Embraer has adopted a more cautious market outlook as it assesses the likely impact of a US economic slowdown on the regional jet market, despite selling over 400 passenger aircraft in 2000, its best-ever year financially.

The Brazilian airframer has already dropped plans to increase production of the ERJ-145/140/ 135/Legacy family to 24 a month. It will instead increase production of the 35 to 50 -seat family from 16 to 20 aircraft per month from year-end, taking output to around 240 aircraft next year.

"This is to be on the safe side as we're seeing something that is not very clear," says chairman Maurico Botelho. "We have very good sales prospects for this year, but I don't see last year being repeated very easily." Embraer had spoken of a production hike as recently as October (Flight International, 24-30 October 2000).

Embraer is also facing a rise in capital expenditure to $1.5 billion over the next five years, almost double the amount spent in the previous six years. Product development will cost $1.1 billion (for the 70-seat ERJ-170, due for delivery from December 2002, and the stretch ERJ-190, due to follow in July 2004). Another $150 million is to be spent on a new manufacturing and test facility at Gaviao Peixoto.

The new plant will be geared to produce the Legacy business jet version of the ERJ-135, with deliveries beginning this year, and for Embraer's military programmes. Defence sales should be bolstered by December's contract to upgrade 47 Brazilian air force Northrop Grumman F-5E/Fs, plus anticipated production go-ahead for 99 ALX light-attack turboprops.

Embraer, which has enjoyed 14 consecutive quarters in the black, reported a net profit of $300 million last year, up 58% on 1999, on sales of $2.45 billion, up from $1.58 billion. Its order backlog almost doubled to $11.4 billion, aided by launch orders for the Legacy (64 sold), the 44-seat ERJ-140 (from American Eagle - 132 aircraft for delivery from September) and extended range ERJ-145XL (from Continental Express - 100 aircraft).

Source: Flight International