2005 - 5th Us Analyst Investors Meeting Commercial Airline Market

Airline Market
Outlook

Some Key Elements
Shaping the New
Industry
(30 to 120 seat segment)

New York
Tuesday, March 29, 2005

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 THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.

Contents

Q Key Global Market Trends

Q LCC’s Next Steps

Q Network Carriers Opportunities

Q Regional Carriers Capacity Increase

Q From Concept to Reality – the E-Jets Family


Key Global Market Trends
Not just another cycle, but a fundamental change

• Ultra competitive environment

• New passenger profile à different value proposition

• Strong focus on cost reduction, reduced investments

• Maximum utilization of assets (fleet optimization and flexibility)

• Scope clauses relaxation / closing the 70-110 seats gap

• Clash of 3 models - LCC x Network x Regional

• Globalization of supply chains

• Government subsidies increasingly challenged

Key Global Market Trends - Traffic Volume

600

500

400

300

200

100

0
2000 2001 2002 2003 2004 2005F

Network Low Cost Regional

(US Domestic RPMs - Billion)

Source: Airlines , Embraer


Key Global Market Trends - Traffic Share

100% 3% 5% 9%
12%
19%
80%
27%

60%

85%
40% 76%
64%

20%

0%
1995 2000 2004


(US Domestic RPMs)
Source: Airlines


Key Global Market Trends - Traffic Share

100%
14% 16% 15%
1%
80% 7%
17%

60%

85%
40% 77%
68%

20%

0%
1995 2000 2004


(Intra-Europe RPKs)
Source: Airlines


Key Global Market Trends - Yields

% Change in Passenger Revenues per Mile (Yield) vs 2000
10%

5%

0%

-5%

-10%

-15%

-20%

-25%

-30%
1

2

3

4
1

2

3

4
1

1

2

2

3

3

4

4
t/0

t/0

t/0

t/0
l/0

l/0

l/0

l/0
n/0

r/0

n/0

r/0

n/0

r/0

n/0

r/0
Ju

Oc

Ju

Oc

Ju

Oc

Ju

Oc
Ap

Ap

Ap

Ap
Ja

Ja

Ja

Ja
US Market
Source: ATA - Air Transport Association


Key Global Market Trends - Oil Prices
WTI (US$/Barrel) JetFuel (US¢/Gallon)

60 180
170
160
150
50
140
130

JetFuel (US¢/Gallon)
120
WTI (US$/Barrel)

40 110
100
90
80
30 70
60
50
40
20
30
20
10
10 0
90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10
19

19

19

19

19

19

19

19

19

19

20

20

20

20

20

20

20

20

20

20

20
Source: NYMEX, EIA and Embraer estimates


Key Global Market Trends - Operating Results

(US$ millions) Network Regional Low Cost

6000

4000

2000

0
2000 2001 2002 2003 2004
-2000

-4000

-6000

-8000

-10000

Source: US DOT Form 41, Airlines


Key Global Market Trends - Scope Clauses
Seats
Seats 44/45
44/45 50
50 55
55 60
60 70
70 75/76
75/76

Unlimited
Limitations apply Restricted
(up to 110% of narrowbody fleet)

Unlimited Limitations apply Restricted

Unlimited Restricted

Unlimited Restricted

Unlimited Limitations apply Restricted (36 Avro RJ exempt)

Limitations apply Restr.

Limitations
Limitations apply Restricted
apply

No Scope Clause

No Scope Clause

No Scope Clause


Key Global Market Trends - Capacity Gap

B737

B737

B757
B737
MD80

B737

B757
70 to 110

B757
A319
B737

A320
Seats

MD80
B737

B737

B757
MD80

A320

B757
A319
B737

B737
A320

B757
A319

A320
25 50 75 100 125 150 175+

Seat Capacity
Source: BACK/Fleet PC


Clash of Three Models

Regional Airlines
RASK / M

Network Airlines

Low Cost
Carriers

Capacity

Clash of Three Models - LCC’s
• increasing capacity to match market growth
• expanding services to secondary markets

Regional Airlines
RASK / M

Network Airlines

Low Cost
Carriers

Capacity

Clash of Three Models - Network Airlines
• right-sizing aircraft capacity / replacing old narrow body jets
• enhancing frequency

Regional Airlines
RASK / M

Network Airlines

Low Cost
Carriers

Capacity

Clash of Three Models - Regional Airlines
• increasing aircraft capacity (natural growth from 50-seater RJ’s)

Regional Airlines
RASK / M

Network Airlines

Low Cost
Carriers

Capacity

Beyond the Current Model...
There is a need for a new TOOL

Regional Airlines
RASK / M

Network Airlines

Low Cost
Carriers
E-Jets
Capacity

Regional Jets
Sustained
Operation

Regional Jets - A Dynamic Tool

When markets are strong…
RJs expand catchment areas by
adding more spokes to carrier hubs
in addition to:

• increasing route frequency

• supplementing mainline jet capacity

• introducing secondary-to-secondary
market service

• opening new “long & thin” routes
with small, low-risk capacity.


Regional Jets - A Dynamic Tool

… and when markets are weak
RJs help to defend an airline’s
competitive market position by:

• maintaining high route-frequency

• preserving network integrity and
overall market presence

• replacing unprofitable mainline jet
capacity service

• rightsizing aircraft capacity to match
demand.


ERJ - American
New Route
Jet Complement
Jet Replacement
TP Complement
TP Replacement

100%

33%
75%

12%

50%
26%

25% 5%

24%

0%
Source: BACK/OAG(Jan/05)


ERJ - Continental

New Route
Jet Complement
Jet Replacement
TP Replacement

100%

35%
75%

19%
50%

26%
25%

20%

0%


ERJ 145 Family Network (Jan/2005)

< 2 hours
2 - 3 hours
> 3 hours

Number of Routes

Jan/2000 Jan/2005

< 2 hours 198 (69%) 818 (66%)

2 - 3 hours 87 (31%) 380 (30%)

> 3 hours 0 48 (4%)

Source: BACK/OAG (ERJ 145 Family)


ERJ - British Airways
New Route
Jet Complement
Jet Replacement
TP Complement
TP Replacement

100%

36%
75%

9%

50%
25%

25% 7%

23%

0%

ERJ - Air France
New Route
Jet Complement
Jet Replacement
TP Complement
TP Replacement
100%

37%
75%

15%
50%
5%

14%

25%
29%

0%


Opportunity for New Routes Development
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

ERJ 145 Family Main Missions

100%

33% 35% 36% 37% New Route 35%
75%

12% 9% Jet Complement
19% 15% 15%
50%
25% 5%
26% Jet Replacement
14% 23%
26%
25% 5% 7% TP Complement 4%

24% 23% 29% 23%
20% TP Replacement
0%



ERJ 145 Family
The Evolution of Regionals

An Intrinsic Part of the Solution

ERJ 145 Family
Dec 1996
Dec 1996
February 2005

First Delivery
First Delivery

Dec 1998
Dec 1998

Dec 1999
Dec 1999

Aug 2000
Aug 2000

Mar 2001
Mar 2001 Sep 2001
Sep 2001 May 2002
May 2002 May 2003
May 2003 May 2004
May 2004


ERJ 145 Family Orderbook

(as of December 31st., 2004) Firm
Firm Options Total Deliveries
Backlog

ERJ 135 123 2 125 106 17

ERJ 140 94 20 114 74 20

ERJ 145 684 314 998 618 66

Total 901 336 1,237 798 103


LCC Next Step - Moving Downwards in Capacity

1,098 markets
500 PDEW
upper boundary for a B737 / A320

24%

315 PDEW
lower boundary for a B737 / A320

530 markets are perfectly
48% suited for 70-110 seaters

150 PDEW
28% upper boundary for a 50 seater RJ

105 PDEW
lower boundary for a 50 seater RJ

Source : US DOT OD1A


EMBRAER 190 - JetBlue


Network Carriers
Opportunities

Opportunity for Enhancing Market Presence
Rightsizing and Frequency Increase
Average Daily Frequency by Route (USA and Europe)
Routes operated exclusively by Jet Aircraft (91 – 175 seats; routes up to 2000 nm)

5500 routes with less than
2 average daily frequency

57%
Routes

28%

11%
3%
1%

0 - 0,5 0,5 - <2 2 - <5 5 - <10 >=10
Average Daily Frequency
Source: BACK/OAG (Jan/2005)

The Opportunity for Right Size - Range

Total Market Served by 91-180 Seats Aircraft (US Airlines)

1,000,000

800,000
Number of Flights

600,000
2004

400,000

200,000

1995
0
100 300 500 700 900 1100 1300 1500 1700 1900 2250 2750 >3000

Distance Sector (nm)

95% of flights are within 1,700 nm range

Source: Back/OAG

Optimizing fleet capacity
38%

}
13 13
Percentage of Flights

19% 12

}
10
9 9
8

6 6
5
4
3
2

<50 50 60 70 80 90 100 110 120 130 140 150 >150

Passengers per Departure

Source: United Airlines (The-Mechanic.com)


EMBRAER 175 / 190 – Air Canada
“Together with the EMBRAER 190, the EMBRAER 175 will give Air
Canada a competitive edge in offering high frequency, low-cost
services on new and existing routes in Canada and the United
States.”
Robert Milton, Air Canada President and CEO (Nov/2004)


EMBRAER 170 - Finnair
“We are continuing with our strategy by acquiring the best
possible fleet for our feeder traffic. Shifting to a single aircraft
type will bring significant savings in operating costs. At the
same time fuel consumption will be cut by a third and air traffic
charges will decrease”.
Keijo Suila, Finnair President (Jun/2004)


EMBRAER 190 - COPA
“The EMBRAER 190 offered the best solution to the company’s
future fleet requirements. The aircraft fits our diverse operating
environment and allows us to right-size aircraft seat capacity,
improve service to smaller but important cities in our network, and
add incremental frequencies and destinations as demand grows.”

Pedro Heilbron, Copa Airlines CEO (Oct/2004)


From Concept
to Reality
E-Jets Family

The E- Jets Family

Certification
Mid 2006

Certification
Mid 2005

Certified
CTA / EASA
Certified TC Mid 2005
CTA / FAA / EASA


EMBRAER 170 Network

New Routes

Right-sizing

Market Growth

2%
100%

39%
75%

50%

59%
25%

0%

EMBRAER 170 Network

New Routes

Right-sizing

Market Growth

100% 7%

75%
48%

50%

25% 45%

0%

EMBRAER 170 Network

New Routes

Right-sizing

Market Growth

100% 5%

75%
50%

50%

25% 45%

0%
Source: BACK/OAG (Jan/05)

EMBRAER 170 - Republic
“The 170’s unique design allows us to offer United a true mainline
product but at regional jet operating economics”.
Bryan Bedford, Chairman, President and CEO
of Republic Airways Holdings (Sep/2004)

70 seats: 48 @ 31” pitch 16 @ 34” 6 @ 36”

FA Seat Wardrobe
Aft Lavatory FA Seat
Aft Galley Forward Lavatory
Forward Galley


EMBRAER 170 Network

New Routes

Right-sizing

Market Growth

100% 8%

75%

68%
50%

25%
24%

0%

EMBRAER 170 Main Missions

100% 2% 5% 6%
7% 8%

75% 39%
48% 50% 48%
68%
50%

59%
25% 45% 45% 46%
24%
0%
Market Growth
Right-sizing
Source: BACK/OAG(Jan/05) New Routes

EMBRAER 170 EIS Statistics

Operating Summary

Operators 5

Aircraft in Service 53

Flight hours 61,740

Flight Cycles 43,570
(as of February 16th, 2005)


EMBRAER170 / 190 Family Orderbook
EMBRAER 170/190 Family Orderbook

Firm
Firm Options Total Deliveries
(as of December 31st., 2004) Backlog

EMBRAER 170 158 177 335 46 112

EMBRAER 175 15 - 15 - 15

EMBRAER 190 155 230 385 - 155

EMBRAER 195 15 20 35 - 15

Total 343 427 770 46 297


Thank you !

2005 - 5th Us Analyst Investors Meeting Commercial Airline Market

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