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2005* Embraer Day   Airline Market Presentation (DisponíVel Apenas Em InglêS)
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2005* Embraer Day Airline Market Presentation (DisponíVel Apenas Em InglêS)

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  • 1. Airline Market Outlook Embraer’s Positioning in the 30 to 120 Seat Segment 6th Annual Analyst & Investor Meeting Frederico Fleury Curado November 18th, 2005 Executive Vice-President, Airline Market São Jose dos Campos SP, Brazil
  • 2. Contents Key Global Market Trends Competitive Environment Regional Jets Sustained Operation Embraer Market Forecast
  • 3. Forward Looking Statement This presentation includes forward-looking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our market. The words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “expects” and similar words are intended to identify forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.
  • 4. Key Global Market Trends • Traffic Recovery Intra-Europe (RPK Billion) U.S. Domestic (RPM Billion) 300 600 250 500 200 400 150 300 100 200 50 100 0 0 2000 2001 2002 2003 2004 2005F 2000 2001 2002 2003 2004 2005F Network Low Cost Regional Network Low Cost Regional Source: Airlines, Embraer • Disconnection from Forecast Ground Rules • Historically > 0.90% of GDP, Passenger Revenue is below 0.70%. • RPM is becoming a more complex function of GDP Source: US Bureau of Economics Analysis and DOT Form 41 and Yield.
  • 5. Key Global Market Trends • LCC Expansion • Around 70% of all domestic passengers in North America and Europe have access to low cost carriers services. • LCCs hold air fare pricing power. • Passengers are more stringent on air travel value proposition. US Domestic (% RPK) Intra-Europe 100% 3% 5% 9% 8% 12% 16% 15% 12% 17% 5% • Shift in Market Share 80% 19% 11% 27% 19% 37% 35% 60% • US: LCCs and Regionals expanding. 85% 87% 40% 76% • Intra-Europe: LCCs expanding and 64% 72% 65% 51% 50% Regionals concentrating on secondary/ 20% Source: Airlines, Embraer /business markets development. 0% 1995 2000 2005E 2010E 1995 2000 2005E 2010E Network Low Cost Regional
  • 6. Key Global Market Trends • Domestic U.S. Pax Yields Down Sharply from 2000 • No evidences or expectation of a sizable recuperation. • Passenger unit revenue trends weak domestically but strong internationally • Crude Oil and Jet Fuel Prices 70 200 Source: EIA 180 Crude Oil (US$/Barrel) Jet Fuel (US¢/Gallon) • Several factors (cold weather, wars, higher 60 160 140 import rates, increased China demand and 50 120 refinery capacity) led to higher prices. 40 100 80 • Projected oil prices: an upward shift from 30 60 40 historical levels to around US$50-60 long 20 20 term. Jet fuel prices expected to be around 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 US¢150-170.
  • 7. Key Global Market Trends 25 • Fleet Right-Sizing 60% 20 of flights • 60% of all US domestic flights depart with load factor more appropriate to 70-110 seat aircraft. 15 % • 95% of all North American narrow-body flights are 10 within 1,700nm range. 5 • 85% of city pairs exclusively served by narrow body 4 8 13 15 20 13 8 7 5 2 2 0 jets have less than two daily frequencies. 50 60 70 80 90 100 110 120 130 140 >150 Source: US DOT/Embraer Passengers per Departure • Replacement Crisis – Ageing Fleets (61 to 120 seats) 810 Aircraft older • 35% of total fleet is more than 20 years in service and 492 than 20 Years 451 35% of total fleet in service shall start to be replaced in the coming years. 361 320 • Old technology equipments, most of them no longer in 233 212 237 production. • Inefficient and expensive aircraft to operate. 0-5 6-10 11-15 16-20 21-25 26-30 30 Aircraft Age (Years) Source: BACK/Fleet PC (Jan/05)
  • 8. Not Another Cycle, but a Fundamental Change New Passenger Profile Different Set of Values Ultra Competitive Environment Strong Focus on Cost Reduction, Reduced Investments Cash is King Maximum Utilization of Assets (fleet optimization and flexibility) Clash of 3 models (LCC x Network x Regional) It´s about cost and efficiency CRJ700 ERJ135 ERJ140 ERJ145 MD80 MD83 B777 B757 B767 A300 B737 70 to ERJ135 ERJ145 MD11 MD82 B737 B777 B737 B737 B757 B757 B767 B737 It´s about value proposition 110 Seats CRJ700 CRJ200 ERJ135 ERJ145 CRJ700 B777 B737 A319 B747 E-170 A320 B767 B737 B757 B767 Fast Scope Clauses Relaxation / CRJ200 CRJ700 ERJ145 A330 B737 A319 A320 B757 A321 B767 B737 E-170 CRJ200 ERJ145 CRJ700 ERJ135 MD88 MD90 B777 B737 B767 B767 A340 B737 B757 B737 / Closing the 70-110 Seat Gap CRJ440 DC-10 AVRO B747 A330 DC-9 A319 DC-9 A330 A320 B757 B757 (Bottom-Up and Top-Down) 25 50 75 100 125 150 175+ Seat Capacity
  • 9. Competitive Environment
  • 10. 30-60 Seat Jet Competitors ERJ 135 ERJ 135 CRJ200 // 440 CRJ200 440 ERJ 140 ERJ 140 328JET 328JET ERJ 145 and 145XR ERJ 145 and 145XR
  • 11. Market Share (30-60 seat segment) 100 93 90 83 80 Accumulated Market Share (%) 70 68 60 52 53 55 54.4 55 52 56 52 50 45 48 48 45 48 47 45 40 45.6 32 30 17 20 7 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 'Sep/2005 Source: Embraer
  • 12. 61-90 Seat Segment Competitors RRJ RRJ EMBRAER 170 EMBRAER 170 CRJ700 CRJ700 CRJ900 CRJ900 EMBRAER 175 EMBRAER 175 ARJ21 ARJ21
  • 13. Market Share (61-90 seat segment) 100 100 100 77 73 80 Accumulated Market Share (%) 70 72 67 64 60 57.9 40 36 36.2 30 33 28 27 23 20 2.5 0 0 3.4 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 'Sep/2005 Source: Embraer
  • 14. 91-120 Seat Segment Competitors B717 B717 B737-600 B737-600 EMBRAER 190 EMBRAER 190 A318 A318 ARJ21 ARJ21 RRJ RRJ EMBRAER 195 EMBRAER 195
  • 15. Market Share (91-120 seat segment) 100 100 100 100 90 80 Accumulated Market Share (%) 70 60 58.5 56 56 45 49 50 45 42 40 42 44 38 30 33 29 24 26 21.3 20 16 20.2 13 20 11 11 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 'Sep/2005 Source: Embraer
  • 16. Embraer Commercial Jets Unique Position 30Y 50Y 70Y 90Y 110Y 130Y Potential New Entrants Scope
  • 17. Regional Jets Sustained Operation (30-60 seat segment)
  • 18. ERJ 145 Family 37 Seats 44 Seats 50 Seats 50 Seats (2,000 nm range)
  • 19. ERJ 145 Family Network - USA New Routes Jet Complement Jet Replacement RJ Complement RJ Replacement TP Complement TP Replacement 100% 28% 75% 18% 50% 22% 3% 25% 5% 6% Average Stage Length = 460 miles 18% Source: BACK/OAG (Jan/05) 0% 1371 routes
  • 20. ERJ 145 Family Network < 1 hour 1 – 2 hours 2 – 3 hours > 3 hours Number of Routes Jan/2000 Jan/2005 < 1 hour 41 (14%) 179 (15%) 1 - 2 hours 157 (55%) 639 (51%) 2 - 3 hours 87 (31%) 380 (30%) > 3 hours 0 48 (4%) Source: BACK/OAG (Jan/05)
  • 21. US Regional System Network % routes in each major US RJs operator network without direct competition 50% 44% 40% 35% 30% 27% 21% 20% 15% 15% 10% 0% AA CO DL NW UA US • High percentage of RJ service is on monopoly routes • 75% of all RJs monopoly routes are operated with less than 2 daily frequencies Source: BACK/OAG (Jan/05 ; combined city effect not considered)
  • 22. US Domestic Market (Year 2004) 2,500 Connecting Flight (Greater than 90% of total PPDEWs in 50-seat RJ Connecting Flight) 2,000 Market Direct & Connecting Flight Number of Markets Opportunities: 1949 1,500 connecting Direct Flight (Less than 10% of markets total PPDEWs in Connecting Flight) 1,000 500 0 25 - 75 75 - 150 150 - 315 315 - 500 >500 Passenger Per Day Each Way (PPDEW) Source: US DOT OD1A (Back Aviation)
  • 23. ERJ 145 Family Network - Europe New Routes Jet Complement Jet Replacement TP Complement TP Replacement 100% 31% 75% 17% 50% 18% 13% 25% 21% Average Stage Length = 430 miles 0% Source: BACK/OAG(Jan/05) 424 routes
  • 24. New Routes Development - London City • ERJ 135: Steep Approach Capable (London City Airport) • Still Air Range: 600 nm ERJ 135 - Typical European airline OEW - Full PAX Passengers at 90.7 kg (200 lb) - Cruise at LRC - Airport Temp. at 20.5ºC / ISA+5.5ºC (85% Summer) - 85% Summer Winds - JAR OPS Reserves 100 nm alternate
  • 25. New Routes Development - China China Eastern 5 ERJ 145 Chengdu Sichuan Airlines China Southern 5 ERJ 145 Guangzhou 6 ERJ 145 Source: BACK/OAG(1Q05)
  • 26. ERJ 145 - AeroLitoral - Mexico New Routes CJS CJS TIJ TIJ Jet Replacement TP Complement HMO HMO CUU CUU TP Replacement CEN CEN LMM LMM MTY MTY 100% CUL CUL 17% 75% 17% BJX BJX GDL GDL MEX MEX 50% 41% • The ERJ 145, on average, attracts 10 more pax per flight on every route it replaces the Saab. 25% • Since the incorporation of the ERJ 145s, AeroMexico’s 25% market share, on disputed routes, has increased by 9 p.p. 0% Source: BACK/OAG(Jan/05)
  • 27. ERJ 145 Family Worldwide Fleet SR and CR Schedule Reliability & Completion Rate 12 Months Moving Average REF. CR=99.7% (completion) Aug/2005 SR=98.8% (15 min. delay)
  • 28. ERJ 145 Family Orderbook (as of September 30th., 2005) Firm Firm Orders Options Total Deliveries Backlog ERJ 135 123 2 125 108 15 ERJ 140 94 20 114 74 20 ERJ 145 677 206 883 661 16 Total 894 228 1,122 843 51
  • 29. The 30-60 Seat Jet Segment Summary • Market has reached maturity (established customer base) • The lowest trip cost: increased frequencies (market presence) and reduced risks to new markets development (long and thin routes with monopoly services – better pricing power) • Secondary market starting to develop • Less than 10 ERJs temporarily parked • Will remain the backbone of US Regional fleet (small density markets)
  • 30. The E-Jets Family Program Status Economics Ergonomics Engineering Efficiency
  • 31. EMBRAER 170 Certified by CTA/FAA/EASA CTA FAA EASA
  • 32. EMBRAER 170/175 Canadian Certification •Canadian Certification Granted on July 15th, 2005. Florida, July 2005, -35 °C McKinley Climatic Lab, Eglin Air Force Base Additional Cold Soak tests performed for the Canadian authorities PR 22/Jul/05
  • 33. EMBRAER 190 – Certified by CTA and FAA CTA TC on August 30th, 2005. FAA TC on September 2nd, 2005. PR 01/Sep/05
  • 34. EMBRAER 195 – Development & Certification Schedule 2000 2001 2002 2003 2004 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Initial Definitions Phase Joint Definition Phase Detail Design and Manufacturing First Flight Certification Tests Type Certification 1st Delivery 1ST Flight – Dec’07th 2004 PR 10/May/05
  • 35. E-Jets Operators ITALY France SWITZERLAND UK FINLAND GERMANY POLAND ●Alitalia ●Régional ●Swiss ●Flybe ●Finnair ●Cirrus ●LOT CANADA ●Air Canada USA ●US Airways ●Republic Delta China United ●Hong Kong ●JetBlue Express India PANAMA ●Paramount ●Copa ECUADOR ●Tame Saudi Arabia ● Current Operators ● Near Future operators ●Saudi Arabian Airlines (as of Oct 24th, 2005)
  • 36. Embraer 170 Network at % of Routes (3Q05) New Route Rightsizing Natural Growth 100% 8% 75% 41% 50% 25% 51% Source: BACK/OAG (3Q05 routes) Average Stage Length = 635 sm (552 nm) 0%
  • 37. Embraer 170 Network at % of Routes (3Q05) New Route Rightsizing Natural Growth 100% 3% 75% 43% 50% 25% 54% Average Stage Length = 640 sm (556 nm) 0% Source: BACK/OAG (3Q05 routes)
  • 38. Embraer 170 Network at % of Routes (3Q05) New Route Rightsizing Natural Growth 100% 12% 75% 29% 50% 59% 25% Average Stage Length = 429 sm (373 nm) 0% Source: BACK/OAG (3Q05 routes)
  • 39. Embraer 175 Network % of Routes (4Q05) New Route Rightsizing Natural Growth 100% 75% 50% 50% 25% 50% Average Stage Length = 410 sm (357 nm) 0% Source: BACK/OAG (4Q05 routes)
  • 40. Embraer 170 Network % of Routes (3Q05) New Route Rightsizing Natural Growth 100% 2% 37% 75% 50% 61% 25% Average Stage Length = 609 sm (529 nm) Source: BACK/OAG (3Q05 routes) 0%
  • 41. EMBRAER 190 Initial Network New Route 100% From Panama City San Pedro Sulas To San Salvador San Jose 22% Equipment 73G E90 73G E90 Jun/05 0 0 0 0 75% Jan/06 0 30 0 0 Jun/06 0 30 0 31 50% Rightsizing From Guatemala City Panama City Panama City Panama City Panama City Panama City 78% To Managua Managua San Andres Barranquilla Cartagena Guayaquil Equipment 73G E90 73G E90 73G E90 73G E90 73G E90 73G E90 25% Jun/05 60 0 30 0 30 0 22 0 22 0 45 0 Jan/06 62 0 30 0 0 31 0 31 0 31 13 31 Jun/06 30 30 30 30 0 31 0 31 0 31 6 46 0% Source: BACK OAG (Oct 05)
  • 42. Y COP 200 400
  • 43. EMBRAER 190 Initial Network New Routes Rightsizing Source: jetBlue website, BACK OAG (Oct/05) and ATI News
  • 44. New Success Stories To Be Written Shortly Firm order of 12 E170 plus 8 options Firm order of 4 E170 Firm order of 2 E170 and 1 E190 Firm order of 15 E170 plus 4 options
  • 45. New Success Stories To Be Written Shortly Firm order of 6 firm E190 Firm order of 14 EMBRAER 195 Firm order of 2 E170 and 3 E175
  • 46. EMBRAER 170/175 EIS Statistics • Operating Summary Operators 8 Aircraft in Service 87 Flight hours 167,700 Flight Cycles 115,200 (as of Oct 14th, 2005) IS 19/Oct/05
  • 47. EMBRAER 170/190 Family Order Book Firm Firm Orders Options Total Deliveries Backlog EMBRAER 170 191 133 324 81 110 EMBRAER 175 22 - 22 9 13 EMBRAER 190 185 219 404 2 183 EMBRAER 195 29 31 60 - 29 Total 427 383 810 92 335 (as of September 30th., 2005)
  • 48. Embraer Market Forecast
  • 49. Embraer Market Forecast (2006-2025) Worldwide Jet Deliveries by Capacity Segment Segment 2006 - 2015 2016 – 2025 2006 - 2025 30 - 60 500 1,050 1,550 61 – 90 1,300 1,650 2,950 91 – 120 1,550 1,900 3,450 TOTAL 3,350 4,600 7,950 30 to 120-seat segment value = US$ 180 billion
  • 50. Embraer Market Forecast (2006-2025) 30 - 120 Seats: 7,950 Jets Europe Russia USA, Canada 1,450 & CIS & Caribbean 525 4,230 18% 53% 7% China 590 7% Africa & Latin Middle East Asia America 280 Pacific 465 4% 410 6% 5%

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