Embraer

Empresa Brasileira de Aeronáutica, S.A.
Type Public (BM&F Bovespa: EMBR3
NYSE: ERJ)
Industry Aerospace / Defense
Founded (1969)
Headquarters São José dos Campos, Brazil
Key people Maurício Novis Botelho, (Chairman)
Frederico Fleury Curado, (CEO)
Products Aircraft, aircraft components, mission systems for air and ground operation
Revenue decrease US$ 6.2 Billion (2009)
Net income increase US$ 513.7 Million (2009)
Employees 17.380
Website www.embraer.com

Embraer (BM&F Bovespa: EMBR3 / NYSE: ERJ) (Portuguese pronunciation: [ẽbɾaˈɛɾ], short for Empresa Brasileira de Aeronáutica, S. A. English: Brazilian Aeronautics Company, Inc.), is a Brazilian aerospace conglomerate that produces commercial, military, and corporate aircraft, and provides related aerospace services. It is the third-largest aircraft company in the world in terms of yearly delivery of commercial aircraft (behind Boeing and Airbus), and fourth-largest in terms of workforce.[1] From 1999 to 2001 it was Brazil's largest exporter and is still one of the three main exporters in Brazil.

The company's headquarters, main production facilities, and engineering/design offices are in São José dos Campos, São Paulo. Embraer also has a production plant and flight testing facility in Gavião Peixoto, São Paulo. This facility includes a 16,400-foot (5,000 m) runway, the third-longest in the world.[2]

Embraer has maintenance, commercial sites and Commercial offices in Fort Lauderdale-USA, Paris, Singapore and Beijing.

As of July 30, 2009, Embraer had a workforce of 17,389 people, and a firm order backlog totalling US$19.8 billion.[3]

Indústria Aeronáutica Neiva is a subsidiary of Embraer which produces airplanes and aircraft components. Its main product is the Embraer EMB 202 Ipanema, the most employed agricultural aircraft in Brazil and the first alcohol powered airplane. Neiva delivered more than 3,700 aircraft until early 2006.

Contents

History

Foundation

The creation of a Brazilian aircraft manufacturer was planned during the 1940s by the Brazilian Government as part of a technical development formed by the General Command for Aerospace Technology (CTA), the Aeronautics Technological Institute (ITA) and Embraer.

The first step in the creation of a Brazilian aircraft industry was the creation of IPD - Instituto de Pesquisas e Desenvolvimento (Research and Development Institute), current IAE - Instituto de Aeronáutica e Espaço (Aeronautics and Space Institute), which was born inside CTA, on January 1, 1954.

The major change occurred on March 29, 1965, when IPD received a proposal of a turboprop transport from the French engineer Max Holste. A group of engineers led by Ozires Silva would turn this proposal into a larger scale project, the IPD-6504, or Bandeirante, which flew for the first time on October 26, 1968. IPD wanted the 6504 to move into serial production, but faced a lack of interest from private companies. It was clear that the creation of a government-owned company was necessary.

Finally, on July 29, 1969, Embraer was created by the Ministry of Aeronautics. By this time, the company had about 500 employees, including many former engineers from both CTA and ITA, and planned to build two Bandeirante aircraft a month. Ozires Silva became the president of the new company.

Growth and expansion

The three first series version Bandeirante were delivered in February, 1973 to the Brazilian Air Force. In the same month, Transbrasil bought the first commercial Bandeirante, which made its debut on April 16, 1973. Exports began in 1975, and the Bandeirante proved to be a success in the international aviation market. About 500 Bandeirante were sold, in 36 countries.

Brazil's Ministry of Aeronautics made efforts to contribute to the growth of Embraer. Two existing projects, the Urupema glider, and the Ipanema agricultural aircraft, were transferred to the new manufacturer. A request for assembly in series of 112 Aermacchi MB-326 trainer aircraft (to be later designated T-26 Xavante), was also made. The Ipanema is still produced today, with more than 1,000 units sold. The Xavante was produced for 11 years, with 186 units sold.

In August, 1974, Embraer established a cooperation with Piper Aircraft to assemble many general aviation products by license, including the models PA-28 Cherokee, PA-34 Seneca, and PA-31 Navajo. These aircraft respectively received the designations of EMB 712 Tupi, EMB 810D Seneca and EMB 820C Navajo. All these products, plus the Ipanema, were transferred to Indústria Aeronáutica Neiva subsidiary in March, 1980.

LOT Polish Airlines E-170 (2007)

On October 22, 1975, the company's first pressurized aircraft, the Xingu, made its inaugural flight. The aircraft was smaller than the Bandeirante, thus it didn't become a successor; a few dozen Xingus were built, with most being delivered to the French Air Force in 1981. By request of the Ministry of Aeronautics, Embraer developed its first original combat aircraft, the Tucano, which made its inaugural flight on December 16, 1980. The Tucano became the most successful turboprop military trainer ever built, with more than 650 units sold around the world and a license for Short Brothers to build it for the Royal Air Force.

The development of a regional airliner able to replace the Bandeirante started in the end of the 1970s. After a few stillborn attempts at updating the Bandeirante design (tentatively called EMB-120, EMB-121, EMB-123 etc.), the company decided to repeat the same basic layout but to design a new model from scratch. Eventually this project took the form of a turboprop able to carry 30-40 passengers, the Brasilia, which was certified in May, 1985. Unlike the Bandeirante, the Brasilia began its career as an export product, entering service with the American Atlantic Southeast Airlines (ASA). The production of Brasilia officially ended on 2002, with 350 units sold; however, the aircraft may still be produced on demand.

In July, 1981, Embraer joined the AMX Program, whose purpose it was to establish a partnership to develop a subsonic light strike aircraft. Together with Aeritalia (current Alenia Aeronautica) and Aermacchi, Embraer worked on the development of the AMX combat aircraft, which was later used to replace old military aircraft: the Aeritalia G.91 in Italy and attack-dedicated Xavantes in Brazil. The first Brazilian AMX made its inaugural flight on October 16, 1985. This project gave Embraer access to new technologies, which would be crucial in the following projects.

1990 crisis

The next commercial project was a 19 passenger turboprop developed in partnership with FMA (current Lockheed Martin Aircraft Argentina), the CBA 123 Vector, which made its inaugural flight on July 30, 1990. The Vector was not accepted by the market because of its high price, and was cancelled without a single aircraft being sold.[4]

By the end of the 1980s, government investments in the aerospace industry were reduced, due to the Constitution of 1988, which extinguished many forms of support to the industry, and due to the lack of interest in the defense area caused by the end of the Cold War. This, combined with the failure of the Vector project, and the crisis in the aviation segment caused by the oil price increase of 1990, made Embraer slide into a deep financial crisis. Massive cuts of expenses were made until 1994, and from the 12,600 employees the company had on 1990, only 3,200 remained. With all this happening, engineers of Embraer were focusing in a new project - a Turbofan regional airliner for 50 passengers, the ERJ 145.

Privatization and recovery

Embraer 175 at Ottawa (2005)

The privatization process started within the democratically elected Fernando Collor de Mello government. The so-called Plano Collor was elaborated by his finance minister, Zélia Cardoso de Mello, aimed to privatize Embraer along with other state companies (such as Acesita, Vale do Rio Doce and Telebras).[5]

On December 7, 1994, Embraer was privatized, and Maurício Botelho, former executive director of Bozano Group, was named the new president. Partnerships with other companies such as Parker Hannifin, Allison Engine Company, and Honeywell ensured enough investment for the development of the ERJ 145. Sales of the new regional jet allowed Embraer to finally recover and regain its position as one of the world's main aircraft manufacturers. More than 1,000 ERJ 145 and aircraft based on the ERJ 145 platform (ERJ 135, ERJ 140, Legacy, 145 AEW&C, 145 RS/AGS and P-99) were delivered up to late 2007.

The next aircraft to be developed was a military trainer and light attack aircraft, the Super Tucano or ALX, which flew for the first time on June 2, 1999. This aircraft was sold to the Brazilian and Colombian air forces, and is mainly employed in the Amazon region.

In July 1999, Embraer announced the development of a new family of aircraft: the E-Jets Series, comprising the Embraer 170, 175, 190 and 195 aircraft. With this decision, Embraer advanced to the 70-110 seat market. The inaugural flight of the first model, the Embraer 170, was made on February 19, 2002.

Embraer 195 taxis at Manchester International Airport. UK

Today, Embraer attempts to expand its presence in the Business jets category with an array of jets of varying sizes: the Lineage 1000, the Legacy 600, the Legacy 500, the Legacy 450, the Phenom 300 and the Phenom 100, which has made it the world's third-largest producer commercial aircraft.[6] In the Defense category, Embraer develops mission systems for air and/or ground operation; customers are Brazil, Mexico, Greece and India.

The interior of a Flybe Embraer 195.

On April 23, 2007, Frederico Fleury Curado succeeded Maurício Botelho as the company's president and CEO. Mr. Curado, 45 years old at the time of his appointment, had worked for Embraer since 1984 (he began as a manufacturing engineer assigned to Pratt & Whitney Canada working on behalf of Embraer),[7] and had been vice-president for the commercial aviation market for the previous eight years.

Product line expansion: military & corporate

Embraer Phenom 100

After the results obtained from the corporate version of their ERJ 135 aircraft, the Embraer Legacy 600[8], Embraer expanded its product line to smaller business jets as well. On May 3, 2005, the company announced two plans to introduce two new aircraft models, dubbed Phenom 100 and 300, in the "Very Light" and "Light" jet segments. Later, on May 2, 2006, Embraer announced plans to produce an executive version of its E-190 jet, called Lineage 1000, with first deliveries in mid-2008.[9] On October 1, 2007, two other concepts for business jets were announced, the MSJ and MLJ, which would target the "Mid-size" and "Mid-light" segments, respectively.[10] On May 20, 2008, at EBACE convention in Geneva, the MLJ concept was named Embraer Legacy 450 and the MSJ concept was named Embraer Legacy 500.[11]

On April 19, 2007, Embraer announced it was considering the production of twin-engine, jet-powered military transport, the Embraer C-390. Using many of the technologies developed for the Embraer 190, it would carry up to 19 tons (41,888 pounds) of cargo and is aimed at replacing older, Cold War-era cargo aircraft. By comparison, the Lockheed C-130 Hercules carries between 19.7 tons (43,550 pounds) and 21.2 tons (46,812 pounds).[12] The project is still under consideration, and is dependent on customer interest. The Brazilian postal service, the Correios, has demonstrated interest in buying at least 5 and eventually 20 to 25 of the aircraft, in lieu of using commercial freight service for mail transport.[13][14]

Shareholders

Originally Embraer was 51% controlled by the Brazilian government, the remainder held by private investors. With the privatization in 1994, control has passed to three Brazilian investment groups (Previ and Sistel pension funds and Bozano Group), with each holding 20% of the voting capital. Another 20% was acquired in 1999 as part of a strategic partnership to develop advanced military aircraft by a European consortium (EADS, Dassault Aviation and Thales Group hold 5.67% each, and SNECMA holds 2.99%). The remainder was publicly traded.

The Brazilian government remained involved through the possession of a golden share (1 share) in the company, which allows it to veto certain deals regarding military aircraft sales and technology transfer to foreign countries.

On March 31, 2006, a capital restructuring proposal was approved, consisting of a simplified capital structure composed of one type of shares (common shares). Current capital distribution is as follows: Bozano Group 11.10%, Previ 16.40%, Sistel 7.40%, BNDES 6.30%, Brazilian Government 0.30%, Others Bovespa 19.20%, Others NYSE 39.30%.[15]

Luxair Embraer ERJ 145

Government subsidy controversy

Embraer and one of its competitor, Bombardier Aerospace, have been engaged in international disputes over the issue of granting of public subsidy on their behalf since late 1990s through the representation of the central governments of their countries of origin, this means, through Brazilian and Canadian governments, totalling four cases brought to the World Trade Organization (WTO)[16]:

1) WTO Dispute DS46: Brazil — Export Financing Programme for Aircraft (Complainant: Canada), 19 June 1996.

Concluded in 2000, The Brazilian government was found to provide prohibited export subsidies according to Article 3.1(a) of the Agreement on Subsidies and Countervailing Measures (“SCM Agreement”[17]) favoring Embraer, and asked to withdraw these subsidies[3].

2) WTO Dispute DS70: Canada — Measures Affecting the Export of Civilian Aircraft (Complainant: Brazil), 10 March 1997

3) WTO Dispute DS71: Canada — Measures Affecting the Export of Civilian Aircraft (Complainant: Brazil), 10 March 1997

4) WTO Dispute DS222: Canada — Export Credits and Loan Guarantees for Regional Aircraft (Complainant: Brazil), 22 January 2001

It was found by the World Trade Organization (WTO), in a 2000 ruling, that Brazilian government had provided prohibited export subsidies favoring Embraer. In its ruling, the WTO ordered Brazil to eliminate its Proex (Programa de Financiamento às Exportações) programme, which was found to aid Embraer.[18]

In October 19, 2001, the WTO ruled against Canada, just as it had ruled against Brazil, over low interest loans from the Canadian government designed to aid Bombardier in gaining market share.[19]

Sites

Main facilities

Regional sales and product support offices

Subsidiaries

Joint ventures

Original aircraft

Commercial

Military

Corporate

Agriculture

Experimental

Licensed-version aircraft

Military

General aviation

Commercial aircraft deliveries

Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Number Of Deliveries 4 32 60 96 160 161 131 101 148 141 130 169 204 244

The numbers include military versions of commercial aircraft.

Total delivered-backlog-options as of June 30, 2007: 862-53-131 145 Family, 256-399-719 170/190 Family

References

  1. ↑ China set to take on Embraer, Bombardier
  2. ↑ Embraer official web site, press release
  3. ↑ Embraer in Numbers (Statistics)
  4. ↑ In certifying this aircraft Federal Aviation Administration attached "special conditions" in 1991: "These special conditions are issued to Embraer for the Model CBA-123 airplane. This airplane is equipped with high-technology digital avionics systems which perform critical or essential functions. The applicable regulations do not contain adequate or appropriate safety standards for the protection of these systems from the effects of lightning and high-intensity radiated fields (HIRF). These special conditions contain the additional safety standards which the Administrator considers necessary to ensure that the critical and essential functions that these systems perform are maintained when the airplane is exposed to lightning and HIRF". See http://www.airweb.faa.gov/Regulatory_and_Guidance_Library/rgSC.nsf/0/2716665111BEC58886256FA90065DD8F?OpenDocument
  5. ↑ Scielo: Os efeitos da privatização sobre o desempenho econômico e financeiro das empresas privatizadas (Portuguese)
  6. ↑ Sirkin, Harold L.; James W. Hemerling, and Arindam K. Bhattacharya (2008-06-11). GLOBALITY: Competing with Everyone from Everywhere for Everything. New York: Business Plus, 304. ISBN 0-446-17829-2
  7. ↑ Forging Ahead, Aviation Week & Space Technology, 171, 1 (July 6, 2009), p. 40
  8. ↑ Private Jets: Reviewing the Embraer Legacy. The Article Writer. August 17, 2007. Retrieved on May 14, 2008.
  9. ↑ Embraer´s Official web site
  10. ↑ Embraer News Outpaces Others at NBAA. Aviation Today. October 1, 2007. Retrieved on October 15, 2007.
  11. ↑ [1]
  12. ↑ EMBRAER HAS MILITARY TRANSPORT AIRCRAFT UNDER STUDY
  13. ↑ Costa confirma projeto dos Correios com cargueiro C-390. Monitor Mercantil. August 28, 2007. Retrieved on October 15, 2007.
  14. ↑ Brazilian postal service may order Embraer C-390 freighters. Flightglobal.com. September 4, 2007. Retrieved on October 15, 2007.
  15. ↑ Informações corporativas (Portuguese)
  16. ↑ WTO: Disputes by country/territory http://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm
  17. ↑ [2]
  18. ↑ Embraer: The Sky's the Limit
  19. ↑ WTO rules against Canada over low-interest loans for Bombardier deal

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