Embraer to decide on larger aircraft within 18 to 24 months

Embraer expects to decide whether to move forward with development of a larger commercial aircraft within the next 18 to 24 months. During an earnings conference call today, Embraer president and CEO Frederico Fleury Curado said: "We keep looking into the whole section of commercial aircraft [from] small to 150 seats or so." In that regard, he says, the Brazilian company is looking at two "moving pieces in this puzzle" - engine technology and "the correct level of use of composites and aluminium alloys" to use in a newer airframe.

On the engine side, for instance, open rotor technology could hold promise, but Embraer still needs to asses the tradeoffs in fuel burn and fuel efficiency versus how passengers would react from a psychological perspective.

"We keep doing the same thing we have been doing for the last 24 months, assessing the market, investing into technology development to be able to use that as we think, and probably, within 18 to 24 months, we will conclude this strategy to address maybe a larger aircraft, maybe an updating of our existing [E-Jets] aircraft," adds Curado.

Another consideration for Embraer as it mulls whether to offer something bigger than its largest commercial aircraft, the E-195, which can carry a maximum of 118 passengers, is the competitive landscape. Bombardier's long-running efforts to offer a 110/130 new-design aircraft are bearing fruit after Lufthansa recently placed a firm order for 30 of the Canadian manufacturer's geared turbofan-powered CSeries aircraft. But Embraer sees Airbus and Boeing as "formidable competitors". Both airframers are targeting narrowbody replacement aircraft for the latter part of the decade. Asked whether Embraer is still looking at the possibility of bringing a new turboprop to market, Curado says the firm sees a "clear trend" away from 30-, 40- and 50-seat aircraft toward turboprops with 70, 80 and 90 seats. But, he says: "We are not sure, to be frank, what is the correct way to go."

In the nearer-term, the industry faces "a perfect storm of recession and credit [crunch]", says Curado, who sees business jets "more impacted than airlines at least as far as the short-term goes".

The company in February announced laying off nearly 4,300 workers as it slashed its 2009 delivery forecast by 28 aircraft and lowered revenue guidance for the year. Today, it revealed that full-year 2008 net income fell by more than 20% to $389 million although sales were up by 21%, on increased deliveries, to $6.3 billion. At 31 December 31, Embraer's firm order backlog totalled a new record of $20.9 billion.

Curado says Embraer is "basically holding on to our strong backlog both on business jets and on airlines" but is seeing very low demand and an environment and prospects that "are not very enthusiastic".

source: flightglobal.com