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  • IN FOCUS: Embraer's investment set to transform Portugal's fledgling aerospace industry

IN FOCUS: Embraer's investment set to transform Portugal's fledgling aerospace industry

Five hundred years ago, Portuguese pioneers ventured to Brazil to seek their fortune in the young colony. Now Brazilian aircraft manufacturer Embraer is on a transatlantic mission in the other direction to create its first overseas manufacturing outpost. In the grand sweep of history, Embraer's move may not rank with the birth of the New World, but for Portugal's small aerospace industry, the arrival of the Brazilian giant in the ancient Roman city of Evora two years ago could hardly be more significant.

The establishment of the factory - where Embraer will build metallic and composite structures, initially wings and horizontal stabilisers for the new Legacy 450 and 500 business jets - follows the Brazilian airframer's first investment in Portuguese industry six years ago. In a part-privatisation, Embraer became the majority shareholder, alongside EADS, in state-owned maintenance, repair and overhaul and aerostructures concern OGMA.

Embraer Evora plant, Embraer

 © Embraer

Embraer is building a new facilty in the ancient Roman city of Evora to provide wings and horizontal stabilisers for the new Legacy 450 and 500 business jets

In December 2011, in a further deepening of ties between the two Portuguese-speaking nations, Embraer awarded Portuguese engineering firms EEA and OGMA contracts to design and manufacture components for the planned KC-390 airlifter and tanker. The move followed a declaration of intent signed between the Brazilian and Portuguese governments just over a year earlier, in which Lisbon committed to buying KC-390s.

Although the KC-390 deal was expected, Portugal's modest band of aerospace companies may be justified in thinking that - with the rest of the economy struggling - Embraer's commitment finally gives their sector a chance to prosper. The country has long been held back by a lack of a home-grown airframer or systems integrator, believes Sérgio da Cunha Oliveira, who runs the country's industry association PEMAS.

As a result, Portuguese companies have looked enviously at how their counterparts over the border in Spain have thrived over the past decade on the back of the activities of Airbus Military in Seville and the rest of EADS' Spanish empire. By contrast, OGMA and the country's smaller companies have had to live off the scraps that small military procurement offset deals have brought, and by fighting on the open market for workshare on civil programmes.

The sense of a new beginning for Portugal's aerospace sector is palpable, although Oliveira is keen to point out that workshare further down the supply chain on either the military or civil Embraer programmes cannot be taken for granted and that Portuguese companies will have to earn their way onto them. There is also the likelihood that experienced aerostructures suppliers in Spain - particularly in the Andalucian cluster just a few hours' drive from Evora and Lisbon - will be attracted by the scent of new business. "I think it is inevitable that some of the Embraer work will go to Spanish companies," he says.

Although Embraer has yet to hand out any new contracts on the Legacy work, the two plants at Evora - one for metals, the other for composites - are being built on land that the city authorities hope to turn into a 877,000m2 (9,440,000ft2) aerospace park where small suppliers to Embraer and others can set up shop. The Brazilian company is committed to nurturing Portuguese firms, despite the fact that only a few have experience of aerospace manufacturing. "We are working hard to develop Portuguese industry to supply the 1,100 parts we will need from third-party suppliers," says Luiz Fernando Fuchs, president Europe, Middle East & Africa for Embraer. "We may have to go to other countries eventually, but the objective is to develop Portuguese industry."

Embraer announced Evora - 130km south of Lisbon in the region of Alentejo - as the location for its new facility in 2008. Construction work on the two factories - each the size of three football pitches - will be complete by the middle of 2012 and both should be fully operational a year later. Fuchs is confident that work on further Embraer programmes can be secured - it will not produce parts for other airframers - but as with Portuguese suppliers, the Evora site will have to compete with other Embraer facilities and third-party integrators. "Everything is set up for us to be extremely competitive," he says.

Embraer's direct impact on the local economy will be significant. Embraer's investment amounts to almost €150 million ($195 million) and the factories will eventually have a workforce of 600. Fuchs says that figure will be "multiplied several times" in terms of wider employment. "We believe we will create jobs for 2,000 people indirectly in the region," he says. For a region largely reliant on agriculture, services and tourism, becoming the hub of Portugal's emerging aerospace sector was a prize worth fighting for; Fuchs says support from the local mayor and authority has been "tireless".

Embraer Legacy 500 fuselage

 © Embraer

Because Portugal has traditionally lacked much of a 'heavy metal' manufacturing sector beyond OGMA, its aerospace and defence industry has largely comprised technology and engineering companies, several of which have had to look beyond aviation to the likes of energy, transportation and automotive for business. PEMAS was set up in 2006 - around the time Embraer's interest in Portugal began - with just nine members. It now represents 33 companies, employing 7,300 people and with combined revenues of just over E1 billion, although less than 40% of that comes directly from aerospace.

Although the absense of a systems integrator has been a drawback, Portugal has "excellent R&D capabilities and an internationally-recognised MRO [maintenance, repair and overhaul setup] in OGMA", says Diamantino Costa, PEMAS president and chief executive of Lisbon-based software company Critical Group, whose products include aircraft health monitoring systems and other sensors for the military market. He believes that the arrival of Embraer means "the aeronautical sector has potential to have a major impact on Portugal's industrial landscape in years to come".

Portugal's relationship with its now former colony could be about to go full-circle, believes Costa. Just as Embraer has invested on the other side of the Atlantic, Portuguese aerospace and technology companies, including his own, are increasingly looking to do business in Brazil's burgeoning economy. "With the [football] World Cup and Olympics coming up, there are huge opportunities in homeland security," he says. "Almost for sure we see Critical having operations in Brazil in the next few years."

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