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Commercial Aviation

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  • 1. Mauro Kern Executive Vice-President Airline Market Airline Market Overview A perspective from the 30 to 120-seat segment Mar/2010
  • 2. 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. The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 3. Contents Air Transport Industry Review ERJ 145 Family E-Jets Family Competitive Scenario Product Development Market Outlook 2010-2019 The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 4. Economic Scenario World Real GDP Evolution (USD 2005) 60 55 Real GDP (US$ trillions) 50 45 40 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 2011F 2012F 2013F 2014F World will return to pre-crisis level in 2010 (due to emerging countries) USA and Europe will recover in 2011-12 Source: The Economist (Feb/10) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 5. Air Transport Demand - IATA World – International RPK Growth Rate (% yoy) 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 5.9% 7.4% 1.6 % -3.5% -14 May-06 May-07 May-08 May-09 Jan-06 Mar-06 Jul-06 Jan-07 Mar-07 Jul-07 Jan-08 Mar-08 Jul-08 Jan-09 Mar-09 Jul-09 Jan-10 Sep-06 Nov-06 Sep-07 Nov-07 Sep-08 Nov-08 Sep-09 Nov-09 IATA: “The industry starts 2010 with some enormous challenges. The worst is behind us, but it is not time to celebrate.” Source: IATA (Jan/10) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 6. Demand Forecast – IATA and ICAO RPK Growth Rate (% yoy) IATA ICAO 7,4 5,8 4,5 6,2 6,1 5,0 5,5 3,3 1,3 -3,1 -4,1 2006 2007 2008 2009 F 2010 F 2011 F 2012 F 2013 F 2009: Reduced demand due to economic crisis 2010-2013: Projected demand recovery Source: IATA and ICAO (Dec/09) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 7. Air Transport Industry Review – a summary Gradual recovery of market demand Weak revenue environment, signs of improvement (IATA halved its loss forecast for 2010 to US$2.8bi) Continuous efficiency improvement and cost reductions Limited aircraft financing resources More consolidations & mergers and fewer start-ups Long term growth in air transport demand despite current crisis The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 8. Air Transport Demand – US Mainline vs. Regionals US Domestic 600 500 RPM (Billion) 400 Mainline: -0,2% cagr FAA Aviation Forecast 300 2009- RPM cagr 2030F 200 Mainline +2,9% Regional: +13,3% cagr Carriers 100 Regional +4,2% Carriers 0 F F 00 01 02 03 04 05 06 07 08 E 10 11 09 20 20 20 20 20 20 20 20 20 20 20 20 FAA Forecast (Mar2010): higher growth rates for Regionals increased use of 70-90 regional jet aircraft Source: FAA The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 9. 1,100 ERJ145 Platforms Already Delivered Dec 1996 Dec 1996 First Delivery First Delivery Dec 1998 Dec 1998 Dec 1999 Dec 1999 Aug 2000 Aug 2000 September, 2007 Mar 2001 Mar 2001 Sep 2001 Sep 2001 May 2002 May 2002 May 2003 May 2003 May 2004 May 2004 Feb 2005 Feb 2005 The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 10. Pre-Owned ERJ Transfers 35 30 Number of ERJs (units) 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 61 pre-owned ERJ transfers in the last two years (2008-09) Source: Embraer (Mar/09) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 11. Pre-Owned ERJ Transactions Passaredo - Brazil BMI – United Kingdom Trans States - US FinnComm - Finland Aeromexico Connect - Mexico Dniproavia - Ukraine Diexim Expresso - Angola Satena - Colombia Athens Airways - Greece City Airline - Sweden Republic - US Nearly 170 pre-owned ERJ transactions since 2000 The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 12. 1st. E195 Delivery to Air Dolomiti (Italy) (January 27, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 13. 1st. E170 Delivery to Fuji Dream Airlines (Japan) (February 20, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 14. 1st. E190 Delivery to Niki (Austria) (May 14, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 15. 1st. E195 Delivery to Augsburg Airways (Germany) (June 9, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 16. 1st. E195 Delivery to Windrose (Ukraine) (June 22, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 17. 1st. E175 Delivery to Trip (Brazil) (June 24, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 18. 1st. E190 Delivery to LAM (Mozambique) (July 31, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 19. 1st. E170 Delivery to BA Cityflyer (United Kingdom) (September 3, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 20. 600 th. E-Jet delivered to LOT Polish Airlines September 15th., 2009 !!!
  • 21. 1st. E195 Delivery to Lufthansa Cityline (Germany) (September 24, 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 22. New E-Jet Customer – Air Astana (Kazakhstan) (Nov/09 ; 2 E190 Jetscape) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 23. New E-Jet Customer – Oman Air (Oman) (Nov/09 ; 5 E175) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 24. New E-Jet Customer – Austral (Argentina) (20 E190) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 25. 1st. E170 Delivery to Gulf Air (Barhain) (March 4, 2010) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 26. E190 at London City Airport (2010) Carriers cleared to use Embraer 190 at London City “BA CityFlyer, Baboo and Lufthansa Cityline will be the first to operate the EMBRAER 190 out of LCY. ” Baboo debuts Embraer 190 at London City “We are especially proud to be the first to operate this aircraft, the most comfortable and popular regional jet, into this most user- friendly airport” – Jacques Bankir, CEO of Baboo BA CityFlyer starts introducing Embraer 190s “We are now on the last leg of our fleet replacement programme and our passengers will benefit from the extra space these new, greener aircraft offer.” – Peter Simpson, Managing Director of BA Cityflyer The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 27. Grand Slam: E-Jets at Europe´s top airlines Orders Backlog 10 E170 3 10 E190 Orders Backlog 17 E190 7 Orders Backlog 17 E190 16 15 E195 Orders Backlog 6 E170 6 5 E190 Source: Embraer (Dec/09) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 28. 620+ E-Jets. 56 Airlines. 39 Countries
  • 29. Current Environment Requires Fleet Optimization Decreasing Demand & Yields Fleet efficiency Capacity Cuts is a critical issue Fuel & to airlines Environment Pressure Right-sized aircraft help airlines to improve fuel burn (environment) and results The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 30. Market Density Profile - USA 500 51-150 PDEW Number of Markets 400 55% 151-300 300 22% >300 23% 200 100 0 51 - 75 100 150 200 250 300 350 400 500 1000 >1000 Passenger per Day Each Way (PDEW) USA domestic mainly low-mid density markets 77% up to 300 PDEW Source: US DOT (3Q09) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 31. Market Density Profile – Latin America 300 26-100 250 PDEW Number of Markets 54% 101-300 200 28% >300 150 18% 100 50 0 26-50 100 200 300 400 500 600 700 800 >800 Passenger per Day Each Way (PDEW) Intra Latin America mainly low-mid density markets 82% up to 300 PDEW Source: SABRE (2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 32. Market Density Profile – China 250 26-100 46% 101-300 200 30% Number of Markets 150 >300 24% 100 50 0 26-50 100 200 300 400 500 600 700 800 900 1000 >1000 Daily Passengers China mainly low-mid density markets 76% up to 300 daily passengers Source: China Airline Traffic Statistics 2008 (Markets with at least one weekly frequency) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 33. Passengers per Departure – USA Narrowbodies (121-210 seats) 1000 Daily 900 Frequencies Annual Flights (x 1000) 800 700 >2 600 500 400 <=2 300 200 100 0 46-60 61-75 76-90 91-105 106-120 121-135 > 135 Passengers per Departure Around 610,000 flights (~18%) of total J121-210 with loads from 61 to 105 pax per departure and low daily frequencies (up to 2) Source: US DOT (Nov/08-Oct/09) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 34. The CASM Paradigm 2,095 1,434 1,305 454 733 177 (504) (1,051) (1,757) Environment: US LCC Avg Sector: 800 sm Avg Fare: 100 USD Fuel Price: 2 USD/gal 61‐75 76‐90 90‐105 The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 35. The CASM Paradigm – the ultimate rule CONTRIBUTION TO PROFIT PER FLIGHT Contribution to Profit per Flight Fare Level 100‐SEATER NB Pax/Flight < 120 Pax/Flight > 120 Passenger Demand per Flight “A place for everything and everything in its place” The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 36. E-Jets Deployment 29% 21% 8% 5% 32% 25% 14% 7% 6% 33% 57% 5% 49% 40% 62% 20% Europe 12% Europe 7% 11% North North C h in a China America America 20% 33% 31% 39% Middle East Middle East 8% 49% 52% 50% Latin Latin Africa Africa Asia Pacific Asia P acific America America World 50% 20% 9% 21% Right-sizing New Markets Replacement Natural Source: OAG (1Q10) of old Jets Growth The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 37. E-Jets: Complementing Narrowbodies Madrid – Paris (ORY) Edmouton–Vancouver San Salvador - Guatemala Amsterdam – Berlin Dec/08 Dec/09 Dec/08 Dec/09 Sep/08 Sep/09 Jan/09 Jan/10 SEATS 744 606 1032 930 494 342 754 611 06:00 E190 E190 07:00 A320 A320 A320 08:00 B738 B738 A320 F70 B737 09:00 E190 E190 10:00 B737 11:00 A320 A320 12:00 13:00 B738 E195 E190 14:00 E190 A320 A320 15:00 A321 B737 16:00 A319 A319 17:00 B737 E190 18:00 B738 B738 A320 E190 B737 CRJ700 E190 19:00 20:00 B737 B737 21:00 B738 E195 A319 E190 22:00 23:00 Source: OAG (2010) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 38. E-Jets Complementing Narrowbodies The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 39. E-Jets: Replacing Narrowbodies Frankfurt - Katowice Amsterdam - Helsinki Los Angeles - Vancouver Brisbane - Oakhampton Sep/08 Sep/09 Dec/08 Dec/09 May/07 May/09 Sep/08 Sep/09 SEATS 714 420 513 392 480 465 690 520 06:00 B737 E170 B737 E190 07:00 E190 A319 E190 08:00 09:00 B737 E190 10:00 B737 E190 11:00 A319 E190 12:00 B737 E170 13:00 B737 E190 14:00 B737 E170 B737 E190 A319 E190 15:00 16:00 B737 E170 B737 E190 17:00 18:00 B737 E170 A319 E190 19:00 B737 E190 20:00 B737 E190 21:00 22:00 B737 E170 23:00 Source: OAG (2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 40. E-Jets Helping Explore New Markets Low Cost Carriers with Two Fleet Types Seats 150+ A320 B737-700 A320 A320 100 E190 E190 E190 E190 North America Asia Pacific Europe Middle East The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 41. E-Jets Helping Reduce Costs and Fuel Burn The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 42. E-Jets: Direct Replacement Benefits Fuel Burn Source: www.eforefficiency.com Note: European economic conditions, fuel at 0.50 EUR/liter The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 43. Replacement Opportunities - World (Jets 61-120 seats) 350 B737-500 Number of Aircraft 300 250 B737-200 Bae 146 200 150 F100 DC-9 TU-134 100 B717-200 YAK-42 50 F70 F28 0 5 15 25 35 Average Age (years) Nearly 1,000 aircraft with more than 15 years old Source: OAG (Dec/09 ; Passenger, Active in Service, Scheduled Services) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 44. E-Jets Family Order Book Firm Firm Options Deliveries Orders Backlog EMBRAER 170 187 48 170 17 EMBRAER 175 140 178 125 15 EMBRAER 190 448 426 263 185 EMBRAER 195 87 70 47 40 Total 862 722 605 257 (December 31th 2009) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 45. E-Jets Worldwide Distribution Customers Firm Orders Diversified customer-base across five continents Increased presence in emerging markets with established carriers Source: Embraer (Dec/09) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 46. E-Jets Backlog Evolution Backlog Share per Region (# of Aircraft): 322 Acft 257 Acft 1% 8% 32% Emerging Countries 20% 16% RoW 22% Europe 71% North America 31% 2005 Dec/2009 North America + Europe share decreased from 91% to 53% Source: Embraer (Dec/09) Emerging Countries include Brazil, Russia, India, China and Eastern Europe. The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 47. E-Jets Schedule Reliability & Completion Rate Schedule Reliability: 99.2% ; Completion Rate: 99.9% 100,00 99.9% 99,88 99,75 99,50 99.2% 99,22 99,25 SR/CR (%) 99,00 98,75 98,50 98,25 98,00 MAY MAY MAY JUL JUL JUL FEB SEP NOV FEB SEP NOV FEB SEP NOV JAN MAR APR JUN DEC JAN MAR APR JUN DEC JAN MAR APR JUN DEC AUG AUG AUG OCT OCT OCT 2007 2008 2009 SR - MONTH SR - L12M CR - MONTH CR - L12M The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 48. Market Share - World (Jets 61-120 seats) Embraer: 170/175/190/195 Sukhoi: Superjet 100 Bombardier: CRJ700/900/1000; CS110 Comac: ARJ-21 Airbus: A318 Antonov: An-148 Boeing: B737-600 Mitsubishi: MRJ90 Considering accumulated Net Orders up to Dec/09. The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 49. E-Jets vs. New Entrants Competitive Scenario 120 E195 CS100 110 100 E190 110 Seats Seat Capacity (32'' pitch) SSJ100/95 ARJ21 100 Seats 90 MRJ90 E175 80 70-90 Seats E170 70 MRJ70 60 1800 2000 2200 2400 2600 2800 3000 3200 Range (nm) The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 50. Competition: CS100 vs. E195 4,500 kg heavier than E195 Higher DOC than E195 Risk associated with new engine technology (GTF) Implications for CS100 perceived as heavy and inneficient Momentum after Republic CS300 vs. A319/737-700 CS 150-seater derivative Competition vs. A320/737-800 The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 51. Competition: E175 vs. MRJ90 Major design review in 2009: back to metallic wing, increased cross-section. 3,500 kg heavier than E175 Equivalent DOC vs. E175 but at higher risks: Challenging integration and development Risk associated with new engine technology (GTF) TSA deal no bid ; price agressiveness sustainable?? The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 52. Expected Technologies for Commercial Aviation 2015/2016 Wingtip Advanced structures Avionics Geared and Adv. Electric taxi devices Composites / Metallic functionalities Turbofan engines 2017/2019 APU Fuel Cell Carbon composites 2nd generation Health monitoring systems nanotubes (2nd gen.) GTF/ATF (On condition maintenance) 2020/2025 Open Rotor / New Configs / Advanced Aerodynamics Single pilot capability The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 53. New Technologies and Next Generation Industry focus on new technologies maturity 2015/2016 2017/2019 2020/2025 Current Technology Potential COC vs.  4% 7% The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 54. Competitive Product Positioning along time Competitive positioning code: higher average lower New entrants introduction Next Gen NB New entrants mature new entrant competition from competitiveness new maturation next-gen NB entrant 2010 2015 2020 New entrants Next Gen NB introduction New entrants competitiveness in case of new entrant competition from mature new entrant next-gen NB NB re-engining maturation 2010 2015 2020 The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 55. Embraer Market Forecast (2010-2019) Projected Deliveries - Jets Market Segment 2010 – 2019 (Seats) Deliveries 30-60 60 61-90 1015 91-120 1550 30-120 2625 Around 2600 jet deliveries (US$ 80bi) in the next 10 years. The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 56. Embraer Market Forecast (2010-2019) 2,625 jet deliveries (30-120 seats) Russia / CIS Europe North 155 America 580 6% 840 22% 32% China Middle 340 Africa East 13% 80 105 3% 4% Asia Latin Pacific America 315 210 8% 12% The information contained herein is property of Embraer and shall not be copied or used without Embraer´s written consent
  • 57. 620+ E-Jets. 56 Airlines. 39 Countries

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