paris air show airline market
TRANSCRIPT
Airline Market OverviewA perspective from the 30 to 120-seat segment
Airline Market OverviewA perspective from the 30 to 120-seat segment
Embraer Investor´s Day
Paris Airshow
June 20th, 2007
Mauro Kern
Executive Vice-President, Airline Market
This presentation includes forward-looking statements or statements about events or
circumstances which have not occurred. We have based these forward-looking statements
largely on our current expectations and projections about future events and financial trends
affecting our business and our future financial performance. These forward-looking
statements are subject to risks, uncertainties and assumptions, including, among other
things: general economic, political and business conditions, both in Brazil and in our
market.
The words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,”
“expects” and similar words are intended to identify forward-looking statements. We
undertake no obligations to update publicly or revise any forward-looking statements
because of new information, future events or other factors. In light of these risks and
uncertainties, the forward-looking events and circumstances discussed in this presentation
might not occur. Our actual results could differ substantially from those anticipated in our
forward-looking statements.
Forward Looking Statement
� Air Transport Industry Overview
� 50-seat Regional Jet Market
� E-Jets: the 70 to 120-seat segment
� Embraer Market Forecast
Contents
World Financial Net Results
Source: IATA Economics Jun/07 (ICAO data to 2005 and IATA Forecast 2006-2008)
Europe
Values in US$ Billion
US net results includes restructuring costs andexcludes United Airlines ‘fresh-start’ accounting losses and gains
AfricaLatin America
North America
Middle East
Asia Pacific
World
Positive results projected for 2007 and 2008
05 06 07F2004 08F
-7.7 -5.7 0.0-10 2.9
1.6 2.6 2.71.1 3.0
05 06 07F2004 08F
0.2 0.5 0.50.2 0.6
05 06 07F2004 08F
-0.1 0.5 0.50.1 0.6
05 06 07F2004 08F
-0.3 -0.3 -0.3-0.3 0.0
05 06 07F2004 08F
2.1 1.9 1.73.4 2.5
05 06 07F2004 08F
-4.1 -0.5 5.1-5.6 9.6
05 06 07F2004 08F
Air Transport Industry Major Drivers
• New Passenger Profile � Different Set of Values (pricing, comfort,
more frequencies and direct services)
• Increased Competition � Pressure for Differentiated Services
• Regulatory Liberalization � Opportunities for New Entrants
• Weak Revenue Environment � Improved Productivity and Efficiency
• Old Fleet � Additional Costs - Fuel & Maintenance
• Demand vs. Capacity � Need of a Better Match of Market
Demand and Aircraft Capacity
Driver Consequence
ERJ 145 FamilyERJ 145 Family
1,000th by Sep/2007
1,000th by Sep/2007
ERJ 145 Family
50 Seats(2,000 nm range)
50 Seats
37 Seats
44 Seats
ERJ 145 Family Order Book
53
53
-
-
FirmBacklog
861132914Total
679132732ERJ 145
74-74ERJ 140
108-108ERJ 135
DeliveriesOptionsFirm Orders
(March 31st., 2007)
RJ 50s current situation
• Worldwide FIS = 2042 aircraft
� distribution: 66% in the US; 21% in EU and 13% in ROW
• Parked aircraft: 57 Bombardier CRJs; 2 Embraer ERJs; 30 others
� only 4% of the total fleet – a stable market
• RJ50s transported 14% of all US domestic passengers in 2006
• RJ50 fleet is responsible for 28% of US domestic departures
• China´s regional airline industry starts to develop – 70 RJ50s in
operation
• Secondary market being developed: Mexico, Eastern Europe and
Africa
China – an unbalanced jet fleet
28%
11%
15%
24%
58%
89%
65%
8%
4%
0%
20%
40%
60%
80%
100%
USA China Europe
% o
f J
et
Fle
et
(J3
0-2
10
)
J121-210
J61-120
J30-60
Seat Segment
Source: BACK (Jun/06 ; active in service ; scheduled airlines)
30-120 seat jets represent only 12% of the Chinese jet fleet up to 210
seats, compared to 43% in the US and 35% in Europe
4,829 aircraft 826 2,612
12%
35%43%
The scarce density of demand and the low density of flights added
to the unbalanced fleet clearly point out to the need of RJs
Source: BACK (Mar/07)
RJ 50 Market Opportunities – Russia/CIS
187 188149
0
50
100
150
200
Turboprop Jet 30-60 Jet 61-90
Nu
mb
er
of
Air
cra
ft
An-24
50 seats
Avg. Age
35 years
Yak-40
30 seats
Avg. Age
32 years
Tu-134
76 seats
Avg. Age
29 years
Old fleet replacement is needed in the short term: 524 aircraft affected
RJ 50s Future Market Trends
• Market entered a mature phase in the US and Europe
• RJ50s will remain the backbone of US hub feeding system
• New market opportunities (long and thin) in the US and EU
• Potential for regional aviation development in China and Russia
• Secondary market will expand
E-Jets FamilyE-Jets Family
E-Jets Family
EMBRAER 170• 70 to 80 seats• 2,000 nm Range• Certification: February 2004
EMBRAER 170/175
EMBRAER 190/195
EMBRAER 175• 78 to 88 seats• 1,900 nm Range• Certification: December 2004
EMBRAER 190• 98 to 114 seats• 2,300 nm Range • Certification: August 2005
EMBRAER 195• 108 to 122 seats• 2,100 nm Range• Certification: June 2006
The E-Jets Family – Main Applications
� Natural evolution for existing 50-seat markets
� Right-sizing of low load-factor narrow-body flights
���� Capacity, range & seamless service
���� Enhancing services by increasing frequencies
� New market opportunities – low risk development
���� Medium density and long/thin markets
� Replacement of old & inefficient jets
Air Canada Strategic Review Presentation (September 27, 2004)
COPY
Air Canada - Changing the Game Presentation (Dec/2006)
COPY
Delta Flight Plan Presentation (Mar/2007)
COPY
Market Opportunities – Right-sizing
US Domestic Load Factor Profile (100/160-seat Jets - 12 months ending Sep/2006)
0
120,000
240,000
360,000
480,000
600,000
<50 50 60 70 80 90 100
110
>120
Pax per Departure
An
nu
al F
lig
hts
0%
20%
40%
60%
80%
100%
Av
era
ge
Lo
ad
Fac
tor
Source: BACK
Industry
100-seater
76-seater
Avg. Load Facto
r
851 thousand flights (40% of total) carried less than 100
passengers onboard – still low load factors to be corrected!
0
100
200
300
400
500
600
700
800
0-5 6-10 11-15 16-20 21-25 26-30 31-35 >35
Age (Years)
Nu
mb
er
of
Air
cra
ft
Source: BACK (Oct/06)
Market Opportunities – Replacement
World Fleet Age Profile 61 to120-seats: 2,454 jets / 15 years average age
152,454World
838China
19241Asia Pacific
1648Middle East
22148Africa
23231Russia & CIS
11617Europe
23285Latin America
10846USA, Canada &
Caribbean
Avg. Age
# Acft.Region
30% of the 61 to 120-seat fleet (735 acft) are more than 20 years old
Not AllowedUp to 67 unitsUnlimited
Not AllowedUp to 35 units 50 seats and
35 units 69 seats
Not Allowed
(Grandfathered rights 18 AirWis BAe 146)Up to 65 units
Not Allowed
(Grandfathered rights 36 Avro RJ85 up to 69 seats)
30 units 45-55 seatsUnlimited
US Scope Clauses - Jun/2000
Unlimited Not Allowed
Not AllowedUnlimited
40 50 70Seats 60 80 90 100
Up to 75 units
2003
2002
2000
2003
2000
2003
Labor
Contract
Amendable
Year
Up to 200 units(30 units 71-76 seats + 3 units for each
mainline aircraft increase)
Not AllowedUnlimited
Unlimited Not Allowed
Not AllowedUp to 50 units“Unlimited”
(Up to 110% AA narrow body)
Not Allowed“Unlimited” up to 70 seats
40 50 70Seats 60 80 90 100
Not AllowedUp to 90 unitsUnlimited
US Scope Clauses - Jun/2007
Not AllowedUnlimited up to 78 seats Up to 93 units(86 seats)
2009
2008
2010
2012
2010
2010
Labor
Contract
Amendable
Year
E-Jets Joint Certification means Flexibility
Same Type Design for ANAC, FAA and EASA
EASAFAA
• Market swap flexibility
• Increased residual value
July 2006June 2007June 2006EMBRAER 195
January 2005August 2006December 2004EMBRAER 175
June 2006September, 2005August 2005EMBRAER 190
February 2004February 2004EMBRAER 170
EASAFAAANAC
Training Qualification Differences : According to FAA AC 120- 53, grades range from A (best) to E (worst) in 3 categories: Training Differences, Check Differences and Recurrent Training
E-Jets Commonality
Training ���� 70% of the potential benefits
same cockpit, common systems and fly-by-wire technology mean maximum training commonality within the family
-------A/A/AA/A/AA/A/A195
A/A/A-------A/A/AA/A/A190
A/A/AA/A/A-------A/A/A175
A/A/AA/A/AA/A/A-------170
195190175170EMBRAER
E-Jets have the maximum training commonality (A/A/A)
E-Jets offer an outstanding parts commonality (86% to 100%)
Spare Parts ���� 30% of the potential benefits
E190
E195
86%
E170
E175
Based on the aircraft RSPL (Recommended Spare Parts List)Note: Airframe and Ground Servicing Equipment only (Engines are not included).
100%
100%
The Comfort Factor
CRJ700/90017.3”
16”
EMBRAER 170/190
18.25”
19.75”
A318/32018.0”
19”
Widest seats
Widest aisles
No middle seats
0.25” (0.6 cm) wider seats
0.75” (1.9 cm) wider aisle
Equal volume per seat
0.95” (2.4cm) wider seats
3.75” (9.5cm) wider aisle (+23%)
16% more volume per seat
E170/190 advantages:
E-Jets: Narrowbody airplane comfort in convenient sizes
“Passengers love this aircraft for its spacious interior design and in particular the
absence of a middle seat” Bryan Bedford, CEO Republic Airways (Jul/06)
“The comfort of the E175 aircraft is important to our customers and the economics of
the aircraft make good business sense.”
Scott Kirby, US Airways EVP Sales and Marketing (Jul/06)
The Trip Cost Factor
Costs exclude: revenue related costs and system (overhead) costs
Costs include: variable: fuel, crew, maintenance, landing fees, handling fees ; ownership: lease cost, hull insurance, spares inventory costs
(2-class seating): (70) (78) (94) (104) (124)
51355368
60586310
7563
0
1000
2000
3000
4000
5000
6000
7000
8000
E170 E175 E190 E195 A319 /
B737-700
US
$ p
er
Tri
p
US Domestic
Network Airline -
800 sm trip
Airplane Variable
plus Ownership
Costs per Trip
- 32%- 20%
E-Jets: Lower trip costs than conventional narrow bodies
“… Moreover, we are now seeing the tangible benefits of our fleet renewal with markedly reduced
Embraer trip costs. The Embraer E190 fleet produced direct operating costs 20 per cent lower
than the Airbus A319 fleet on a per trip basis”. said Montie Brewer, AC´s Pres.& CEO (Q1/2007)
E-Jets Family Order Book
3955144EMBRAER 195
401
262
70
30
FirmBacklog
229558630Total
65241327EMBRAER 190
2913699EMBRAER 175
130130160EMBRAER 170
DeliveriesOptionsFirm
Orders
(March 31st., 2007)
Cumulative Net Firm Orders Since First Sale
Jet Programs Order Build-up (70 to 200-seat segment)
0
200
400
600
800
1000
1200
1400
1600
1800
1 2 3 4 5 6 7 8Year since first sale
Cum
. N
et
Fir
m O
rders
A320 FAMILY B737 1st generation 170/190 FAMILY
CRJ 700/900 B737 2nd generation B737-3rd generation
BAE 146-100/200/300 BAE 146-RJ70-85-100 DC-9-10/20/30/40/50
MD-80/90 F70/100 F-28-1000/2/3/4/6000
DC9E-JetsA320 family
CRJ700/900
B737 3rd generation
B737 2nd generation
B737 1st generationMD-80
Source: Back Fleet PC, ACAS, Embraer
E-Jets
60
110 112 118
245
343
440
630619
0
100
200
300
400
500
600
700
1999 2000 2001 2002 2003 2004 2005 2006 Mar/2007
Accu
mu
late
d F
irm
Ord
ers
E-Jets Customer Base Evolution
Source: Embraer
Deliveries
Accumulated 32 customers/operators
E-Jets Worldwide Distribution
• growing and diversified customer-base across five continents
• increased presence in emerging markets with established carriers
16%
6%
60%
13%
5%
Asia Pacific /China
Middle East /Africa
Europe
Latin America
North America
17%
24%
24%14%
21%
Customers Firm Orders
E-Jets Family - Efficiency to all Business Models
Source: Embraer (Mar/07 ; Sirte Oil and GECAS not presented)
Regional Network Low Cost
Charter
Market Share - World (61-90 seats)
27
36
23
36373633
2830
60
67
100
606164
100
77
7073
72
442
0
20
40
60
80
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Mar/07
(%)
Embraer: Embraer 170/175
Bombardier: CRJ700/900
Antonov: An-148
Source: Embraer
Backlog Evolution Comparison
Source: Embraer and Bombardier
Strong competitive position
245
297322
410 401
111 10584 80
125
0
50
100
150
200
250
300
350
400
450
Dec/2003 Dec/2004 Dec/2005 Dec/2006 Mar/2007
Nu
mb
er
of
Air
cra
ft
E-Jets
CRJ700/900/1000
Market Share - World (91-120 seats)
610
45
15
131111
56585556
1118
24
26
100 100 100
43
32
38
42
29
4349
57
46
1212
22
20
695 10
0
10
20
30
40
50
60
70
80
90
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Mar/07
(%)
Embraer: Embraer 190/195
Airbus: A318
Boeing: B737-600
Bombardier: CRJ1000
AVIC I: ARJ-21
Sukhoi: Superjet 100
Source: Embraer
Market Share - World (30-120 seats)
59
52 52
47
11
44424244
37
34
24
11
4
47474545
44
4850505150
44
51
45
223
3
3738
24
14
84
3 32
3458
8
23
2 1 21 10
10
20
30
40
50
60
70
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Mar/07
(%)
Embraer: ERJ 145/140/135 ; Embraer 170/175/190/195
Bombardier: CRJ100/200/440/700/900/1000
Airbus: A318
Boeing: B737-600
AVIC I: ARJ-21
Sukhoi: Superjet 100
Antonov: An-148
Source: Embraer
5 E195
5 E190
15 E17015 E195
4 E1902 E190
11 E1953 E195
8 E19010 E170
2 E190
6 E170
E-Jets
Mar/07
63 41
10 E170 6 E175
2 E170
BacklogDeliveries
Source: BACK (4Q06), Embraer% of Routes (4Q06)
41% 53% 3%
0% 20% 40% 60% 80% 100%
Natural Growth Right-sizing New Routes
E-Jets Deployment - Europe
4 E170
28 E170
E-Jets
Mar/07
16 E170
54 E1903 E190
36 E175
23 E19015 E175
22 E190
215145
26 E17528 E170
4 E175
76 E19025 E190
BacklogDeliveries
Source: BACK (4Q06), Embraer
E-Jets Deployment - USA and Canada
40% 42% 18%
0% 20% 40% 60% 80% 100%
Natural Growth Right-sizing New Routes
% of Routes (4Q06)
2007-2026 Embraer Market Outlook4th. Edition
A LONG-TERM VIEW
OF THE 30 TO 120-SEAT
COMMERCIAL JET MARKET
0% 1% 2% 3% 4% 5% 6% 7% 8%
World
China
Asia Pacific
Middle East
Africa
CIS
Europe
Latin America
USA, Canada & Caribbean
Average Annual Growth (%)
RPK
GDP
Projected Traffic and Economic Growth
Growth by World Region (2007-2026)
Projected world GDP growth around 3% in the next twenty years
will sustain nearly 5% annual increase in air transport demand.
Source: Global Insight and Embraer (Oct/06)
4,4504,450
1,8501,850
1,5001,500
1,1001,100
2017 2017 -- 20262026
7,5007,500
3,5003,500
2,6002,600
1,4001,400
2007 2007 -- 20262026
3,0503,05030 30 -- 120120
1,6501,65091 91 -- 120120
1,1001,10061 61 -- 9090
30030030 30 -- 6060
2007 2007 -- 20162016SegmentSegment
Embraer Market Forecast (2007-2026)
Worldwide Jet Deliveries
Projected Deliveries (30-120 seats): 7,500 Jets
USA, Canada& Caribbean
3,85051%
Europe
1,29017% China
6309%
LatinAmerica
4806%
Africa
1302% Asia
Pacific
3855%
MiddleEast
2303%
Russia & CIS
5057%
Embraer Market Forecast (2007-2026)
Summary
• Air transportation growth and airline economic conditions are
favourable
• 50-seat RJ market is stable in the US and EU with new opportunities
in China and Russia
• Market conditions are in place for further expansion of the 70 to 120-
seat jet fleet, showing strong opportunities for the E-Jets
• Embraer´s market share growing with a diversified customer base
• Embraer´s firm backlog of US$15 billion
78 airlines. 45 countries. 1 manufacturer. EMBRAER78 airlines. 45 countries. 1 manufacturer. EMBRAER
Thank youThank you