US private jet buyer backs record Embraer deal as tariff turmoil hits Brazil planemaker

By Gabriel Araujo and Allison Lampert

SAO PAULO, July 10 (Reuters) - Private jet operator Flexjet, a key U.S. customer of Embraer EMBR3.SA, suggested on Thursday it would stand by a record deal with the Brazilian planemaker despite turmoil from fresh trade tensions between the U.S. and the South American country.

U.S. President Donald Trump said on Wednesday he would impose a 50% tariff on all imports from Brazil, starting August 1.

Sao Paulo-traded shares of Embraer initially tumbled as much as 8% on Trump's comments, before paring losses to close 3.7% lower. But they remain up more than 30% year-to-date on demand for the world's third-largest aircraft manufacturer's executive planes and regional jetliners.

The higher tariffs create a fresh challenge for Embraer as airlines in the U.S., the world's largest market for both regional and private aviation, see a slowdown in domestic travel demand and capacity.

Asked about a February deal with Embraer to buy up to 212 private jets valued at up to $7 billion based on list prices, Cleveland, Ohio-based Flexjet said its clients, which buy a part-share in the aircraft, tend to "proceed" with such decisions.

"Based on my 40 years in the industry, this group of purchasers tends to proceed with their decisions regardless, given their priorities and past purchasing behavior," Flexjet Chairman Kenn Ricci said in a statement.

"In the short term, aircraft already under contract with foreign manufacturers are covered by existing agreements. If tariffs on foreign-made aircraft do indeed increase, manufacturers will likely bear some of the initial impact for these committed orders," he said, but added that over time, "those added costs will be passed on to the buyer."

Flexjet's deliveries are expected to start in 2026.

TARIFF IMPACT

Embraer said in a statement it was evaluating the potential impacts of the tariffs, and would provide further comments during its second-quarter earnings call on August 5.

Brazilian imports to the U.S. are currently subject to a 10% tariff, however Embraer can deduct U.S.-made content on its planes, and some of its jets are assembled in Florida.

Itau BBA analysts said 60% of Embraer's revenue is from North America, of which three-quarters could be exposed to tariffs. They estimated a potential impact of $150 million to Embraer's earnings before interest and taxes from August to December.

According to March 31 company filings, American Airlines AAL.O has purchase agreements for 90 Embraer E175 jets, with deliveries in 2025 and beyond. American declined to comment on tariffs ahead of its quarterly earnings later this month.

Alaska Airlines ALK.N told the Seattle Times in June it had delayed delivery of two E175 jets due to tariffs. The carrier told Reuters on Thursday that both planes have been delivered after a short delay and will enter service shortly.

Alaska has no more scheduled E175 deliveries this year.

The assembly of Embraer's business jets is finished in Florida, but key parts of planes such as the Phenom fuselage come from Brazil.

Higher tariffs could have a greater impact on Embraer's smallest jet, the Phenom 100, which is produced in low volumes and has slimmer margins, one industry source said.

"The lower end of the business jet family is more price sensitive," said U.S. business aviation analyst Brian Foley.

Aircraft are among the top U.S. imports from Brazil, along with oil, steel products, coffee and orange juice.

"Although we see Trump's announcement primarily as a bargaining leverage, we expect investors' concern to remain high given the significant potential impact that a 50% import tariff on Brazilian goods would imply for Embraer," XP analysts said.