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Boeing relationship key to KC-390 costs, marketing

Embraer’s defence joint venture with Boeing will use the American company’s leverage over suppliers to cut parts and components costs on the KC-390 tactical transport.

The Brazilian company said at an investor conference on 16 January that it will also lean on Boeing’s international sales and marketing network, as well as the USA’s geopolitical influence, to expand the transport’s sales.

“The markets where the US has a huge geopolitical influence, we compete with Lockheed Martin in those markets,” said Nelson Salgado, chief financial officer of Embraer. “Now with the partnership with Boeing, we are opening up all of those markets, the US and the markets where the US has significant geopolitical influence. With Boeing leverage on the supply chain we will have big possibilities of reducing costs on the [KC-390] and make it a product [that is] more competitive as well.”

The KC-390 is powered by two International Aero Engines V2500 turbofans and can carry 80 passengers or 64 paratroopers. The aircraft is designed to perform missions such as cargo and troop transport, troop and cargo air delivery, aerial refueling, search and rescue and forest fire fighting.

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Embraer KC-390 military transport

Embraer

In order to launch the new defence joint venture, Embraer and Boeing will each contribute cash and assets, says Salgado.

“The main asset Embraer is going to contribute is the license that we hold to market the KC-390 worldwide exclusively. The intellectual property of the KC-390 belongs to the Brazilian Air Force and will still belong to the Brazilian Air Force,” he says. “Our cash contribution will be something below $100 million.”

The defence-focused joint venture will also retain Embraer’s final assembly facilities in Melbourne, Florida, Gavião Peixoto, Brazil, and Jacksonville, Florida. Embraer says it is also researching adding a final assembly facility for the KC-390 in the USA.

The KC-390 is aimed at the market segment filled by the Lockheed Martin C-130 Hercules, which holds the largest piece of the global military transport market in 2018 with 878 active aircraft, or a 21% market share, according to Flight Fleets Analyzer. Embraer claims the KC-390 has the lowest life-cycle cost in the market as well as top speeds that surpass its turboprop rival.

Embraer plans to continue flight testing the transport in 2019 including advanced airdrop tests with heavy loads, aerial refueling and unpaved runway operations. The firm says that the first production aircraft will be delivered to the Brazilian Air Force in the first half of 2019. FlightGlobal’s Flight Fleets Analyzer shows that the service has 27 firm orders.

There are 38 letters of intent to order the aircraft from international customers, including six LOIs from Argentina, six from Chile, 12 from Colombia, two from Czech Republic, six from Portugal, and six from Lisbon-based aviation services firm SkyTech, according to Flight Fleets Analyzer.

Due to a runway excursion with prototype 001 in May 2018, the declaration of final operational capability for the aircraft is delayed until the second half of 2019, says the company. The incident caused the firm to incur a special item of $127 million, pushing down the company’s defense and security unit's 2018 revenue to $600 million from the forecasted $800 million to $900 million.

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