Mauro Kern Executive Vice-President Airline Market Airline Market Overview A perspective from the 30 to 120-seat segment Mar/2010
Forward Looking Statement 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 forwardlooking 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.
Contents Air Transport Industry Review ERJ 145 Family E-Jets Family Competitive Scenario Product Development Market Outlook 2010-2019
Economic Scenario World Real GDP Evolution (USD 2005) 60 55 Real GDP (US$ trillions) 50 45 40 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 2011F 2012F 2013F 2014F World will return to pre-crisis level in 2010 (due to emerging countries) USA and Europe will recover in 2011-12 Source: The Economist (Feb/10)
Air Transport Demand - IATA World International RPK Growth Rate (% yoy) 12 10 8 6 4 2 0-2 -4-6 -8-10 -12-14 5.9% 7.4% 1.6 % -3.5% Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 IATA: The industry starts 2010 with some enormous challenges. The worst is behind us, but it is not time to celebrate. Source: IATA (Jan/10)
Demand Forecast IATA and ICAO RPK Growth Rate (% yoy) IATA ICAO 7,4 5,8 4,5 1,3 3,3 5,0 5,5 6,2 6,1-4,1-3,1 2006 2007 2008 2009 F 2010 F 2011 F 2012 F 2013 F 2009: Reduced demand due to economic crisis 2010-2013: Projected demand recovery Source: IATA and ICAO (Dec/09)
Air Transport Industry Review a summary Gradual recovery of market demand Weak revenue environment, signs of improvement (IATA halved its loss forecast for 2010 to US$2.8bi) Continuous efficiency improvement and cost reductions Limited aircraft financing resources More consolidations & mergers and fewer start-ups Long term growth in air transport demand despite current crisis
Air Transport Demand US Mainline vs. Regionals US Domestic 600 500 RPM (Billion) 400 300 Mainline: -0,2% cagr FAA Aviation Forecast RPM cagr 2009-2030F 200 100 0 2000 2001 2002 Regional: +13,3% cagr 2003 2004 2005 2006 2007 2008 2009E 2010F 2011F Mainline Carriers Regional Carriers +2,9% +4,2% FAA Forecast (Mar2010): higher growth rates for Regionals increased use of 70-90 regional jet aircraft Source: FAA
1,100 ERJ145 Platforms Already Delivered Dec 1996 First Delivery Dec 1998 Dec 1999 Aug 2000 September, 2007 Mar 2001 Sep 2001 May 2002 May 2003 May 2004 Feb 2005
Pre-Owned ERJ Transfers 35 Number of ERJs (units) 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 61 pre-owned ERJ transfers in the last two years (2008-09) Source: Embraer (Mar/09)
Pre-Owned ERJ Transactions BMI United Kingdom Trans States - US Passaredo - Brazil FinnComm - Finland Aeromexico Connect - Mexico Dniproavia - Ukraine Satena - Colombia Diexim Expresso - Angola Athens Airways - Greece City Airline - Sweden Republic - US Nearly 170 pre-owned ERJ transactions since 2000
1 st. E195 Delivery to Air Dolomiti (Italy) (January 27, 2009)
1 st. E170 Delivery to Fuji Dream Airlines (Japan) (February 20, 2009)
1 st. E190 Delivery to Niki (Austria) (May 14, 2009)
1 st. E195 Delivery to Augsburg Airways (Germany) (June 9, 2009)
1 st. E195 Delivery to Windrose (Ukraine) (June 22, 2009)
1 st. E175 Delivery to Trip (Brazil) (June 24, 2009)
1 st. E190 Delivery to LAM (Mozambique) (July 31, 2009)
1 st. E170 Delivery to BA Cityflyer (United Kingdom) (September 3, 2009)
600 th. E-Jet delivered to LOT Polish Airlines September 15 th., 2009!!!
1 st. E195 Delivery to Lufthansa Cityline (Germany) (September 24, 2009)
New E-Jet Customer Air Astana (Kazakhstan) (Nov/09 ; 2 E190 Jetscape)
New E-Jet Customer Oman Air (Oman) (Nov/09 ; 5 E175)
New E-Jet Customer Austral (Argentina) (20 E190)
1 st. E170 Delivery to Gulf Air (Barhain) (March 4, 2010)
E190 at London City Airport (2010) Carriers cleared to use Embraer 190 at London City BA CityFlyer, Baboo and Lufthansa Cityline will be the first to operate the EMBRAER 190 out of LCY. Baboo debuts Embraer 190 at London City We are especially proud to be the first to operate this aircraft, the most comfortable and popular regional jet, into this most userfriendly airport Jacques Bankir, CEO of Baboo BA CityFlyer starts introducing Embraer 190s We are now on the last leg of our fleet replacement programme and our passengers will benefit from the extra space these new, greener aircraft offer. Peter Simpson, Managing Director of BA Cityflyer
Grand Slam: E-Jets at Europe s top airlines Orders Backlog 10 E170 3 10 E190 Orders Backlog 17 E190 7 Orders Backlog 17 E190 16 15 E195 Orders Backlog 6 E170 6 5 E190 Source: Embraer (Dec/09)
620+ E-Jets. 56 Airlines. 39 Countries
Current Environment Requires Fleet Optimization Decreasing Demand & Yields Capacity Cuts Fuel & Environment Pressure Fleet efficiency is a critical issue to airlines Right-sized aircraft help airlines to improve fuel burn (environment) and results
Market Density Profile - USA 500 51-150 PDEW Number of Markets 400 300 200 55% 151-300 22% >300 23% 100 0 51-75 100 150 200 250 300 350 400 500 1000 >1000 Source: US DOT (3Q09) Passenger per Day Each Way (PDEW) USA domestic mainly low-mid density markets 77% up to 300 PDEW
Market Density Profile Latin America 300 26-100 250 PDEW Number of Markets 200 150 100 54% 101-300 28% >300 18% 50 0 26-50 100 200 300 400 500 600 700 800 >800 Source: SABRE (2009) Passenger per Day Each Way (PDEW) Intra Latin America mainly low-mid density markets 82% up to 300 PDEW
Market Density Profile China 250 26-100 Number of Markets 200 150 100 46% 101-300 30% >300 24% 50 0 26-50 100 200 300 400 500 600 700 800 900 1000 >1000 Daily Passengers China mainly low-mid density markets 76% up to 300 daily passengers Source: China Airline Traffic Statistics 2008 (Markets with at least one weekly frequency)
Passengers per Departure USA Narrowbodies (121-210 seats) Annual Flights (x 1000) 1000 900 800 700 600 500 400 300 200 100 Daily Frequencies >2 <=2 0 46-60 61-75 76-90 91-105 106-120 121-135 > 135 Passengers per Departure Around 610,000 flights (~18%) of total J121-210 with loads from 61 to 105 pax per departure and low daily frequencies (up to 2) Source: US DOT (Nov/08-Oct/09)
The CASM Paradigm 2,095 1,434 1,305 454 177 733 (1,051) (504) (1,757) 61 75 76 90 90 105 Environment: Avg Sector: Avg Fare: Fuel Price: US LCC 800 sm 100 USD 2 USD/gal
The CASM Paradigm the ultimate rule Contribution to Profit per Flight CONTRIBUTION TO PROFIT PER FLIGHT 100 SEATER Pax/Flight < 120 Fare Level NB Pax/Flight > 120 Passenger Demand per Flight A place for everything and everything in its place
E-Jets Deployment 21% 29% 8% 14% 25% 6% 5% 33% 32% 7% 57% 40% 5% 49% North America 20% Europe 7% 20% 31% 33% 8% 62% Middle East 12% China 11% 39% 49% 52% 50% Latin Latin America America Africa Asia Pacific World Source: OAG (1Q10) 50% Right-sizing 20% New Markets 9% Replacement of old Jets 21% Natural Growth
E-Jets: Complementing Narrowbodies Madrid Paris (ORY) Edmouton Vancouver San Salvador - Guatemala Amsterdam Berlin SEATS 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 Dec/08 Dec/09 744 606 B738 B738 B738 B738 B738 E195 B738 E195 Dec/08 1032 E190 A320 E190 A320 A320 A319 E190 CRJ700 A319 Dec/09 930 E190 A320 E190 A320 A320 A319 E190 E190 Sep/08 Sep/09 494 342 Source: OAG (2010) A320 A321 A320 A320 E190 E190 Jan/09 754 F70 B737 B737 B737 B737 Jan/10 611 B737 E190 B737 B737
E-Jets Complementing Narrowbodies
E-Jets: Replacing Narrowbodies Frankfurt - Katowice Amsterdam - Helsinki Los Angeles - Vancouver Brisbane - Oakhampton Sep/08 Sep/09 Dec/08 Dec/09 May/07 May/09 Sep/08 Sep/09 SEATS 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 714 B737 B737 420 E170 E170 513 B737 392 E190 E190 480 A319 A319 465 E190 E190 690 B737 B737 B737 520 E190 E190 E190 14:00 B737 E170 15:00 B737 E190 A319 E190 16:00 17:00 B737 E170 B737 E190 18:00 B737 E170 A319 E190 19:00 B737 E190 20:00 21:00 B737 E190 22:00 23:00 B737 E170 Source: OAG (2009)
E-Jets Helping Explore New Markets 100 150+ Seats Low Cost Carriers with Two Fleet Types A320 B737-700 A320 A320 E190 E190 E190 E190 North America Asia Pacific Europe Middle East
E-Jets Helping Reduce Costs and Fuel Burn
E-Jets: Direct Replacement Benefits Fuel Burn Source: www.eforefficiency.com Note: European economic conditions, fuel at 0.50 EUR/liter
Replacement Opportunities - World (Jets 61-120 seats) 350 300 B737-500 Number of Aircraft 250 200 150 100 50 0 B737-200 Bae 146 F100 DC-9 TU-134 B717-200 YAK-42 F70 F28 5 15 25 35 Average Age (years) Nearly 1,000 aircraft with more than 15 years old Source: OAG (Dec/09 ; Passenger, Active in Service, Scheduled Services)
E-Jets Family Order Book Firm Orders Options Deliveries Firm Backlog EMBRAER 170 187 48 170 17 EMBRAER 175 140 178 125 15 EMBRAER 190 448 426 263 185 EMBRAER 195 87 70 47 40 Total 862 722 605 257 (December 31 th 2009)
E-Jets Worldwide Distribution Customers Firm Orders Diversified customer-base across five continents Increased presence in emerging markets with established carriers Source: Embraer (Dec/09)
E-Jets Backlog Evolution Backlog Share per Region (# of Aircraft): 322 Acft 257 Acft 1% 8% 20% 71% 32% 16% 22% 31% Emerging Countries RoW Europe North America 2005 Dec/2009 North America + Europe share decreased from 91% to 53% Source: Embraer (Dec/09) Emerging Countries include Brazil, Russia, India, China and Eastern Europe.
E-Jets Schedule Reliability & Completion Rate Schedule Reliability: 99.2% ; Completion Rate: 99.9% 100,00 99.9% 99,88 99,75 99,50 99,25 99.2% 99,22 SR/CR (%) 99,00 98,75 98,50 98,25 98,00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2007 2008 2009 SR - MONTH SR - L12M CR - MONTH CR - L12M
Market Share - World (Jets 61-120 seats) Embraer: 170/175/190/195 Sukhoi: Superjet 100 Bombardier: CRJ700/900/1000; CS110 Comac: ARJ-21 Airbus: A318 Antonov: An-148 Boeing: B737-600 Mitsubishi: MRJ90 Considering accumulated Net Orders up to Dec/09.
E-Jets vs. New Entrants Competitive Scenario 120 110 E195 CS100 Seat Capacity (32'' pitch) 100 90 80 70 E175 ARJ21 MRJ90 E170 MRJ70 E190 SSJ100/95 100 Seats 70-90 Seats 110 Seats 60 1800 2000 2200 2400 2600 2800 3000 3200 Range (nm)
Competition: CS100 vs. E195 4,500 kg heavier than E195 Higher DOC than E195 Risk associated with new engine technology (GTF) Implications for CS100 perceived as heavy and inneficient Momentum after Republic CS300 vs. A319/737-700 CS 150-seater derivative Competition vs. A320/737-800
Competition: E175 vs. MRJ90 Major design review in 2009: back to metallic wing, increased cross-section. 3,500 kg heavier than E175 Equivalent DOC vs. E175 but at higher risks: Challenging integration and development Risk associated with new engine technology (GTF) TSA deal no bid ; price agressiveness sustainable??
Expected Technologies for Commercial Aviation 2015/2016 Wingtip devices Advanced structures Composites / Metallic Avionics functionalities Electric taxi Geared and Adv. Turbofan engines 2017/2019 APU Fuel Cell Carbon composites nanotubes (2 nd gen.) 2 nd generation GTF/ATF Health monitoring systems (On condition maintenance) 2020/2025 Open Rotor / New Configs / Advanced Aerodynamics Single pilot capability
New Technologies and Next Generation Industry focus on new technologies maturity 2015/2016 2017/2019 2020/2025 Potential COC vs. Current Technology 4% 7%
Competitive Product Positioning along time Competitive positioning code: higher average lower New entrants introduction Next Gen NB New entrants competitiveness new entrant maturation mature new entrant competition from next-gen NB 2010 2015 2020 New entrants introduction Next Gen NB New entrants competitiveness in case of NB re-engining new entrant maturation mature new entrant competition from next-gen NB 2010 2015 2020
Embraer Market Forecast (2010-2019) Projected Deliveries - Jets Market Segment (Seats) 2010 2019 Deliveries 30-60 60 61-90 1015 91-120 1550 30-120 2625 Around 2600 jet deliveries (US$ 80bi) in the next 10 years.
Embraer Market Forecast (2010-2019) 2,625 jet deliveries (30-120 seats) North America 840 32% Latin America 315 12% Europe 580 22% Africa 80 3% Middle East 105 Russia / CIS 155 6% China 340 13% 4% Asia Pacific 210 8%
620+ E-Jets. 56 Airlines. 39 Countries