Embraer 'Supportive' of Bribery Probe, Looks Ready To Nix New Narrowbody

 - November 4, 2011, 2:33 PM
Embraer CEO Frederico Curado

Embraer CEO Frederico Curado promised complete transparency as the U.S. Securities and Exchange Commission (SEC) continues with an investigation into bribery and corruption allegations against the Brazilian aircraft manufacturer. Made public yesterday in Embraer’s third-quarter earnings report, the probe centers on transactions involving three countries, Curado reiterated today.

Curado added that although the company takes the allegations “very seriously,” he insisted that business integrity stands as one of the company’s guiding principles and that Embraer would not tolerate any kind of corruption.

“So we are very much at ease to say that we will be totally transparent and fully supportive of the investigation,” Curado said through an interpreter.

“[An] internal investigation is ongoing, and the company is fully cooperating with the SEC and the U.S. Department of Justice [DOJ],” said Embraer in its statement. “The company’s outside counsel has been in regular contact with the SEC and the DOJ and has provided both agencies with documents and other information. The company’s outside counsel recently met with both agencies to brief them on the status of its investigation. The company and its outside counsel expect to continue to have discussions with the SEC and the DOJ. The company is unable to predict duration, scope or results of the investigation.”

Separately, Curado expressed perhaps less enthusiasm than ever before over the prospect of introducing a new airliner into the market that extends beyond 120 seats.

“We are concluding our studies,” he said. “We believe it will be difficult for us to penetrate this segment, not because of technical or industrial aspects, not because of our ability or capacity to build a family of planes that would be competitive and even slightly better than the market alternatives. It has more to do with the competitive scenarios.”

Curado identified the re-engined Airbus A320 and Boeing 737 families as his main concerns.

“The competitive advantage that we would be able to bring with our own plane would not be enough,” he said. “Our plane would be a bit more efficient…[but] we are finding it difficult achieving the return on investment that we would need…We would have to sell many planes to have a return on investment, and this is our doubt.”

Meanwhile, Curado essentially ruled out re-engining the existing E-Jets, at least until the end of the decade.

“When we think about the [Embraer] 170 and 190, these are very young planes, they were recently certified and they have a long life ahead,” stressed Curado. “At some point in the future these airplanes will have a new generation with new engines and other improvements, but we don’t believe this is happening in the short term.”