important product, achieving great results and being responsible for consolidating our presence in the United States regional market. As of March 31, 2021, 346 ERJ aircraft remained in service around the world.

EMBRAER 170/190 Jet Family

The EMBRAER 170/190 jet family provides our customers four aircraft models in the regional passenger jet range. The EMBRAER 170 is a 66-78 seat jet and the EMBRAER 175 is a 76-88 seat jet, while the EMBRAER 190 is a 98-114 seat jet and the EMBRAER 195 is a 100-124 seat jet. The EMBRAER 170 was certified by the Brazilian Aviation Authority, the FAA, the Joint Aviation Authority of Europe (the former advisory organization that made certification recommendations to non-European Union national authorities), or the JAA, and the EASA in February 2004, and deliveries of the EMBRAER 170 began in March 2004. The EMBRAER 175 was certified by the Brazilian Aviation Authority in December 2004, by the EASA in January 2005 and by the FAA in August 2006. The EMBRAER 190 was certified by the Brazilian Aviation Authority in August 2005, by the FAA in September 2005 and by the EASA in June 2006. The EMBRAER 195 was certified by the Brazilian Aviation Authority in June 2006, by the EASA in July 2006 and by the FAA in June 2007.

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We designed the EMBRAER 170/190 jet family to maximize the benefits of commonality. Aircraft in the family share approximately 86% of the same components. The high level of commonality in this jet family lowered our development expenses and shortened our development period. We believe that this commonality leads to significant savings to our customers in the form of easier training, less expensive parts and maintenance and lower operational costs. Due to differences in size and weight, the EMBRAER 170/190 jet family does not share the same wing design. This new regional jet family has engines fixed under its main wings—a design intended to enhance power, improve fuel economy and minimize turnaround times. All of the aircraft models of this family are powered by engines manufactured by General Electric Aircraft Engines and contain state-of-the-art avionics manufactured by Honeywell International Inc. (Aerospace).

The EMBRAER 170/190 jet family’s principal features are:

E-Jets E2Family

In June 2013, we launched the second generation of our E-Jets family of commercial aircraft, named the E-Jets E2, comprising three new aircraft, the E175-E2, E190-E2, and E195-E2. The E190-E2 and E195-E2 entered service in April of 2018 and September of 2019, respectively.

The launch of the E2 advances our vision of offering leading-edge commercial aircraft with a capacity for 70 to 150 seats, seamless mainline comfort and performance for flexible and efficient utilization by regional, low-cost and network carriers. Our strategy is to offer all the benefits of a new design, but with the reliability of an updated platform and commonality with current generation E-Jets. We have continually invested in the E-Jets program, so that our customers can stay competitive with aircraft that have the lowest operating costs and the highest passenger appeal.

In a typical single-class layout, the E175-E2 was extended by one seat row, compared to the current generation E175, and will seat up to 90 passengers, while the E190-E2 is the same size as the E190, with up to 114 seats. The E195-E2, compared to the current E195, has grown by three seat rows and will accommodate up to 132 seats in a typical single class configuration or up to 144 seats in a high-density configuration.

In June 2015, two years after the launch of the program, we began to assemble the first of the E-Jets E2 family, an E190-E2, at our factory in São José dos Campos.

In November 2015, the Pratt &Whitney PW1900G PurePower^® Geared Turbofan^™ (GTF) engine for the Embraer E190-E2 and E195-E2 aircraft successfully completed its first flight initiating the engine’s flight test program.

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In February 2016, in a ceremony held at our plant in São José dos Campos, we presented the E190-E2, which made its first flight in May 2016. In March 2017, in a ceremony held at our plant in São José dos Campos, we presented the second model of the E2 generation. In March 2017, we announced that Azul, the largest operator of the current generation E195s in the world, would be the launch operator of the E195-E2.

On February 28, 2018, we received a Type Certificate from the National Civil Aviation Agency, the FAA and EASA for the E190-E2, the first member of the E-Jets E2 family of commercial aircraft. It was the first time that an aircraft program with the level of complexity of the E2 received a type certificate from three major worldwide certification authorities simultaneously.

On April 4, 2018, in a ceremony held in São José dos Campos, we celebrated the delivery of the first aircraft E190-E2 aircraft to Widerøe, the largest regional airline of Scandinavia. The aircraft entered into service in the same month and performed a sold-out flight between Bergen and Tromsø in Norway.

In April 2019, the E195-E2 received simultaneous approval and was certified by the Brazilian Aviation Authority, the FAA and EASA.

On September 12, 2019, in a ceremony held at our plant in São José dos Campos, we delivered the first E195-E2, the largest of the three members of the E-Jets E2 family of commercial aircraft. The recipients were AerCap, the world’s largest aircraft leasing company, and Azul Linhas Aéreas Brasileiras S.A., or Azul, which is the global launch operator for the E195-E2.

On December 12, 2019, the Embraer E175-E2 made its inaugural flight from our facility in São José dos Campos. In August 2020, as a result of the COVID-19 pandemic, we confirmed the rescheduling for the beginning of operations of the E175-E2 jet until 2023. We believe that the E175-E2 will be timely available to start operations in the commercial aviation and adequately meet market demand for the jet. Until then, we continue to offer the market-leading E175 jet from the first generation of E-Jets, the most efficient and comfortable commercial aircraft in the market for the 76-seat category. The reduction in our workforce, as a result of the COVID-19 pandemic, has slowed down the pace of certification activities for the E175-E2 aircraft. For additional information on the impacts of COVID-19, see “Item 5. Operating and Financial Review and Prospects—5A. Operating Results—Current Conditions and Trends in our Industry—COVID-19.”

As of December 31, 2020, the E-Jets E2 have 146 orders in backlog and 29 aircraft have already been delivered to customers worldwide. Operators include airlines in various regions, such as Azul Linhas Aéreas (Latin America), Widerøe (Europe), Helvetic (Europe), KLM (Europe), Binter (Europe), Air Kiribati (Asia Pacific), Bevalia (CIS), Air Peace (Africa) and Congo Airways (Africa).

Customers

We have a diverse, global customer base, and our major operators for commercial aircraft include some of the largest regional, low-cost and mainline airlines in the world. As of March 31, 2021, our largest E-Jet customers by number of aircraft in service are SkyWest, Republic, Envoy Air, Mesa, JetBlue, KLM Cityhopper, Azul, Aeromexico, J-Air, Air France HOP and Horizon Air. In addition, as of December 31, 2020, 90% of our firm orders in backlog for the current EMBRAER 170/190 jet family are from the airlines Republic Airlines and Skywest. Moreover, our E-Jets E2 family backlog mainly comprises orders from the companies Azul, AerCap, AirCastle and AirPeace, which represent approximately 83% of our E-Jets E2 family orders.

We generally sell our commercial aircraft pursuant to contracts with our customers on a fixed-price basis, adjusted by an escalation formula. Our contracts generally include an option for our customers to purchase additional aircraft at a fixed-price option, subject to the same escalation formula. In addition, our contracts include a product support package to cover the entry into service of our aircraft, as well as a general warranty for such aircraft. Other provisions for specific aircraft performance and design requirements are negotiated with our customers. In addition, some of our contracts contain cancellation provisions and trade-in options and financial and residual value guarantees. See “Item 3. Key Information—3D. Risk Factors—Risks Relating to Embraer—Some of our aircraft sales may be subject to financial and residual value guarantees and trade-in options that may require us to make significant cash disbursements” for a more detailed discussion of these provisions.

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Sales and Marketing

Our current marketing strategy is based upon our assessments of the worldwide commercial airline market and of the needs of our customers. We actively market our aircraft to international airlines and regional affiliates of major global airlines through our regional offices in the United States, Europe and Asia. Our success depends, to a significant extent, on our ability to discern our customers’ needs, including needs for customer service and product support, and to fill those needs in a timely and efficient manner while maintaining the high quality of our products. Our market and airline analysts focus on the long-term trends of the market, competitive analysis, product-enhancement planning and airline analysis. In terms of direct marketing to our customers, we rely on relationship development, social media and professional network. Due to the COVID-19 pandemic, our participation in air shows and other events has been mostly substituted by Webinars and other online forums that enhance customer awareness and brand recognition. Besides São José dos Campos in Brazil, we have regional sales offices in Amsterdam, Holland; Fort Lauderdale, Florida, United States; Beijing, China; and Singapore.

Production, New Orders and Options

Prior to starting production or development of a new project, we secure letters of intent for future orders of a significant number of aircraft. We typically begin taking orders and building a backlog two years before we begin producing a new aircraft model, aiming to receive a significant number of orders before we deliver the initial aircraft. Once an order is taken, we reserve a place for that order on the production line, ensuring that we will maintain production sufficient to meet demand. Once a place is reserved on the production line, we are able to give customers delivery dates for their orders.

We include an order in backlog once we have received a firm commitment, represented by a signed contract. Our backlog does not include options and letters of intent for which definitive contracts have not been entered into.

Our options generally provide our customers the right to purchase an aircraft at a fixed price and on a specified delivery date, subject to escalation provisions, under a purchase agreement. Once a customer decides to exercise an option, we account for it as a firm order. Occasionally, we have extended the exercise date for our options and renegotiated the delivery schedule of firm orders, as well as allowed customers to convert their firm orders or options for one aircraft into firm orders or options for another aircraft within the same commercial aircraft family.

Competition

We generally face competition from major manufacturers in the international aircraft market. Each category of our products faces competition of a different nature and generally from different companies. Some of our competitors have greater financial, marketing and other resources than we do.

We currently face the strongest competition from the following aircraft:

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We are the leading manufacturer in the market for jets up to 150 seats in the world, with 29% market share in terms of accumulated deliveries, since 2004.

The key competitive factors in the markets in which we participate include design and technological strength, aircraft operational costs, aircraft price, including financing costs, customer service and manufacturing efficiency. We believe that we will be able to compete favorably based on our aircraft performance, efficiency, low operating costs, product development experience, global customer base, market acceptance, cabin design and aircraft price. In addition, while the competitive landscape has become increasingly aggressive, deals such as the Airbus acquisition of a majority stake in Bombardier’s C-Series Program, rebranded as A220, are evidence of the opportunities in the 100-150 seats market. With the Airbus sales team marketing the A220 Program, we believe customers who would not have previously considered aircraft of this size may seek our E190/E195-E2 as a comparable alternative.

Executive Aviation Business Unit

We refer to our executive aviation business unit as our “Executive Aviation business.” Our current portfolio of executive jets comprises the entry-level Phenom 100 EV, the light Phenom 300E the midsize Praetor 500 and the super-midsize Praetor 600.

We market our executive jets to companies, including fractional ownership companies, charter and air-taxi companies, high-net-worth individuals and to flight academies, both independent as well as those belonging to airlines and armed forces. Our Executive Aviation business unit accounted for 28.4%, 25.6% and 21.8% of our total revenue for the years ended December 31, 2020, 2019 and 2018, respectively. On December 31, 2020, our firm orders in backlog for our executive jets totaled US$1.2 billion as compared to US$1.4 billion on December 31, 2019.

In May 2005, we launched the Phenom 100 and Phenom 300, which are executive jets in the entry-level and light jet categories, respectively. The Phenom 100 jet, which carries six to eight people, received the Brazilian Aviation Authority and FAA certification in December 2008, the same month of its entry into service. The Phenom 300 carries up to ten people and has a larger fuselage and wingspan and longer range than the Phenom 100. It received the Brazilian Aviation Authority and FAA certification and entered service one year after the Phenom 100. By the end of 2020, the Phenom 100 fleet comprised more than 370 aircraft distributed in over 28 countries and the Phenom 300 fleet comprised over 580 jets distributed in more than 30 countries. Focused on constant improvement, we launched the Phenom 100EV and the Phenom 300E in 2016 and 2017, respectively. In 2020, we introduced the new Phenom 300E, featuring enhancements in performance, comfort and on-board technology. The new Phenom 300E is currently the only in-production single-pilot jet to reach Mach 0.80, offering a quieter cabin and upgrades to its avionics suite. These features include predictive windshear and a runway overrun awareness and alerting system, which are our exclusive intellectual property and the first technology of its kind to be developed and certified in business aviation. The model was already granted its certification by the Brazilian Aviation Authority, EASA and the FAA.

In August 2020, we announced the Phenom 300MED, an unique medical evacuation (MEDEVAC) transportation solution suitable to Phenom 300 model series, which is also available for retrofit, through a partnership with the companies umlaut and Aerolite AG (Aerolite). Embraer and umlaut are jointly developing and certifying a new supplemental type certificate (STC) utilizing Aerolite equipment. Designed as an ideal solution for both civil and government applications, the MEDEVAC solution will be installed exclusively by Embraer’s award-winning Services and Support organization, ensuring the highest quality, reliability, and service experience, direct from the manufacturer.

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In November 2020, Embraer and Porsche announced that they have collaborated to create a limited-edition, limited-quantity Embraer Phenom 300E aircraft and Porsche 911 Turbo S-car pairing called Duet. Embraer and Porsche will produce just ten pairs of business jets and sports cars, providing a truly seamless experience from road to sky, for the first time in history. Duet fuses speed and style, luxury and power, which are features of both the Phenom 300E and Porsche 911 Turbo S, resulting in a uniquely designed jet and car, both featuring a customized interior with similar design and paint scheme details inspired one by another.

In May 2006, we launched the Lineage 1000, an ultra-large executive jet based on the EMBRAER 190 commercial jet platform. The Lineage 1000 is configured to accommodate up to 19 passengers in a total cabin area of 750 square feet (70 square meters). The Lineage 1000 was certified by the Brazilian Aviation Authority in December 2008 and by the FAA in January 2009 and entered service in the first half of 2009. By the end of 2018, the Lineage 1000 fleet comprised more than 25 units distributed in more than10 countries. Continued investments in the Lineage 1000 resulted in the introduction of the Lineage 1000E, in 2013, enhancing the customer experience by extending its range capability and offering new interior amenities. In 2019, we successfully implemented the sunset strategy of the Lineage 1000E.

In April 2008, we formally launched two new programs in the medium cabin category, the medium cabin Legacy 450 jet, with a 2,575 nautical mile range and a capacity for up to nine passengers, and the medium cabin Legacy 500 jet, with a 3,125 nautical mile range and a capacity for up to 12 passengers. The Legacy 450/500 medium cabin jets were positioned in our executive jets portfolio between the Phenom 300E and the Legacy 650. The Legacy 500 was certified by the Brazilian Aviation Authority and the FAA in 2014, the same year that it entered service. The Legacy 450 was certified by the Brazilian Aviation Authority and the FAA in August 2015 and by the EASA in September 2015. In November of the same year, we announced an increase of the Legacy 450’s range in 2,900 nautical miles, and it entered service in December. In November 2017, we introduced the best-in-class 5,800-foot cabin altitude for the Legacy 450/500 jets, which further enhanced customer experience. These two aircraft programs have helped strengthen our position in the market and establish our portfolio as one of the broadest in the executive aviation industry. By the end of 2020, the Legacy 450/500 fleet was composed of more than 145 units distributed in 16 countries. Both the Legacy 450 and 500 had their final deliveries to customers in 2020.

In October 2009, we introduced the Legacy 650 jet, a large jet based on the Legacy 600 platform, with a longer range for up to 14 passengers. The Legacy 650 received the Brazilian Aviation Authority and FAA certification in October 2010 and February 2011, respectively, and entered service in November 2010. The latest evolution of the aircraft that started our Executive Aviation business unit is the Legacy 650E, which introduces auto-throttle and interior enhancements, in addition to a ten-year warranty, which set a new industry standard for performance and reliability. By the end of 2020, the fleet of Legacy 600 and Legacy 650 comprised more than 300 jets in service in over 45 countries. In 2019, we successfully implemented the Legacy 650 series sunset strategy.

In October 2018, we launched the new Praetor 500 and Praetor 600, the most disruptive and technologically advanced midsize and super-midsize jets, respectively, introducing unprecedented range into their categories. The Praetor 600 is expected to be the farthest-flying super-midsize business jet, which allows nonstop flights between London and New York. The Praetor 500 will be the fastest midsize aircraft, capable of reaching Europe from the west coast of the US with a single stop. The Praetor 600 was certified and entered service in June of 2019 and in December of 2019, respectively. The Praetor 500 is the successor of the Legacy 450 in the midsize class as the Praetor 600 is for the Legacy 500 in the super midsize class. In 2020, we announced a series of breakthrough cabin enhancements for the Praetor 500 and Praetor 600. In addition to the lowest cabin internal atmospheric pressure in the class (equivalent to an altitude of 5,800 feet) and 100% fresh air capability, Embraer is now offering the HEPA filter as a standard feature on all Praetor aircraft and announced the certification of a new electric lavatory pocket door. In 2020, we announced the completion of the first European conversion of a Legacy 450 to a Praetor 500. The conversion was performed at the Embraer Executive Aviation Service Center at Le Bourget International Airport, in Paris, France.

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Competition

Phenom 100EV and Phenom 300E competitors in the entry-level and light jet categories include Textron, Bombardier, Honda and Pilatus. In the medium cabin category, the Praetor 600 compete with Textron, Bombardier, Dassault and Gulfstream aircraft, while the Praetor 500 compete largely with aircraft produced by Bombardier and Textron.

Continuing Internationalization

In October 2014, we announced the opening of our Legacy 500 and Legacy 450 assembly complex in Melbourne, Florida, more than doubling the size of our campus at Melbourne International Airport. The new complex consists of four new buildings: a delivery center, an assembly hangar, a paint facility and a flight preparation facility, which are operational, as well as a new dedicated delivery center that began operations in the first half of 2018. As of December 31, 2020, our Melbourne campus had a constructed area of approximately 352,000 square feet.

Defense and Security Business Unit

We conceive, design, develop, manufacture and support a wide range of integrated solutions for the defense and security market. Our products include training, light attack aircraft, aerial surveillance platforms, military transport aircraft, government transport aircraft and command, control, communications, computer, intelligence, surveillance and reconnaissance systems and border surveillance and security. We offer a complete portfolio of customer services, ranging from maintenance and material solutions to complete Contractor Logistical Support programs.

As of December 31, 2020, we had sold more than 1,360 defense aircraft, including government transport aircraft, to more than 60 armed forces and operators worldwide. We are also the leading supplier of defense aircraft to the Brazilian Air Force based on the total number of aircraft in its fleet. Our Defense and Security business unit accounted for 17.3%, 10.5% and 9.1% of our total revenue for the years ended December 31, 2020, 2019 and 2018 respectively.

Products

Military Transport – C-390 Millennium

Our new multi-mission aircraft C-390 Millennium maintained its features for civilian use (as certified by ANAC) and military use (as certified by the Department of Aeronautical Science and Technology – DCTA, and the Industrial Development and Coordination Institute – IFI) after its rebranding in 2019.

The C-390 Millennium is a multi-role military transport aircraft developed to set higher standards in its class. The C-390 Millennium is efficient for cargo and troop transport, aerial resupply and humanitarian missions, among other uses, as well as for uses in adverse situations, evacuations and firefighting. Designed with modern engineering solutions, this new aircraft is an innovation in military transport aviation. The C-390 Millennium features flexibility, strength, mobility, easy maintenance and new technology.

In 2017, the C-390 Millennium completed a key milestone, when Embraer demonstrated its Initial Operating Certificate, or IOC, to the Brazilian Air Force. After making its debut at the Paris Airshow in France, the aircraft subsequently carried out demonstrations in several countries and covered an additional 90,000 km. The aircraft confirmed a high level of capability, achieving 100% availability during all flights in this period.

In the fourth quarter of 2018, the C-390 Millennium reached another important milestone when it obtained a Type Certificate from ANAC. This certificate evidences that the project meets the highest standards of quality, which are the same as those used by the international air transport association.

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In 2019, Embraer delivered the first two KC-390 Millennium multi-mission transport aircraft (the “K” denotes that these C-390 aircraft will also have aerial refueling capabilities) to the Brazilian Air Force. The aircraft were engaged by the Brazilian Air Force in the pilots and maintenance training program. In addition, the tests campaign focused on military functionalities which have significantly evolved, highlighting the successful test accomplishment of air-to-air refueling and heavy-loads airdrop. By the end of 2019, the test campaign accumulated 2,500 flight hours. In addition, the Portuguese government signed the first export contract of KC-390 Millennium aircraft, including the acquisition of five aircraft and one flight simulator, together with a 12-year contract of services to support the fleet. The first delivery is planned for 2023, and the aircraft will be used for military transport.

In 2020, Embraer delivered the third and fourth KC-390 Millennium multi-mission transport aircraft to Brazilian Air Force. Since the beginning of the COVID-19 pandemic, Brazilian Air Force has operated the KC-390 in logistics transport operations, carrying essential supplies to combat the pandemic in Brazil. The development of the version of the KC-390 Millennium for Portugal also showed significant progress, with the Critical Project Review being successfully carried out in October, 2020. Additionally, an export contract for the KC-390 Millennium was signed in November 2020 with the Hungarian government for the acquisition of two aircraft in its KC-390 Millennium version, with the capacity to carry out in-flight refueling missions.

Light Attack and Training – Super Tucano

The Super Tucano is an aircraft equipped for counter-insurgency scenarios, containing integrated sensors, datalink, cockpit protection and multiple weapons configurations. We believe that Super Tucano is the market benchmark in its class, as it combines a rugged and reliable turboprop platform with a delivery system of high-precision weapons. It is the only combat-proven light attack aircraft currently under production. The Super Tucano is also a full-fledged advanced trainer due to its handling features, low operational cost and state-of-the-art avionics systems.

In 2017, we sold six Super Tucano aircraft, which were delivered in 2018 to be used for tactical and advanced training as well as light attack missions. Still in 2017, we entered into an agreement with Mali’s Air Force to adjust the scope from six to four Super Tucano aircraft, after which four aircraft were delivered in 2016. During 2017, we sold six Super Tucano aircraft to the Philippine Air Force. The Super Tucano was selected as part of the Philippine Air Force’s modernization plan following a public bidding process involving other manufacturers. The aircraft were delivered in 2020.

In 2019, we sold nine A-29 Super Tucano aircraft. The deliveries are expected to take place by the end of 2021. In 2020, we delivered Super Tucano four aircraft. Additionally, in the same year, an integrated solution was delivered to an undisclosed customer compound of two Super Tucano aircraft, three SABER M60 Radar Units and three SENTIR M20 Radar units.

Furthermore, jointly with Sierra Nevada Corporation (SNC), we have been acting as a subcontractor in the United States Air Force’s Light Air Support (LAS), the United State Air Force’s Light Attack Aircraft (LAA) and the Nigerian Air Force (NAF) programs. In the context of the LAS program, three A-29 Super Tucano aircraft were delivered to SNC, and six additional aircraft were purchased during 2017, which deliveries were made in 2018 and 2019. In 2018, in the context of the NAF Program, we were awarded a contract for twelve A-29 Super Tucano aircraft that are expected to be delivered by the end of 2021. In 2020, we delivered six of these twelve aircraft to SNC. In early 2020, in the context of the LAA program, we were awarded a contract for two A-29 aircraft for use by the Air Force Special Operations Command (AFSOC). The contract was later amended to procure a total of three aircraft. The aircraft will be delivered to SNC in 2021.

Fighter – F-X2 Project

In July 2014, Embraer Defense and Security and Saab AB (Saab) entered into a memorandum of understanding to collaborate in a joint management program for the F-X2 Project, pursuant to the selection of the Gripen NG as Brazil’s next generation fighter jet. Under this agreement, we have performed a material role in the overall program, as well as undertook an extensive share of work in systems development, integration, flight testing, final assembly and aircraft deliveries of both the single and the two sear version of the state of the art Gripen NG aircraft for the Brazilian Air Force.

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In December 2017, a team of more than 120 Embraer engineers and technicians were in Sweden to conduct initial training in maintenance and development work for the Gripen NG. All the technology developed by the joint team will be transferred to Brazil later. A dedicated engineering development center for this program, the Gripen Design Development Network, or the GDDN, was inaugurated at Embraer’s industrial plant in Gavião Peixoto in the State of São Paulo to support the Brazilian Air Force Program. In June 2017, the first Gripen E prototype flight took place in Sweden.

In October 2018, at Vidsel Test Range in the north of Sweden, the Gripen E fighter successfully completed the first tests to verify the ability to release and launch external payloads. The tests conducted by the first test aircraft consisted of discharging an external fuel tank and firing an IRIS-T air-to-air missile.

In August 2019, the Brazilian Fighter Gripen E Fighter achieved its first flight, being introduced to the Brazilian Air Force in September of the same year. The flight test campaign started at Saab and, in 2020, will continue at Embraer in Brazil. The prototype used for the first flight included software features developed by Embraer’s engineers. The first Gripen development simulator (S-RIG) was completed in November 2019 at the Embraer facility in Gavião Peixoto.

In 2020, we received the first Brazilian Gripen E at our plant in Gavião Peixoto, marking the beginning of the test program in Brazil at the Gripen Flight Test Center (GFTC) operations center at our Gavião Peixoto plant located in the state of São Paulo, Brazil, fully integrated with Saab in Sweden.

Special Transport Aircraft

We have two ongoing programs under an agreement to develop special transport aircraft. The first special mission program is I-X, entered into between Embraer and the Brazilian Air Force. The agreement started in 2014 with the sale of six Legacy 500 aircraft adapted to flight inspection missions. Due to budgetary constraints of the Brazilian government at the end of 2017, the scope had to be adjusted from six to four aircraft. In 2019, the last aircraft of four Legacy 500 units was delivered to the Special Flight Inspection Group (GEIV).

The second program started at the end of 2018 with the sale of two Phenom 100 aircraft. All deliveries were concluded in 2019.

Modernization Programs

We offer military aircraft modernization services and currently have four ongoing programs under contract, of which three are with the Brazilian Air Force and one with the Brazilian Navy. The first program, known as F-5BR, is focused on performing structural and electronics upgrades for F-5 fighter jets. In 2012, we concluded the modernization and delivery of 46 F-5 jets to the Brazilian Air Force. In 2011, a contract to modernize one additional batch of 11 F-5 fighter jets was signed. During 2015, the scope of this contract was reduced from 11 to three aircraft. In 2019, two aircraft were delivered. In 2020, we delivered the last modernized F-5M aircraft to the Brazilian Air Force. In total, 49 aircraft were modernized in this program, with the first units delivered in 2005.

The second program, known as the A-1M modernization program, focuses on modernizing the AM-X aircraft, which is an aircraft developed and sold by Embraer to the Brazilian Air Force approximately 20 years ago and became technologically outdated overtime. From 2013 to 2014, Defense and Security delivered three A-1M fighter jets to the Brazilian Air Force. Due to Brazilian government budget constraints, the scope was adjusted from 43 to 14 aircraft at the end of 2016. We delivered two of such aircraft in 2019 and three aircraft in 2020.

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The third program relates to the upgrade of A-4 Skyhawk fighter jets (AF-1 Brazilian Navy Designation), aimed at incorporating new technology, including new avionics, radar, power generation and independent oxygen generating systems. In 2019, the scope was adjusted from 12 to 7 aircraft. By 2020, five modernized AF-1 (AF-1B) fighter jets were delivered to the Brazilian Navy.

The fourth program entered into between Embraer and the Brazilian Air Force relates to the modernization of five E-99M Early Warning and Control aircraft. This related agreement also provides for six mission planning and analysis stations, which will be employed for training and crew improvement. In 2019, Embraer performed the first flight of these modernized aircraft. In 2020, the first two units were delivered to the Brazilian Air Force.

Radars Programs

In 2019, Embraer delivered a modernized SABER M60 Radar unit. The radar will be used as a tactical defense system. During the period, the contract for the acquisition of fourteen SABER M60 Radar mockups was signed between Embraer and the Brazilian Army. The mockups will be used for training and were delivered along 2019 and 2020. Furthermore in 2019, Embraer sold five anti-aircraft operations centers (Centro de Operações de Artilharia Antiaéreas – COAAe) to the Brazilian Army. The operations centers will be used for land surveillance and were delivered in 2020.

In 2020, Embraer signed a contract with the Brazilian Army for the acquisition of two radars SABER M60 radars. The deliveries are expected by second quarter of 2022.

Principal Defense and Security Subsidiaries and Joint Ventures

Savis Tecnologia e Sistemas S.A.

Savis Tecnologia e Sistemas S.A., or Savis, our affiliate, is an engineering company dedicated to system integration, and specializes in the development, integration, project management, implementation and life cycle support of border protection projects and of strategic defense structures. Savis is the lead system integrator for the Brazilian Army’s Integrated Border Monitoring System (SISFRON) program; we believe it is one of the largest ongoing border surveillance projects in the world.

The implementation of SISFRON during 2020 comprised the delivery of relevant incremental capacity to the project. All different solutions and technologies have been tested and validated by the Brazilian Army in operational scenarios, enabling its follow-on application and continued development in the next phases of the program. We expect that the pilot phase will be concluded by 2022.

In 2019, Savis and the Brazilian Army amended the SISFRON agreement to add price escalation clauses, among other provisions. Additionally, in 2019 the Brazilian Army compensated us for currency conversion losses according to the terms of the SISFRON agreement.

In December 2019, Savis received a request for a proposal related to phase 2 of the SISFRON Program. Continuing the implementation of the SISFRON project, in 2020, Savis delivered important additional capabilities to the Brazilian Army, reaching 84% of the Pilot Phase already implemented and in operation by the Land Force.

Atech

Atech is a Brazilian company, wholly owned by us since 2013, focused on complex systems for critical missions, developing products and services in the area of command and control, communications, computer and intelligence, cyber defense, air defense and air traffic control for defense, security and other civil applications. Atech has worked in many Brazilian government strategic projects, including a nuclear-electric generation laboratory program (LABGENE), which aims to develop a protection and control system for the nuclear reactor and the Brazilian air defense systems. Atech is also responsible for the development, implementation and modernization of the Brazilian air traffic control centers.

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In 2018, Atech advanced on several fronts, such as contracting with main suppliers for the LABGENE, receiving and accomplishing several tests of acceptance for the control and monitoring of sub-systems, as well as the inauguration of the first replica of the control room. In the area of air traffic control in Brazil, Atech completed the upgrade of the aeronautical messaging system (AMHS) and the implementation of the platform for evaluation and simulation of the new aeronautical communications network (ATN-BR). In the defense market, it also successfully concluded tests for the acceptance of the first fixed center for air traffic control and surveillance in a North African country, as well as the delivery of the first mobile air and ground surveillance centers. In the naval helicopter for the Brazilian Navy (H-XBR) program, the final certification of the tactical naval data management system was obtained, concluding the program’s development phase with the delivery of two complete sets with the embedded console tactical and mission computers.

In 2019, Atech concluded the LABGENE program with the hiring of the main suppliers of the subsystems of the program and the performance of factory acceptance tests in the control and monitoring subsystems. In the area of air traffic control, the SAGITARIO system was fully implemented in Venezuela, after being implemented in Paraguay. In 2019, Atech has also completed the project relating to the air traffic flow management system (Skyflow) to the Airport Authority of India, meeting all customer requirements. In Brazil, factory acceptance of the project to centralize flight plans for DECEA was completed. In the defense market, in a partnership with Embraer, Atech delivered a simulator for the Gripen BR program. In the same year, Águas Azuis consortium, to which Atech is a party, was selected by the Brazilian Navy for the supply of four Tamandaré class ships. Atech will provide the Integrated Platform Management System (IPMS), which is expected to be delivered, together with the class ships, to the Brazilian Navy in 2025.

In 2020, Atech completed in the LABGENE program the acceptance tests of some systems and instruments and also completed the engineering phase of its main safety systems. In the air traffic control, Atech delivered the modernization of CINDACTA I and completed the development and testing of the “Flight Plan Centralization” project in Brazil. In the defense market, the first E-99M aircraft was delivered to the Brazilian Air Force with modernized mission systems. In the Gripen E program, the transfer of technology to Atech related to mission trainer system in Sweden was initiated. Atech also signed important contracts, including the contracts for the Tamandaré Class Frigates, already starting the development of the program, and a contract for support and maintenance of air traffic systems with the Brazilian Air Force.

Visiona Tecnologia Espacial S.A.

Embraer and Telecomunicações Brasileiras S.A., or Telebras, formed Visiona Tecnologia Espacial S.A., or Visiona, of which Embraer holds a 51% stake and Telebras 49%. Through this agreement between Embraer and Telebras, Visiona became the prime contractor for the Brazilian Strategic and Defense Communications Geostationary Satellite (SGDC), with responsibility for the system integration.

In December 2016, after a successful phase of environmental and functional tests, Visiona delivered the SGDC satellite to be operated by Telebras and the Brazilian Ministry of Defense. The ground system’s test and validation was also concluded in December 2016.

In 2017, the SGDC X-Band services (6 GHz to 8.5 GHz), which is used for strategic defense communication was launched successfully, and Telebras took over its control. Visiona has also entered into an agreement to support Telebras in its satellite operations.

In 2018, Visiona launched the VCUB nano-satellite program, the first satellite designed by a company in the Brazilian industry, and entered into partnerships with INPE, SENAI-SC/EMBRAPII, Government of Santa Catarina, Centro Nacional de Monitoramento e Alertas de Desastres Naturais (CEMADEN) and the Brazilian Agricultural Research Corporation (EMBRAPA) for technological development and evaluation of the products generated by satellite.

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In 2019, Visiona made substantial progress in the VCUB program, successfully concluding the satellite Preliminary Design Review and, later in the year, all subsystems Critical Design Reviews. Visiona has also entered into cooperation agreements with CPRM, the Brazilian geological survey, and the São José dos Campos municipality, for evaluation of the use of the VCUB in geological survey and city management applications. Additionally, Visiona has entered into an agreement with the Brazilian Army for airborne P-Band radar remote sensing services using technology licensed from Embraer. We expect this opportunity to open a new business unit for Visiona’s remote sensing services.

In 2020, Visiona successfully completed the Critical Design Review of the nanosatellite VCUB-1, which marked the beginning of the integration and testing phase of the artifact. The company also signed several agreements for testing and evaluating VCUB products, for the development of application technologies. In relation to the SGDC project, the last stage of the main contract was delivered, with remaining contracts to support the satellite operations. Finally, Visiona completed its first aerial survey project with a high penetration radar sensor, for mapping and inspection applications in dense forest environments, such as the Amazon.

Competition

Our military aircraft faces competition from various manufacturers in different countries in each market segment. The Super Tucano competes in the light attack market with the Textron AT-6 (United States), L3 AT-802L Longsword (United States), Textron Scorpion (United States), Leonardo M-345 (Italy), Aero Vodochody L-159 (Czech Republic), among others. In the flight training market, it competes with the Pilatus PC-21 (Switzerland), Textron T-6A/B (United States), Aero Vodochody L-39NG (Czech Republic), among others.

In the military transportation segment, the C-390 Millennium operates in the medium airlift segment in the class of 20 tons. Accordingly, its main competitor is the Lockheed Martin C-130J (United States). Due to the multi-mission design of the C-390 Millennium, including medical evacuation, search and rescue, firefighting, air-to-air refueling, transport of troops and aerial resupply, we expect specific competition with the Airbus A400M and Kawasaki C-2 with respect to air-to-air refueling missions, Airbus C-295 with respect to search and rescue missions, Leonardo C-27J with respect to passenger aircraft convertible into troop transportation aircraft, Ilyushin IL-76 with respect to firefighting aircraft, as well as C-130J, which is our biggest competitor in all of these categories.

In the VIP transportation segment, which comprises the aircraft that will be used by government officials and authorities, our business jets face competition from the main manufacturers of business jets, such as Bombardier (Canada), Gulfstream (United States), Textron (United States) and Dassault (France).

Services and Support Business Unit

On December 20, 2016, we announced the creation of Embraer Services and Support, a business unit focused on services and customer support, which brings together capabilities that were previously allocated to each business unit, and is responsible for developing solutions in support of current and new products and services, as well as for managing the associated processes and resources. This represents an opportunity to obtain greater operational efficiency and recurring revenues. Currently there are approximately 2,270 Embraer commercial aircraft and over 1,460 Embraer executive jets, as well as more than 620 defense aircraft, in operation. During 2017, the new business unit of Embraer Services and Support consolidated the services and customer support processes previously allocated to each of our business units to identify synergies and quantify our expertise in our Commercial Aviation, Executive Aviation and Defense and Security business units regarding services and support. Since the first quarter of 2018, we have reported the Services and Support business unit as a separate segment in our financial statements. For further information, see Note 38.4 to our consolidated financial statements as of and for the year ended December 31, 2020. Our Services and Support business unit accounted for 24.4%, 22.8% and 22.3% of our revenue for the years ended December 31, 2020, 2019 and 2018, respectively.

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Commercial Aviation Industry

We are working on further developing our portfolio of services for our Commercial Aviation customers, which comprises the following areas:

We have a worldwide presence, with five regional units strategically positioned around the globe in order to provide us with greater agility in understanding the needs and desires of our customers and respecting the cultural diversity of the different regions where our customers are based. Our regional units are located as follows:

All units mentioned above have the following infrastructure:

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In São José dos Campos, we also offer the following services:

Beyond parts fulfillment and simple rental plans, we also provide innovative programs for material planning, logistics, and acquisitions, such as our:

We own a full flight simulator, which is operated by the Embraer Training Center in Johannesburg, South Africa, and supports our fleet growth in the African market.

We own and operate MRO facilities in Nashville, La Vergne, and Macon, United States, where we have Embraer Aircraft Maintenance Services, a dedicated service center for commercial aviation, and through Indústria Aeronáutica de Portugal S.A, or OGMA, in Alverca, Portugal and Embraer Service Center in Gavião Peixoto, state of São Paulo, Brazil, we offer dedicated maintenance services to both commercial and defense customers.

The Embraer MRO Network that supports our commercial aviation aircraft fleet is also expanding with our third-party maintenance service centers. As of December 31, 2020, these centers are:

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Our strategy is to target our services and support leadership position by continuing to provide the best customer support anytime and anywhere in the world, and relying on our strong MRO Network, which satisfies customers’ expectations of quality, lead time, affordability, capability and global coverage.

We constantly monitor customer satisfaction levels and keep open communication channels with them to understand customer needs and define the most appropriate actions for the continuous improvement of our customer support. To do so, we use the following tools and forums:

Executive Aviation Industry

Our executive jets customer fleet has expanded globally and has a strong presence in major markets. We expect to continue enhancing customer services and support offered to our Executive Aviation business unit. Between 2008 and 2010, we added seven wholly owned service centers to support our executive and defense aircraft in Fort Lauderdale, Florida, United States: Melbourne, Florida, United States; Mesa, Arizona, United States; Bradley, Connecticut, United States; Le Bourget, France; Gavião Peixoto and Sorocaba, São Paulo, Brazil. At the end of 2020, we had six service centers to support our executive and defense jets fleet; including OGMA in Lisbon, Portugal, and 63 authorized service centers around the world. In addition, in order to ensure customer satisfaction, we implemented a new spare parts system and planning policy to generate synergies among business units. Our new planning policy will further enhance stock optimization and service levels, offering customers an availability around 92% for our spare parts items.

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We have further developed our customer services and support structure to enhance our customers’ satisfaction in operating our Executive Aviation business unit. To measure our customers’ satisfaction, we implemented the Journey to Wow project, which is a marketing tool to measure customer satisfaction based on the customer’s experience. The score under this project allows us to be more responsive on developing initiatives based on customers feedback and well as predict their needs. Our Customer Support Contact Center has a team of specialists dedicated to support all Embraer Executive Aviation and offers complete and timely assistance for their operational, technical and maintenance needs. This Customer Support Contact Center operates 24 hours a day, seven days a week, and is based at Embraer’s headquarters in São José dos Campos. Its priority is to minimize downtime from the customer’s first contact to final completion, by quickly and efficiently applying appropriate resources to critical needs, assuring that customers have expert assistance anywhere in the world.

Since 2014, our product support has been top-ranked in industry surveys. In 2016, for the first time we were number one in both the AIN and Pro Pilot Product Support Surveys. In 2017, AIN ranked us first for product support. In 2018, we were ranked number one in the Pro Pilot Product Support Survey and number two in AIN’s Product Support Survey. In 2020, we were top ranked in Pro Pilot’s Product Support Survey 2020, in all categories of the survey. In AIN’s Product Support Survey Embraer was ranked three for overall results and top ranked in the older aircraft (over ten years) support among executive jets customers. The positive customer responses evidenced by these surveys demonstrate our efforts in providing excellent customer services and support which are consistent with our business strategy and demonstrate Embraer’s commitment in this regard.

In 2019, our four service centers in the United States received for the ninth time the FAA Diamond award, a certificate of excellence related to maintenance technician training. In 2020, all of our services centers in the United States received the FAA Diamond Award for the tenth time.

In 2020, we added two new authorized service centers in Europe and concluded 11 conversions from Legacy 450 to Praetor 500 in our wholly-owned service centers in the United States and Le Bourget, France.

Defense and Security Industry

The Services and Support business unit provides solutions to several air forces and government entities through our comprehensive portfolio. These solutions are tailored to our customer needs and may include provision of material, training, maintenance, engineering and other aspects that will enhance fleet availability and mission readiness.

Our support services may range from simple transactional sales to integrated support programs. We assess our customer capabilities and requirements in order to define the integrated solution that will keep the fleet operating in the most effective way.

The multi-mission C-390 Millennium has a dedicated team to design and implement the most effective entry into service solution. The customer participates directly in the process, alongside the Embraer team, encompassing overall strategy as well as specific details, assuring a reliable and smooth operation from the beginning of the process.

As part of the integrated support program, we also provide services to new and existing customers of our Super Tucano, which is an aircraft used by several air forces around the world.

Additionally, we also provide support aircraft services to passenger carriers from several government organizations. For instance, we have support services designed to fulfill requirements, including sale of spare parts, maintenance, training and technical support, among others, relating to (i) recent aircraft Phenom 100, Phenom 300, Legacy 450; (ii) older aircraft, including Legacy 600 and ERJ-145, and (iii) legacy aircraft, including Bandeirantes (EMB-110) and Brasília (EMB-120). Through the support services we provide to our customers, we can complement commercial or business aircraft with equipment and sensors, thereby making our customers’ fleet available for different types of missions.

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One of the pillars of the Services and Support business unit is to keep old aircraft in service. We provide engineering solutions to our customers designed to overcome material shortages or technical difficulties of obsolete aircraft by means of incorporation of modern technologies into older aircraft, making their operation reliable, safe and cost-effective.

We provide a full range of services in different countries, often operating together with our customers’ teams in their own bases. In order to provide specific activities and comprehensive maintenance solutions, we own and operate maintenance, repair and overhaul, or MRO, service centers as follows:

These MRO service centers are adapting their capabilities for purposes of providing C-390 Millennium maintenance services.

In 2019, as a result of our sales efforts, we entered into new service support agreements in Latin America, Europe, Africa and Asia to support our Defense and Security customers, thus improving the quality of service in order to meet our customers’ operational requirements. In 2020, the 8^th A1-M modernized aircraft was delivered to the Brazilian Air Force. Also, six M60 radars were delivered to the Brazilian Army.

We also entered into a major contract to provide spare parts for the Brazilian Air Force support its fleet of T-27, EMB110 – Bandeirantes and EMB120 – Brasilia aircraft and also with significant material sales for Sierra Nevada and North American Customers. We have also improved the services and support associated with radars for Brazilian customers and entered into a support service agreement with the Brazilian Army.

We strive to deliver training to KC-390 Maintenance for the Brazilian Air Force and continued to meet milestones of the contracted training devices and learning systems such as the Delivery of Lebanon Air Force CBT to SNC and Phase 1 delivery of Nigerian Air Force CBT to SNC.

Indústria Aeronáutica de Portugal S.A. – OGMA

Indústria Aeronáutica de Portugal S.A—OGMA, or OGMA, located in Alverca, Portugal, combines the accumulated know-how as an aircraft manufacturer and maintenance service provider. It offers worldwide MRO services, for defense, commercial and executive aviation as well for aircraft engines and components. Furthermore, OGMA plays an important role as a major aerostructures supplier of integrated solutions to OEMs and first tier suppliers. OGMA delivers assemblies and sub-assemblies of both metallic and composite materials. Embraer owns 65% of the voting capital of OGMA and the Portuguese State owns the remaining 35%.

In 2018, OGMA celebrated 100 years of activity in the aeronautical market. Since its formation, OGMA has been investing in the areas of MRO and manufacturing of aerostructures. In 2018, it also entered into an agreement for the maintenance and management of the Brazilian Air Force’s C-130 aircraft fleet, strengthening OGMA’s position in this market. OGMA further extended the MRO spectrum, obtaining certification for maintenance of the Rolls-Royce AE1107 engine. In addition, it also entered into a pylon manufacturing agreement with one of the largest manufacturers of executive aircraft.

Additionally, as of the date of this annual report, OGMA is developing the Supplementary Type Certificate (STCs) to integrate additional functionalities and certify the C-390 Millennium according to NATO requirements in the scope of the agreement entered into with the Portuguese Air Force (FAP) for five KC-390s. Pursuant to the terms of subcontracting agreement we have with OGMA, OGMA is also responsible to perform the maintenance activities related to the delivery of the KC-390 Millennium aircraft to the FAP from March 2023 until March 2027.

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In 2020, OGMA entered into 12 new contracts to provide MRO services to defense and security and commercial aviation segments, and repair of maintenance components, such as those related to hydraulic, pneumatic, fuel, electrical and avionics systems.

Also, in November 2020, OGMA became a new authorized maintenance center for Pratt & Whitney engines, as a result of a project developed by OGMA, with the support of Embraer, over the prior 12 months, allowing the expansion of its scope of services in the area of engine maintenance, and marking the entry of Pratt & Whitney maintenance, repair and overhaul in Portugal.

Other Related Business Unit

We provide fuel systems, structural parts, and mechanical and hydraulic systems to Sikorsky Aircraft Corporation, a Lockheed Martin Company, for its production of helicopters. We also manufacture general aviation propeller aircraft, also known as light aircraft, such as crop dusters. Our Other Related business unit accounted for 0.3%, 0.2% and 0.3% of our revenue for the years ended December 31, 2020, 2019 and 2018 respectively.

We provide Sikorsky Corporation with the development and manufacture of landing gear, fuel systems and fuel tanks for the S-92 and H-92 Helibus helicopters. We also act as a risk-sharing partner for Sikorsky. These contracts were renewed in 2015 and are under renewal negotiation after their expiration in December, 2020.

We also have Ipanema in our Other Related business unit pipeline, which is a crop duster aircraft developed pursuant to the specifications of the Brazilian Ministry of Agriculture. These aircraft are produced only on demand. As of December 31, 2020, we have delivered a total of 1,444 of these aircraft, including 22 in 2020.

Aircraft Operating Lease Activities

In order to provide better financial support to our commercial activities, as well as to manage and reduce financial risks related to the marketing of aircraft, we created ECC Leasing in September 2002. ECC Leasing has been able to remarket aircraft in its portfolio with conditions and at values similar to market conditions and without any guarantee from Embraer. All sale and leasing transactions were entered into based on market rates, helping to sustain the present and future value of our products.

In January 2017, ECC Leasing merged with Embraer Netherlands, with its assets and activities incorporated under Embraer Netherlands. The mission of Embraer Netherlands, as our company responsible for aircraft operating lease activities, is to manage and remarket Embraer’s aircraft portfolio, which as a result of contractual obligations, may be acquired by us via trade-in transactions. We also provide remarketing services to third parties looking to sell their Embraer manufactured aircraft.

In 2020, despite the COVID-19 pandemic scenario, which had an adverse impact on the aviation industry, Embraer Netherlands successfully sold and delivered two aircraft, for a total amount of US$6.5 million as compared to 13 aircraft sold in 2019, for a total amount of US$34.4 million, and 32 aircraft sold in 2018, for a total amount of US$72.4 million. Since ECC was established in 2002 through December 31, 2020, this business unit handled 263 aircraft, of which two are available or under sale negotiations.

We believe the results of Embraer Netherlands will be largely dependent on market conditions, aircraft availability levels and the demand for jets in the 37 to 50 seat category.

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