Advertising
  • News
  • Reversal of fortunes

Reversal of fortunes

Max Kingsley-Jones/PARIS

Embraer emerged from a successful week at the Paris air show facing the enviable task of having to boost EMB-145 production to match its recent booming sales fortunes. During the show, total firm orders for the Brazilian 50-seat regional jet doubled from 65 to 132, while total commitments for the programme now stand at almost 330.

The order book has mushroomed following Embraer's conquest in the AMR Eagle campaign, which saw the manufacturer take an order for 42 EMB-145s, plus 25 options, and the securing of a follow-on order from Continental Express for 25 aircraft, bringing its total to 50 orders and 150 options. Deliveries of the newly ordered aircraft will begin in 1998.

The drastic restructuring which followed Embraer's privatisation in late 1994 has resulted in losses being reduced from $337 million in that year to $40 million in 1996, while sales have risen from $276 million to an expected $750 million this year, surpassing the record of $700 million in 1989. While Embraer is yet to achieve a full-year profit since its flotation, Maurício Botelho, the former financier who was appointed as Embraer's president and chief executive in 1995, is confident that this will be achieved in 1997. Botelho explains that operations were in profit during the second half of 1996, but reverted into loss during the first of half of 1997 because of a delay in European Joint Aviation Authorities certification which held up deliveries to European customers. The company has recently completed an agreement to raise $200 million on international markets.

The 1989 sales record was achieved before Embraer's privatisation, when the company employed over 12,500 people. Botelho points out that the1997 result will be achieved with almost one quarter of the number of people (around 3,600) because of a huge improvement in productivity. "We are already approaching the $200,000 revenue-per-employee level, and our target is $300,000," explains Botelho.

EMB-145 production at the company's Sao José dos Campos plant is now running at a rate of three aircraft a month. This will reach four units a month in September, and will achieve the planned maximum of six a month in May 1998, which equates to over 70 aircraft a year, a record for the Brazilian manufacturer. In comparison, the maximum annual rate achieved on the EMB-120 Brasilia turboprop was 57 in 1989. Production cycle time for the Brasilia has been almost halved from 14 months in 1994 to eight months, with six months the target by the end of 1997 for both models.

With the EMB-145 now established in the market place, Embraer is poised to make an important decision later this year on its strategy in the 30- to 40-seat market, where it has competed for many years with its 30-seat Brasilia. The company is proposing a short-fuselage 37-seat derivative of the -145, dubbed the -135, which could be launched in August, and be in service by late 1999.

Having sold over 320 Brasilias since its launch in 1985, Embraer has a wealth of experience in this sector of the market. Botelho sees the bulk of demand for a 37-seat jet airliner coming from the USA, Australasia and South America in that order, with interest from Europe expected to be "marginal". While Embraer's focus at the smaller end of the market in the future is likely to be on the jet-powered -135, Botelho says that he does not envisage production of the Brasilia ceasing completely, although he concedes that he does not expect any more large orders.

Although Fairchild Dornier received its first orders during the show for its 33-seat regional jet, the Dornier 328JET, the jury is still out on the size of the small jet-airliner market. Continental Express president Dave Siegel is now scrutinising the market, but confesses that he is yet to be convinced about the economics of the 33-seat regional jets: "We hope to make a decision by August," he says, explaining that he is evaluating the 328JET and the EMB-135, as he ponders the long-term viability of an all-jet-powered fleet.

Although the EMB-145's Allison AE3007 is suitable for the -135, Botelho says that the AlliedSignal AS108 and Pratt & Whitney Canada PW308 are also being examined. "We are looking for partners, rather than suppliers, and are interested to hear what the engine manufacturers can offer," he says.

What is less clear is Embraer's strategy for an aircraft larger than the EMB-145. The proposed stretched, wider fuselage, EMB-170 would cost an estimated $450 million to develop, and Botelho is well aware of the need to examine the design and market closely before making a commitment. He says that there has been "loose dialogue" with Aero International (Regional) about these issues, and the concerns over the number of competing players, and it is understood that these discussions could lead to a jointly developed rival to Bombardier's Canadair Regional Jet 700.

Advertising
Advertising