Posted: May 1, 2012 |  AUTHOR: KEN FOX | CONTACT ME

 

Many U.S. regional jet passengers probably do not realize the jets are foreign made. They are either made by Canadian based Bombardier (ERJ) or a Brazilian company, Embraer (EMJ), The Embraer jets, in my opinion, have nicer interiors. They have higher ceilings, more comfortable leather seats and a more pleasant appearance. The story of Embraer and how it has grown to be the world’s third largest aircraft manufacturer and a Brazilian success story is interesting.

The aircraft manufacturer was started by the Brazilian government in 1969 to build military aircraft for the air force. On the brink of bankruptcy in 1994, the government allowed the company to be privatized. Although struggling to stabilize the aircraft manufacturer financially, in the 1990’s, Embraer saw a niche for aircraft that seats 70-100 passengers, something that Boeing and Airbus did not offer.

Headquartered in San Jose dos Campos, Brazil, Embraer has about 17,265 employees worldwide (94% based in Brazil) and generated revenue of U.S.$5.4 billion in 2010. Its revenue is derived globally: Europe 33%, Asia/Pacific 22%, Latin America 15%, North America 13%, Brazil 13% and other 4%. Embraer aircraft are used by 45 airlines in 30 countries.

The company has four divisions, with commercial aircraft accounting for the most revenue (67%). Embraer also manufactures military aircraft, private or executive jets and even crop dusters, part of the Agricultural Division. The Ipanema crop duster is probably the best known in the world. The company also makes a Super Tucano aircraft which is a light attack and advanced military training aircraft. Their military planes provide 50% of the Brazilian air force and are also represented in about 20 foreign air forces.

It was reported in the January 11, 2012 issue of the Wall Street Journal the U.S. government is considering the purchase of twenty A-29 Super Tucano aircraft for the Afghan Air force as part of its exit strategy from that country. The planes would be assembled in Florida with U.S. employees. The $355 million contract is being considered because Embraer has a joint venture with U.S. based Sierra Nevada Corporation (based in Sparks, Nevada). The consideration and subsequent award to Sierra Nevada Corp/Embraer was withdrawn by the U.S. Air Force because of a challenge by rival Hawker-Beechcraft Corp., which offered their AT-6 aircraft as a replacement for the Super Tucano. The U.S. Air Force is reviewing whether to restart the bidding for this contract (based on a February 28, 2012 news release).

Embraer has sales, maintenance or parts facilities in: China, France, Portugal, U.S., and Singapore. Embraer opened a new, global customer center and showroom (150,000 square feet) for Executive Jets in Melbourne, Florida on December 5, 2011. Embraer is now the major supplier of regional jet aircraft in China, for up to 120 seats. This segment is expected to show strong future growth.

Embraer is the exclusive aircraft for the new Brazilian airline, Azul, The airline was started by David Neeleman, who founded Jet Blue in the U.S. Once fired by Southwest Airline president Herb Kelleher, David was also fired from Jet Blue after a 2007 ice storm fiasco with a Jet Blue plane having to wait many hours on a runway with no contingency plan or treatment of outraged passengers. Neeleman, who has dual citizenship in the U.S. and Brazil, realized that a low-cost start up could transform the Brazilian travel market.

Brazilian born and Portuguese speaking Neeleman (he left Brazil with his family when he was 5 years old) returned to Brazil to start a new airline in December 2008. The name Azul means “blue” in Portuguese. The new airline, and how it is managed, reflects the lessons David learned from his former low cost airline employers. The airline has 18 mid sized jets in its fuel efficient fleet and has committed to buy 28 more. Like Jet Blue, Azul offers low prices, and flies point to point, mainly from secondary airports. Its base is at Viracopos/Campinas International Airport, which is located about 50 miles North of Sao Paulo.

Azul’s young fleet, enthusiastic flight attendants and employees will be ready when Brazil hosts the World Cup in 2014 and the Summer Olympic Games in 2016. As Brazil will showcase its beautiful cities such as Rio de Janeiro, Azul will also have a great opportunity to increase its brand awareness and favorable imagery among domestic and foreign tourists.

It will also be interesting to watch the evolving aircraft manufacturing industry in China. Indications are that China will manufacture their own wide bodied jets by 2020 and use GE or Rolls Royce engines. One question remains, will China also produce the smaller jets that Embracer supplies? Stay tuned and watch Embraer grow as Brazil’s international trade and tourism increases due to these upcoming world sporting events, and China’s continued growth.

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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