Embraer, AgustaWestland To Form Joint Venture in Brazil

 - February 1, 2013, 4:45 AM

AgustaWestland is making a new push into South America. The Italian helicopter maker, part of the defense and industrial conglomerate Finmeccanica, signed a memorandum of understanding on January 21 to establish a joint venture with Brazilian aircraft manufacturer Embraer to build AgustaWestland helicopters in Brazil for both the domestic and regional military and civilian markets.

The move is seen as potentially a major assault on Eurocopter’s majority share of the Brazilian civil, parapublic and military markets. Eurocopter has operated its Helibras subsidiary in Brazil since 1978, delivering more than 500 helicopters there. The model to enter production most recently at the Itajuba factory is the EC725 medium twin, which has started equipping Brazilian forces. Eurocopter CEO Lutz Bertling has previously said he intends to expand Helibras into a fully fledged helicopter design and manufacturing company.

In a joint statement, AgustaWestland and Embraer said they expect to form the joint venture following regulatory approval within the next few months and that the new company will pursue the offshore oil and gas, military and executive markets. An AgustaWestland spokesman told AIN that it is likely the joint-venture company will focus initially on manufacture of medium twins, including the AW139, 149 and 189, “to meet several market requirements for both commercial and military applications.” He said the exact location of the joint venture will be revealed when the final agreement is signed. “This should be reasonably quick,” he said. According to an Embraer spokesman in Europe, the idea of such a joint venture emerged late last year. “Embraer is looking for diversification to support growth,” he explained, referring to other forays into unmanned air vehicles and satellites.

Embraer and Finmeccanica companies have a long history of collaboration, primarily on military projects. In the 1970s Embraer produced 167 Aermacchi MB-326 advanced trainer/light attack aircraft under license, designated the EMB-326. In the early 1980s Embraer joined with Alenia Aeronautica and Aermacchi to produce the AMX, delivering 100 of the ground-attack fighters to the Brazilian Air Force. While the defense sector accounted for only $1.44 billion of Embraer’s total revenues of $9.38 billion in 2011, according to the company’s most recent annual report, it is by far the company’s most profitable sector, with a gross profit margin of 27 percent. Sixty percent of Embraer’s defense revenues originate in Brazil and other Latin American countries. The potential alliance could substantially increase defense revenues for both companies as well as position them to take advantage of the growing offshore helicopter services industry in the region, driven by the discovery of large oil and gas reserves in the pre-salt deepwater areas off the Brazilian coast. The new proposed joint venture “is an important step for Embraer as we continue expanding our business,” said Frederico Fleury Curado, Embraer president and CEO.

Finmeccanica has long signaled its intention to expand its South American footprint, most recently announcing at the 2011 Latin American Aero and Defense Exhibition, “Finmeccanica sees Brazil not simply as a new market for the group’s products, but rather as a skilled counterparty with which the group can initiate stable and strategic partnerships involving local companies,” said the company.

Thierry Dubois contributed to this report.