New jets under way, Embraer adds support

 - September 30, 2008, 9:29 AM

There are reasons for smiles among the staff at Brazilian aircraft manufacturer Embraer, most notably the traction the company’s Embraer Executive Jets division has achieved.

With the launch of the Phenom 100 very light jet and Phenom 300 light jet programs in 2005, the addition of the Lineage 1000 executive version of its E190 regional airliner in 2006 and the announcement last year that it has formally launched the Legacy 450 and Legacy 500 programs, Embraer has made it clear that it is serious about becoming “a major player” in the business aviation market.

At its São Jose dos Campos headquarters last month, market intelligence chief Clãudio Galdo Camelier said of the Phenom program launch and creation of Embraer Executive Jets, “Our decision then to invest heavily [in business aviation] remains unchanged.” That investment, according to an Embraer source, has surpassed the
$1 billion mark, including $100 million-plus in customer support. More important, it is showing a relatively healthy return.

Even before 2005, Embraer had launched the Legacy 600, an executive version of its ERJ 135 regional jet, now priced at $27.45 million (for 2010 deliveries). The first was delivered in 2002, and as of early last month 150 had been delivered; the backlog extends into 2010.

The OEM launched its second executive version of a regional product, the Lineage 1000, filling a market niche between large-body business jets such as the Gulfstream G550 and executive versions of single-aisle airliners such as the Airbus A319, in May 2006. According to Luis Carlos Affonso, executive v-p of Embraer Executive Jets, the order book now holds signatures for more than 20 copies of the $42.95 million bizliner. The first three are already undergoing interior finish work at PATS Aircraft Completions in Georgetown, Del., and delivery of the first is expected in December to a Middle East customer.

The latest news regarding the Lineage is a Kollsman EVS (enhanced-vision system) as an option. Combined with Rockwell Collins’s head-up guidance system, it will allow the equivalent of a Category II approach to 100-foot minimums. Certification of the system is expected in 2010 and Embraer is considering offering it as a retrofit for Lineage 1000s already in service.

Phenom Order Book Tops 800 Aircraft
As for the Phenom program, the company claims to hold orders for more than 800 Phenom 100s and 300s combined. The first to enter service will be the $2.98 million Phenom 100, which Embraer categorizes as an “entry level” jet.

With only paperwork to validate the Eaton flap actuator software and certification of seats from new primary suppliers Goodrich (pilots) and DeCrane (passengers) pending, deliveries are expected to begin next month, following certification.

There are currently two Phenom 300 light jets in the certification flight-test program and two more are being assembled at the Botucatu site. Certification and entry into service of the $6.65 million light jet are anticipated in next year’s second half.

Both aircraft will come off the same production lines, with fuselage, wings and tail section built at Botucatu and shipped for final assembly and interior completion work at the Embraer plant at Gavião Peixoto. The company expects to deliver 10 to 15 Phenom 100s by year-end and anticipates a combined delivery of 120 to 150 aircraft next year. At full production, roughly two-thirds of deliveries are expected to be Phenom 100s.

The Phenom program is expected to build a customer base for the larger Legacy 450 and 500 as owners’ requirements evolve.

The Legacy 450 and Legacy 500 programs represent an investment of $750 million. The company would not reveal the number of orders, saying only that, to date, “[the number of] orders converted from letters of interest justifies the decision to launch the program,” and that most of the demand so far is for the pricier and longer-legged Legacy 500.

The Legacy 500 is priced at $18.4 million, has a range of 3,000 nm with four passengers and is expected to enter service in the second half of 2012. The 450 has
a price tag of $15.25 million, a range of 2,300 nm with four passengers and is expected to enter service in 2013. Both airplanes are derived from the same clean-sheet design and feature sidestick, fly-by-wire controls.

With identical fuselage cross sections and six-foot-tall, flat-floor cabins, as well as Honeywell’s HTF7500 series turbofan engine, the airplanes will share the same production line.

In addition to developing and building its business jet offerings, Embraer has launched an ambitious service and support program.

By year-end Embraer will have 45 service centers worldwide, seven of them company-owned and -operated. Already the manufacturer has three U.S. service centers: Fort Lauderdale International in Florida; Bradley International at Windsor Locks, Conn.; and the recently opened facility at Phoenix-Mesa Gateway Airport.

Embraer is also sinking considerable effort into its online Fly-Embraer Web portal. It will offer online data via the Internet regarding aircraft maintenance and engineering activities. It will streamline the customer parts procurement process and flight operation information, and will also contain technical training course packages.

The Brazilian manufacturer is organizing a customer support network that includes a maintenance planning and tracking service and a call center. Under logistics and parts support, Embraer plans distribution centers and third-party logistics. The company has already formed a parts storage and shipment contract with UPS that includes a major parts warehouse at Louisville International Airport.

Product support, according to Affonso, “is the greatest growth area for Embraer” this year. He also noted that while aircraft service is considered a profit center, the company views customer support as “a customer satisfaction center.”

Further, the Embraer Executive Care (EEC) program is up and running and will be ready when the first Phenom enters service later this year. Customers will have a choice of standard EEC or an enhanced care package. Subscription to the FlyEmbraer “eMaintenance” package is required, but the first year of enrollment in the executive care program is free.

Taking into consideration environmental issues, Embraer is offering customers the option of a voluntary full carbon offset program. It will operate as a non-profit program and acquire carbon credits from relevant projects, allowing “full transparency on how [customers’] environmental concerns are being addressed.”

An International Market
Operations have already begun at Embraer’s first training center, located at CAE in Dallas. A second center is scheduled to open at CAE’s facility in Burgess Hill in the UK. A second U.S.-based center is to open in 2010 at a location still to be identified, and a fourth center is to open in 2012, also at a location as yet unidentified.

With an order book that suggests approximately half the aircraft produced will go to the North American market, Embraer has committed to building a $50 million assembly plant in Melbourne, Fla. It will include hangar space for final assembly and interior completion work, a shop for exterior paint and a customer design and delivery center.

Aircraft wings and fuselages will be produced at Botucatu in Brazil and shipped to Florida for final assembly.

The Melbourne facility is expected to begin producing Phenom 100s and Phenom 300s by 2010, and when up to speed, will be able to turn out eight aircraft a month.
Since Embraer launched its executive jet division, that segment of the business has grown at a rate that even the company’s executives had not forecast. Revenues for the division have risen from $300 million in 2005 to $850 million last year. During the same period, Embraer Executive Jets’ contribution to total company revenue grew from 7.3 percent to 16 percent.

Looking at a global market for business aircraft, Embraer is decidedly optimistic, pointing out that the world gross domestic product (GDP) grew 3.7 percent last year. Even more encouraging, said Camelier, is the 6.6- and 7.6-percent GDP growth experienced by Latin America and Eastern Europe, respectively, in 2007. In fact, he pointed out, last year, for the first time, the GDP growth in the People’s Republic of China exceeded that of the U.S.

Latin American business jet market potential, he added, is reflected in the fact that Embraer now has firm orders from that part of the globe for 100 Phenoms.

Last year Embraer forecast that the business jet OEMs would deliver 13,150 executive jets over the following decade, with a value of about $201 billion. The company is revising that forecast, and will release its new projections at this month’s NBAA Convention.