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Embraer juggles business jet production slots

Airframer Embraer has warned that the recovery in the market for light business jets remains fragile and it is still having to balance cancellations and deferrals against maintaining production levels.

Although it delivered a record number of business jets, 144, in 2010 - the majority of which were Phenom 100s - CEO Frederico Curado says that the bottom end of the market is still weak.

"It's no secret to anybody that the business jet market has been more hit at the lower than the upper end," he told analysts at the company's full year results call.

However, with a strong backlog "that stretches out many years down the road" it has been able to pull some orders forward as production slots have appeared on the back of cancellations.

"So far we have been very successful in persuading customers who have orders down the road to take their airplanes earlier," he says.

Nonetheless, Curado acknowledges that this trend cannot continue indefinitely so "we prefer to reduce the production rate to reflect that and have less pressure to bring people up".

Its book-to-bill ration will fall below one in 2011, however, on the back of a slow recovery in the sector.

Curado says that its future programmes, particularly the Legacy 450 and 500 are still on track, with first flight due for the latter type in 2011. The two new models will "give us a smoother entry into service" than any previous programmes, he adds.

The company is not disclosing current sales of the two models, but Curado stresses that there is a backlog. However, with entry into service not until 2012 for the 500 and 2013 for the 450, he concedes it is presently the wrong climate in the business jet market for that sort of long-term commitment.

In addition, Embraer saw certification and the start of deliveries for its large cabin Legacy 650 jet in 2010.

Overall, the division contributed some $1.1 billion to the company's revenues during 2010. It forecasts this rising slightly to $1.2 billion in 2011.

"We believe 2011 will be another important year for Embraer's consolidation in the business aviation arena," says Luis Carlos Affonso, executive vice-president, executive jets. It expects to deliver 118 jets this year.

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