Recovery crawls but Embraer won’t stall

EBACE Convention News » 2011
May 16, 2011, 12:50 AM

Embraer has resigned itself to a slower rate recovery for the business aviation market, further downgrading its anticipated delivery rates for 2011 compared with those envisaged by the forecast it issued last year. In March, the Brazilian airframer revised its output projections, indicating that total bizjet deliveries for the whole industry could dip this year by as many as 50 units less than the 2010 total of 763.

“We now see stronger recovering really starting only in 2012 and 2013 if economic conditions [between now and then] prove to be stable,” Claudio Camelier, marketing vice president for Embraer’s executive aircraft division told a press briefing ahead of this year’s EBACE show. The company doesn’t now envisage a return to 2008 delivery levels until 2017.

The economists at Embraer ardently track key indicators such as global growth (or lack thereof) in gross domestic product (GDP), U.S. corporate profits and average return on investments from world stock markets. While the latter two factors appear to be on the mend, global GDP growth appears to be stubbornly stalled at just barely 3 percent and Embraer expects it to stay there or thereabouts through 2014. Historically, the bizjet market has achieved sustained ascendency in periods when GDP growth conclusively exceeds 3 percent for prolonged periods and, as things stand, the industry appears to lack the confidence that this will be the case in the short term.

The reason for Embraer’s conservatism over planned production rates for its Legacy, Lineage and Phenom jet families is not hard to understand. “Manufacturers were badly affected by the [economic] crisis because, at the time [mainly 2008], they were investing in increasing production rates,” explained Camelier. That said, he also pointed out that today’s level of deliveries is, in fact, roughly where it was back in 2006, at which point the industry was rejoicing in its success. The output subsequently achieved in 2008 is now viewed as something of a freak peak.

At the same time, business jet traffic data from both Eurocontrol and the FAA in the U.S. show signs of increasing activity. However, Camelier cautioned, in the U.S. flight levels are still between 10 and 20 percent lower than they were at the start of 2008 and in Europe average utilization is actually lower today because there are no more aircraft accounting for a similar number of hours logged.

Embraer also sees the pre-owned market needing at least another 12 months to bounce back from the damage done by the financial crisis, which would mean getting back to the pre-2008 situation in which about 12 percent of the existing business aircraft fleet typically was being offered for sale at any given time. At the height of the downturn (around 2009), more like 18 percent of the fleet were on the market (and for the most part not moving), but today that proportion is just over 14 percent, according to Embraer’s data.

“When the recovery does come, there won’t be such cheap and easy credit,” predicted Camelier. “There was a lot of speculation [over aircraft delivery positions] in the last growth phase and the industry will be more cautious in future.”

Phenomenal Progress

Meanwhile, Embraer believes that its executive aviation division is well on track to achieve the 10-year goal it set for itself at its foundation in 2005–that of becoming a major player in the market by 2015 by offering “innovative and differentiating products.” With the Legacy 600 already in production, the company launched the Phenom 100 and 300 very-light- and light-jet programs in 2005. It has since added, or is on the way to adding, the Legacy 450, 500 and 650 models.

For the Phenom 100 entry-level model, the innovation and differentiation began with the Prodigy cockpit featuring Garmin’s ground-breaking G1000 avionics suite and continued into the cabin, for which it partnered with BMW Designworks to maximize the comfort of this relatively small space.

The improvement process was extended recently when Embraer completed the certification process for a belted toilet to allow for a fifth passenger. Later this year, this feature will be available for retrofit in existing Phenom 100s, of which some 200 are now in service worldwide.

In the cockpit, pilots will now be able to use a satellite datalink to communicate with the ground via email and SMS text messaging. This now is available in both the Phenom 100 and 300.

A still-more enhanced version of the Phenom 300 is due to start going into service with NetJets from 2013. Last October, the fractional ownership group signed a major contract (50 firm orders plus 75 options) for the type and is due to get the so-called Platinum Edition model, about which no further details are to be revealed until deliveries begin.

In February, anticipating another burst of production, Embraer opened its new factory in Melbourne, Florida, which will be assembling and delivering Phenom 100s by year-end. Part of its rationale for the $50 million investment is that its aircraft have significant North American content and now won’t need to be delivered to Brazil for assembly, only then for most of the completed aircraft to be flown back north.

Phenom customers are being offered a choice as to whether they want aircraft built in the U.S. or Brazil. The U.S.-made examples will cost slightly more due to factors such as higher labor rates and to recoup the investment in the site, which will soon employ 200 people.

The Melbourne facility is to be developed as the future U.S. headquarters of Embraer’s executive aviation division, which currently is located in Fort Lauderdale. The factory will be able to produce up to six aircraft per month and will soon include a customer design center. Embraer’s Gavião Peixoto plant in Brazil can produce Phenoms at a rate of up to 20 per month.

Embraer may opt to start making the larger Phenom 300 in Melbourne as well. The combined backlog for the two types is more than 400 units.

The Phenom 300 has the same avionics suite as the 100 and the same cabin cross section, but more length to accommodate either six seats plus a galley, or a seventh passenger. With a larger wing and twice the engine thrust, the 300 delivers more range and speed, competing with the likes of the Cessna Citation CJ3 and CJ4, as well as the Bombardier 40XR and Hawker 400XP. Distinguishing features of the Phenom 300 include a large door with airstair, an externally serviced lavatory, a single point for fueling and ease of access for maintenance.

Embraer is adding new functionality to the 300 as well. It has completed certification of a synthetic-vision system and has already delivered the first example of a new version designed for emergency medical evacuation work. Also now certified is the new Premium in-flight entertainment system with video screens for each passenger. More than 30 of the aircraft are now in service, U.S. operator Flight Options holding orders for 100.

Legacys Fulfill Destiny

Following in the footsteps of the new Legacy 650 model, which completed certification last October, the Legacy 500 midsized jet is on track to make its first flight during the fourth quarter of this year and enter service about 12 months later. The smaller 450 model is set to take to the air in 2012 and enter service by the end of 2013.

Both the 500 and the smaller 450 feature spacious, standup cabins with a flat-floor design. But the real technological advance is in the full fly-by-wire controls for all primary and secondary flight controls that are currently available only on much larger aircraft, such as the Airbus Corporate Jetliner, Embraer’s own Lineage 1000 and the Dassault Falcon 7X. The cockpit is built around Rockwell Collins’s latest Fusion avionics suite.

The 500’s Honeywell HTF7500E engines are now being tested in flight on their maker’s Boeing 757 test bed. The landing gear drop test has been completed and growing numbers of parts are being shipped to Embraer’s São Jose dos Campos headquarters from suppliers, as the detailed design and certification phase gathers pace.

According to Camelier, the introduction of the Legacy 650, with its new Rolls-Royce AE3007A2 engines, gives Embraer the range it needs to be able to match that offered by Bombardier’s Challenger 605 and Dassault Falcon 2000s. Intercontinental city pairs possible with the 650 include Moscow to Shanghai. The new Legacy also features a quieter cabin than the original 600 and the latest version of Honeywell’s Primus Epic avionics suite.

At the top end of Embraer’s growing business jet dynasty is the Lineage 1000, with a cabin that can be divided into five separate zones to offer an interior that competes with that of the A318 Elite (being longer, but not quite as wide). The 1000 is in a similar price bracket to the longer-range Gulfstream G550, the Global XRS and the Falcon 7X, but provides much roomier internal real estate for those who value space above operational reach. That said, the 1000, for which the backlog now stands at 20, has just proven its ability to fly the 4,015-nm hop from Mumbai to London in 9 hours 15 minutes.

For the time being, concluded Camelier, Embraer sees no urgent need to develop its own ultra-long range jet, but neither would he rule out such a move. He conceded that Brazilian airframer already has its work cut out for it achieving service entry for the new Legacys, while also laying plans for a new airliner and the KC-390 military transport.

More details on Embraer’s design and development efforts for the Phenom, Legacy and Lineage families will included in the May 18 edition of EBACE Convention News.

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