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    Paris air show   airline market Paris air show airline market Presentation Transcript

    • Embraer Investor´s Day Paris Airshow June 20th, 2007Mauro KernExecutive Vice-President, Airline MarketAirline Market OverviewAirline Market OverviewA perspective from the 30 to 120-seat segmentA perspective from the 30 to 120-seat segment
    • Forward Looking StatementThis presentation includes forward-looking statements or statements about events orcircumstances which have not occurred. We have based these forward-looking statementslargely on our current expectations and projections about future events and financial trendsaffecting our business and our future financial performance. These forward-lookingstatements are subject to risks, uncertainties and assumptions, including, among otherthings: general economic, political and business conditions, both in Brazil and in ourmarket.The words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,”“expects” and similar words are intended to identify forward-looking statements. Weundertake no obligations to update publicly or revise any forward-looking statementsbecause of new information, future events or other factors. In light of these risks anduncertainties, the forward-looking events and circumstances discussed in this presentationmight not occur. Our actual results could differ substantially from those anticipated in ourforward-looking statements.
    • Contents Air Transport Industry Overview 50-seat Regional Jet Market E-Jets: the 70 to 120-seat segment Embraer Market Forecast
    • World Financial Net ResultsPositive results projected for 2007 and 2008 North America -10 -7.7 -5.7 0.0 2.9 World -5.6 -4.1 -0.5 5.1 9.6 Europe 1.1 1.6 2.6 2.7 3.0 2004 05 06 07F 08F Middle East 0.2 0.2 0.5 0.5 0.6 2004 05 06 07F 08F Asia Pacific 2004 05 06 07F 08F 3.4 2.1 1.9 1.7 2.5 Africa Latin America -0.3 -0.3 -0.3 -0.3 0.0 2004 05 06 07F 08F 0.1 -0.1 0.5 0.5 0.6 2004 05 06 07F 08F 2004 05 06 07F 08F 2004 05 06 07F 08F Values in US$ Billion US net results includes restructuring costs andSource: IATA Economics Jun/07 (ICAO data to 2005 and IATA Forecast 2006-2008) excludes United Airlines ‘fresh-start’ accounting losses and gains
    • Air Transport Industry Major Drivers Driver Consequence• New Passenger Profile Different Set of Values (pricing, comfort, more frequencies and direct services)• Increased Competition Pressure for Differentiated Services• Regulatory Liberalization Opportunities for New Entrants• Weak Revenue Environment Improved Productivity and Efficiency• Old Fleet Additional Costs - Fuel & Maintenance• Demand vs. Capacity Need of a Better Match of Market Demand and Aircraft Capacity
    • ep/2007 yS 1 ,00 0th bERJ 145 Family
    • ERJ 145 Family 37 Seats 44 Seats 50 Seats 50 Seats (2,000 nm range)
    • ERJ 145 Family Order Book Firm Firm Orders Options Deliveries Backlog ERJ 135 108 - 108 - ERJ 140 74 - 74 - ERJ 145 732 132 679 53 Total 914 132 861 53 (March 31st., 2007)
    • RJ 50s current situation• Worldwide FIS = 2042 aircraft distribution: 66% in the US; 21% in EU and 13% in ROW• Parked aircraft: 57 Bombardier CRJs; 2 Embraer ERJs; 30 others only 4% of the total fleet – a stable market• RJ50s transported 14% of all US domestic passengers in 2006• RJ50 fleet is responsible for 28% of US domestic departures• China´s regional airline industry starts to develop – 70 RJ50s in operation• Secondary market being developed: Mexico, Eastern Europe and Africa
    • China – an unbalanced jet fleet 30-120 seat jets represent only 12% of the Chinese jet fleet up to 210 seats, compared to 43% in the US and 35% in Europe 4,829 aircraft 826 2,612 100%% of Jet Fleet (J30-210) 80% 58% 65% Seat Segment 60% J121-210 89% J61-120 40% J30-60 15% 20% 43% 24% 35% 28% 4% 8% 12% 11% 0% Source: BACK (Jun/06 ; active in service ; scheduled airlines) USA China Europe The scarce density of demand and the low density of flights added to the unbalanced fleet clearly point out to the need of RJs
    • RJ 50 Market Opportunities – Russia/CIS Old fleet replacement is needed in the short term: 524 aircraft affected 200Number of Aircraft 150 50 seats 30 seats Avg. Age Avg. Age 76 seats 35 years 32 years Avg. Age 29 years 100 187 188 An-24 Yak-40 149 50 Tu-134 0 Turboprop Jet 30-60 Jet 61-90 Source: BACK (Mar/07)
    • RJ 50s Future Market Trends• Market entered a mature phase in the US and Europe• RJ50s will remain the backbone of US hub feeding system• New market opportunities (long and thin) in the US and EU• Potential for regional aviation development in China and Russia• Secondary market will expand
    • E-Jets Family
    • E-Jets Family EMBRAER 170/175 EMBRAER 170 • 70 to 80 seats • 2,000 nm Range • Certification: February 2004 EMBRAER 175 • 78 to 88 seats • 1,900 nm Range • Certification: December 2004 EMBRAER 190/195 EMBRAER 190 • 98 to 114 seats • 2,300 nm Range • Certification: August 2005 EMBRAER 195 • 108 to 122 seats • 2,100 nm Range • Certification: June 2006
    • The E-Jets Family – Main Applications Natural evolution for existing 50-seat markets Right-sizing of low load-factor narrow-body flights Capacity, range & seamless service Enhancing services by increasing frequencies New market opportunities – low risk development Medium density and long/thin markets Replacement of old & inefficient jets
    • Air Canada Strategic Review Presentation (September 27, 2004) Y COP
    • Air Canada - Changing the Game Presentation (Dec/2006) Y COP
    • Delta Flight Plan Presentation (Mar/2007) Y COP
    • Market Opportunities – Right-sizingUS Domestic Load Factor Profile (100/160-seat Jets - 12 months ending Sep/2006) r to 600,000 F ac 100% ad r Lo eate ate r g. e tr y Av 76-s 0-s Indus 480,000 10 80% Average Load Factor Annual Flights 360,000 60% 240,000 40% 120,000 20% 0 0% 20 0 0 0 50 60 70 80 90 <5 10 11 >1 Pax per Departure 851 thousand flights (40% of total) carried less than 100 passengers onboard – still low load factors to be corrected!Source: BACK
    • Market Opportunities – Replacement World Fleet Age Profile 61 to120-seats: 2,454 jets / 15 years average age 800 Avg. Region # Acft. 700 Age USA, Canada & 600 846 10 CaribbeanNumber of Aircraft 500 Latin America 285 23 Europe 617 11 400 Russia & CIS 231 23 300 Africa 148 22 200 Middle East 48 16 100 Asia Pacific 241 19 China 38 8 0 0-5 6-10 11-15 16-20 21-25 26-30 31-35 >35 World 2,454 15 Age (Years) 30% of the 61 to 120-seat fleet (735 acft) are more than 20 years old Source: BACK (Oct/06)
    • US Scope Clauses - Jun/2000 LaborSeats 40 50 60 70 80 90 100 Contract Amendable Year 30 units Not Allowed Unlimited 45-55 seats (Grandfathered rights 36 Avro RJ85 up to 69 seats) 2003 Unlimited Not Allowed 2003 Unlimited Up to 67 units Not Allowed 2002 Unlimited Up to 75 units Not Allowed 2000 Not Allowed Up to 65 units 2000 (Grandfathered rights 18 AirWis BAe 146) Up to 35 units 50 seats and 35 units 69 seats Not Allowed 2003
    • US Scope Clauses - Jun/2007 LaborSeats 40 50 60 70 80 90 100 Contract Amendable Year Unlimited Up to 90 units Not Allowed 2012 Unlimited Not Allowed 2009 “Unlimited” (Up to 110% AA Up to 50 units Not Allowed 2008 narrow body) Up to 200 units Unlimited (30 units 71-76 seats + 3 units for each Not Allowed 2010 mainline aircraft increase) “Unlimited” up to 70 seats Not Allowed 2010 Up to 93 units Unlimited up to 78 seats (86 seats) Not Allowed 2010
    • E-Jets Joint Certification means FlexibilitySame Type Design for ANAC, FAA and EASA FAA EASA ANAC FAA EASA EMBRAER 170 February 2004 February 2004 EMBRAER 175 December 2004 August 2006 January 2005 EMBRAER 190 August 2005 September, 2005 June 2006 EMBRAER 195 June 2006 June 2007 July 2006 • Market swap flexibility • Increased residual value
    • E-Jets CommonalityTraining 70% of the potential Spare Parts 30% of the potential benefits benefitssame cockpit, common systems and fly- E170by-wire technology mean maximumtraining commonality within the family 100% E175 EMBRAER 170 175 190 195 170 ------- A/A/A A/A/A A/A/A 86% 175 A/A/A ------- A/A/A A/A/A E190 190 A/A/A A/A/A ------- A/A/A 100% 195 A/A/A A/A/A A/A/A ------- E195Training Qualification Differences : According to FAA AC 120- 53, grades Based on the aircraft RSPL (Recommended Spare Parts List)range from A (best) to E (worst) in 3 categories: Training Differences, Check Note: Airframe and Ground Servicing Equipment only (Engines are not included).Differences and Recurrent Training E-Jets have the maximum training commonality (A/A/A) E-Jets offer an outstanding parts commonality (86% to 100%)
    • The Comfort FactorE-Jets: Narrowbody airplane comfort in convenient sizes CRJ700/900 EMBRAER 170/190 A318/320 17.3” 18.25” 18.0” 16” 19.75” 19” E170/190 advantages:0.95” (2.4cm) wider seats Widest seats 0.25” (0.6 cm) wider seats3.75” (9.5cm) wider aisle (+23%) Widest aisles 0.75” (1.9 cm) wider aisle16% more volume per seat No middle seats Equal volume per seat“Passengers love this aircraft for its spacious interior design and in particular theabsence of a middle seat” Bryan Bedford, CEO Republic Airways (Jul/06)“The comfort of the E175 aircraft is important to our customers and the economics ofthe aircraft make good business sense.”Scott Kirby, US Airways EVP Sales and Marketing (Jul/06)
    • The Trip Cost FactorE-Jets: Lower trip costs than conventional narrow bodies 8000 7563 - 20% 7000 - 32% 6310 6058 6000 5368 US Domestic 5135 US$ per Trip 5000 Network Airline - 800 sm trip 4000 3000 Airplane Variable 2000 plus Ownership Costs per Trip 1000 0 (2-class seating): E170 (70) E175 (78) E190 (94) E195 (104) A319 / (124) B737-700“… Moreover, we are now seeing the tangible benefits of our fleet renewal with markedly reducedEmbraer trip costs. The Embraer E190 fleet produced direct operating costs 20 per cent lowerthan the Airbus A319 fleet on a per trip basis”. said Montie Brewer, AC´s Pres.& CEO (Q1/2007)Costs exclude: revenue related costs and system (overhead) costsCosts include: variable: fuel, crew, maintenance, landing fees, handling fees ; ownership: lease cost, hull insurance, spares inventory costs
    • E-Jets Family Order Book Firm Firm Options Deliveries Backlog Orders EMBRAER 170 160 130 130 30 EMBRAER 175 99 136 29 70 EMBRAER 190 327 241 65 262 EMBRAER 195 44 51 5 39 Total 630 558 229 401 (March 31st., 2007)
    • Cumulative Net Firm Orders Since First Sale Jet Programs Order Build-up (70 to 200-seat segment) 1800 B737 1600 3rd generation 1400 E-JetsCum. Net Firm Orders 1200 B737 2nd generation 1000 800 A320 family 600 E-Jets DC9 400 MD-80 B737 1st generation CRJ700/900 200 0 1 2 3 4 5 6 7 8 Year since first sale A320 FAMILY B737 1st generation 170/190 FAMILY CRJ 700/900 B737 2nd generation B737-3rd generation BAE 146-100/200/300 BAE 146-RJ70-85-100 DC-9-10/20/30/40/50 MD-80/90 F70/100 F-28-1000/2/3/4/6000 Source: Back Fleet PC, ACAS, Embraer
    • E-Jets Customer Base Evolution Accumulated 32 customers/operators 700 630 619 600Accumulated Firm Orders 500 440 400 343 300 245 200 110 112 118 100 60 0 1999 2000 2001 2002 2003 2004 2005 2006 Mar/2007 Deliveries Source: Embraer
    • E-Jets Worldwide Distribution Customers Firm Orders Asia Pacific / China 14% Middle East / 13% 24% Africa 5% 21% Europe 16% 60% 17% 24% 6% Latin America North America• growing and diversified customer-base across five continents• increased presence in emerging markets with established carriers
    • E-Jets Family - Efficiency to all Business Models Regional Network Low Cost Charter Source: Embraer (Mar/07 ; Sirte Oil and GECAS not presented)
    • Market Share - World (61-90 seats) 100 100 Embraer: Embraer 170/175 100 Bombardier: CRJ700/900 Antonov: An-148 80 77 73 70 72 67 64 61 60 60 60(%) 40 36 37 36 36 30 33 28 27 23 20 4 4 2 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Mar/07 Source: Embraer
    • Backlog Evolution ComparisonStrong competitive position 450 410 401 400 E-Jets CRJ700/900/1000 350 322 Number of Aircraft 297 300 245 250 200 150 125 111 105 100 84 80 50 0 Dec/2003 Dec/2004 Dec/2005 Dec/2006 Mar/2007Source: Embraer and Bombardier
    • Market Share - World (91-120 seats) 100 100 100 100 Embraer: Embraer 190/195 Airbus: A318 Boeing: B737-600 90 Bombardier: CRJ1000 AVIC I: ARJ-21 80 Sukhoi: Superjet 100 70 60 58 56 57 56 55 46 50 49(%) 45 43 40 42 43 38 29 30 32 24 22 26 20 15 13 20 12 11 11 18 11 12 10 10 10 5 9 6 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Mar/07 Source: Embraer
    • Market Share - World (30-120 seats) Embraer: ERJ 145/140/135 ; Embraer 170/175/190/195 70 Bombardier: CRJ100/200/440/700/900/1000 Airbus: A318 Boeing: B737-600 AVIC I: ARJ-21 60 59 Sukhoi: Superjet 100 Antonov: An-148 51 52 52 50 51 50 50 50 48 47 47 47 44 44 45 45 42 42 45 44 44 40 37 38 37(%) 34 30 24 20 24 14 10 11 8 8 5 4 3 3 4 8 23 2 2 2 2 4 3 3 2 1 1 1 1 0 3 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Mar/07 Source: Embraer
    • E-Jets Deployment - Europe Mar/07 Deliveries Backlog 6 E170 5 E195 2 E170 10 E170 8 E190 2 E190 5 E190 3 E195 11 E195 10 E170 6 E175 2 E190 4 E190 15 E170 Natural Growth Right-sizing New Routes 15 E195 41% 53% 3% E-Jets 41 630% 20% 40% 60% 80% 100% % of Routes (4Q06) Source: BACK (4Q06), Embraer
    • E-Jets Deployment - USA and Canada Mar/07 Deliveries Backlog 15 E175 23 E190 22 E190 25 E190 76 E190 36 E175 3 E190 54 E190 16 E170 4 E170 Natural Growth Right-sizing New Routes 28 E170 40% 42% 18% 28 E1700% 20% 40% 60% 80% 100% 26 E175 4 E175 % of Routes (4Q06) E-Jets 145 215 Source: BACK (4Q06), Embraer
    • 2007-2026 Embraer Market Outlook 4th. Edition A LONG-TERM VIEW OF THE 30 TO 120-SEATCOMMERCIAL JET MARKET
    • Projected Traffic and Economic GrowthGrowth by World Region (2007-2026) USA, Canada & Caribbean RPK Latin America GDP Europe CIS Africa Middle East Asia Pacific China World 0% 1% 2% 3% 4% 5% 6% 7% 8% Average Annual Growth (%) Projected world GDP growth around 3% in the next twenty years will sustain nearly 5% annual increase in air transport demand.Source: Global Insight and Embraer (Oct/06)
    • Embraer Market Forecast (2007-2026) Worldwide Jet Deliveries Segment 2007 - 2016 2017 - 2026 2007 - 2026 30 - 60 300 1,100 1,400 61 - 90 1,100 1,500 2,600 91 - 120 1,650 1,850 3,500 30 - 120 3,050 4,450 7,500
    • Embraer Market Forecast (2007-2026)Projected Deliveries (30-120 seats): 7,500 Jets Russia & CIS USA, Canada 505 & Caribbean Europe 7% 3,850 1,290 51% 17% China Middle 630 East 9% Africa 230 Latin 130 3% America 2% Asia 480 Pacific 6% 385 5%
    • Summary• Air transportation growth and airline economic conditions are favourable• 50-seat RJ market is stable in the US and EU with new opportunities in China and Russia• Market conditions are in place for further expansion of the 70 to 120- seat jet fleet, showing strong opportunities for the E-Jets• Embraer´s market share growing with a diversified customer base• Embraer´s firm backlog of US$15 billion
    • Thank you78 airlines. 45 countries. 1 manufacturer. EMBRAER