Company sees expansion potential in commercial, business, and military aircraft

06/20/2024

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Brazilian plane maker is exploring mergers or acquisitions to gain a foothold in the defense sector with the military C-390 aircraft — Foto: Divulgação

Embraer is ramping up efforts to expand its presence in the United States. The plane maker’s strategies include increasing sales of commercial jets like the E-175 and business jets like the Praetor 500 and exploring mergers or acquisitions (M&A) to gain a foothold in the defense sector with the military C-390 aircraft. These plans were outlined during Embraer Day in São José dos Campos on Tuesday (18) and Wednesday (19).

The United States leads the aviation sector, with the largest airlines and business jet operators globally. North America accounted for 62% of Embraer’s revenue in the first quarter of this year.

Rodrigo Silva e Souza, the chief marketing officer of Embraer’s commercial division, noted that by 2030, an average of 40 aircraft in the sub-76-seat category will be retired annually in the U.S.

“Significant replacement demand is expected to favor Embraer, given U.S. market regulations,” Mr. Souza said. A union agreement limits the weight of regional jets to 39 tonnes, which is why the heavier E2 model does not compete in the U.S. regional market, unlike the E-175.

“While this demand is primarily for replacement, we also see interest in fleet expansion, as evidenced by American Airlines,” he added. According to Mr. Souza, American Airlines’s order has spurred interest from other groups in the country.

In addition to replacing older E1s, a model launched in 2004, the company aims to capture the market for renewing Bombardier’s CRJ 700 and 900 fleets.

Another focus area is the business jet division. Alvadi Serpa Junior, director of market and product intelligence for executive aviation, highlighted that the company aims to capture market share from Cessna’s Citation Latitude with increased sales of the Praetor 500.

Currently, the Praetor 500 holds 33% of the mid-size business jet market, with the Latitude holding the remainder. Mr. Serpa Junior attributed this to deliveries to NetJets, the world’s largest fractional jet ownership company.

NetJets has started converting part of its purchase options for Embraer jets into firm orders—so far, five orders have been confirmed. NetJets has options for 250 Praetor 500 jets, worth approximately $5 billion. These options are not included in Embraer’s disclosed executive aviation order book, valued at about $4.6 billion. “Delivering our models to NetJets naturally balances the market,” Mr. Serpa Junior told Valor.

North America and the Caribbean are Embraer’s primary markets for executive aviation, with 57% of the manufacturer’s jets (1,015 units) in operation. Latin America accounts for 17%.

In the defense division, Embraer is considering M&A strategies in the U.S. to introduce the C-390 military aircraft. U.S. defense operations must be conducted by local companies, necessitating a partnership with Embraer. The company already collaborates with Sierra Nevada Corporation to produce the Super Tucano.

“We have a Super Tucano production line in Jacksonville. We are expanding the team and are open to partnerships with the U.S. government and acquisition opportunities,” said João Bosco Costa Jr., CEO of Embraer’s defense and security division.

To date, Embraer has delivered seven C-390 units (six to the Brazilian Air Force and one to Portugal). The order book includes 13 more units for the Brazilian Air Force, two for Hungary, four remaining deliveries to Portugal, and orders from South Korea—though the total for South Korea has not been disclosed.

The reporter’s travel costs were covered by Embraer.

*Por Cristian Favaro — São José dos Campos

Source: Valor International

https://valorinternational.globo.com/