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Aerolineas' E-190 order not yet finalised: Embraer

Embraer has encountered delays in finalising a 20-aircraft E-190 order placed by Aerolineas Argentinas domestic subsidiary Austral, forcing the manufacturer to push back initial deliveries by at least a couple of months.

Austral signed in May a contract for 20 E-190s with deliveries scheduled to begin in early 2010. But Embraer CEO Frederico Curado acknowledges the manufacturer has had to push back by 60 days a deadline for Austral meeting certain conditions and requirements of the purchase and this makes it "impossible" for deliveries to begin in early 2010.

"Of course we'll not put aircraft on the assembly line without a fully enforceable contract," Curado told reporters today during a media briefing in Washington DC.

Curado explains "a commercial contract is signed but it is subject to a few conditions on their side". He says Austral was originally required to sign certain documents and meet various requirements listed in the contract by the end of July but Embraer has had to extend this deadline until the end of September following leadership changes at the airline and at Argentina's transport ministry.

"We expected to have those requirements met by the end of July and it will probably take another 60 days because of those changes," he says. "Now we'll have to wait and see."

In late June Mariano Recalde took over as CEO of Aerolineas and Austral while Juan Pablo Schiavi took over as transport secretary. Austral and Aerolineas were recently renationalised, which Curado says can also slow down the process of finalising an aircraft order.

But Curado does not believe the new appointments, which came after the party in power lost mid-term legislative elections, will lead to any reconsideration of the decision to purchase E-190s. He points out Austral still badly needs to renew its fleet.

"I don't see that deal as political. I see it as an airline deal," he says. "The airline clearly needs new airplanes."

Curado is also not concerned about the possibility of Austral and the Argentinean government not agreeing to financing terms with Brazilian development bank BNDES. He says discussions are still ongoing between BNDES and Austral over financing and "there is pre-commitment there" for BNDES to offer financing although a deal has not yet been completed.

While Curado says early 2010 deliveries are no longer possible because Embraer is not prepared to risk the start of aircraft production until Austral meets all the terms and conditions of the contract, he still expects deliveries will begin later in 2010.

Earlier this week Recalde, in his first public comments since taking over as Aerolineas CEO, said the Embraer order is "confirmed" but is still subject to some "renegotiation" which he did not specify.

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