Embraer CEO Expects Firm To Survive
Click here for more news / Clique aqui para mais notícias
By Anthony L. Velocci, Jr., Graham Warwick and Joseph C. Anselmo
PARIS LE BOURGET AIRPORT - A push by Brazilian regional jet builder Embraer into executive jets has collided with the worst downturn the business aviation sector has ever seen. At the Paris air show, President and CEO Frederico Fleury Curado discussed with Aviation Week & Space Technology Editor-in-Chief Anthony L. Velocci, Jr., Senior Editor-Technology Graham Warwick and Senior Business Editor Joseph C. Anselmo how the global economic downturn could alter the business jet landscape and why he believes Embraer will be one of the survivors.
AW&ST: When do you see the commercial and business jet industries hitting bottom?
Curado: Our vision is that by 2011 we should be seeing some recovery [in commercial aviation], but the business jet market will take longer to recover. We won't see delivery numbers like we saw in 2007-08 for many years - more than five. The business jet market may be seeing a structural change. Fewer manufacturers is a possibility. You may also see less segmentation. For example, I call our Phenom 100 a "category killer" because it's really blurring the lines. It's not a very light jet at all; it's an entry-level jet at very-light-jet prices. I think we'll see more of that.
Given the hindsight you have today, do you regret focusing on business jets instead of expanding into another area?
A year ago was certainly a better time, but we have absolutely no regret. I think we're on the right track. I don't think the business jet market will disappear. It may shrink, it may have fewer players, but we believe we can be one of those players. Some people misread that our investment in the executive jet market means we are switching priorities [away from commercial jets]. We are not. We are trying to open growth alternatives. In the commercial airline business, there is an obvious barrier to bigger aircraft: Boeing and Airbus are sitting right on top of our product line. Unless there is a change to a significantly better aircraft - in fuel burn, emissions, etc. - launching a "me too" airplane in the 150-seat category would be suicidal.
Could Embraer play the role of consolidator in the business aviation industry?
That's a difficult question. We tend to be more oriented to organic growth. We have a very conservative view on acquisitions. We're not philosophically against them, but we have a tremendous respect for the problems that come with integration. So, unless there is a very natural fit, we probably would not do it.
Isn't Embraer having the same fundamental challenges as more established business jet manufacturers with financing and customers not being able to take delivery?
Our existing product, the Legacy, was probably hit as badly as any other [business jet]. The data we collect shows that everybody has been impacted, from the [Gulfstream] G550 all the way down to very light jets. On our [smaller] Phenoms we have a huge backlog, 800 aircraft through 2012 or 2013, so it's easier to move up deliveries. We already cut back the production ramp-up on the Phenom 100 this year, so that combined with [delivery] move-ups should sustain the core. Financing is a daily challenge, but 2009 looks OK. We have a few challenges in 2010 and nobody really can see into 2011. [The Brazilian export development bank] is clearly ramping up. Last year they financed 10-11% of our deliveries and this year it's probably going to reach 30%.
Do you believe the level of transparency between Embraer and your suppliers is what it should be to help them adequately plan their production rates?
I do. We share our production plans with all the major suppliers, especially those with equipment that requires long lead times. With several suppliers, we share our long-term outlook. In this current crisis, nobody is happy with the very severe deceleration of production, but at least the transparency is there. I believe our suppliers feel that they have the same level of information that we do. To my knowledge, we have not had anybody disconnected from our forecast and found ourselves with a shortage of anything.
What are your thoughts on a supersonic business jet?
That is probably a better question for Gulfstream and Dassault. It's not something we see as very logical or attractive to us. Will there be customers for such a jet? Of course, but very limited, because not many people can afford it. And there is also the technical challenge of the sonic boom, which I think still has to be resolved. So technical challenges, huge investment and a very small market. That doesn't sound very exciting.
Frederico Fleury Curado photo: Embraer
