Brazilian aircraft builder Embraer diversifies for down market

Washington Post Foreign Service
Friday, November 19, 2010; 10:14 PM

IN SAO JOSE DOS CAMPOS, BRAZIL Grainy old photographs lining the walls of Brazil's biggest aircraft plant here show men in tight suits and high collars posing proudly next to their flimsy flying machines.

The pictures evoke the era, more than a century ago, when Brazil was in the forefront of efforts to develop an airplane. Yet in the decades that followed, the country did little to follow up on its early aviation successes.

Just in the past 16 years, with the quiet resurgence of Empresa Brasileira de Aeronautica, the aircraft manufacturer known as Embraer, it has lived up to that potential. Since going private in 1994, the once-bloated and unprofitable state-run company has joined the ranks of elite aircraft designers in a transformation symbolizing Brazil's emergence as an economic power.

Now the world's third-largest manufacturer of commercial aircraft, Embraer is a $5.4 billion company with plants here outside Sao Paulo and more opening soon in Portugal and Melbourne, Fla. Its aircraft - including fighter planes, business jets and the sleek E-195 jetliners - are ubiquitous.

Embraer make up 37 percent of the U.S. regional airline fleet. In 2008, Sarah Palin leased an E-190 for her vice presidential campaign.

"If you fly into Chicago, if you fly into Miami, if you fly into Dallas, those major hubs, into Houston, Cleveland, you have a very high chance . . . of flying in an Embraer aircraft," the company's chief executive, Frederico Fleury Curado, said in a recent interview.

Judging from Embraer's order book, the future also appears bright: As of September, the company had a backlog of 1,806 planes on order, representing revenue of more than $15 billion.

Still, the company has not escaped the challenges facing the worldwide aviation industry: Airlines are trying to recover from the global economic crisis and cope with high fuel costs just as emerging countries are entering the high-risk, capital-intensive world of aircraft manufacturing.

History of drive

It is not the first time Brazilian aviation has been on the cusp of change.

In 1906, Alberto Santos-Dumont, scion of a Brazilian coffee-growing family and a dreamer who had already built dirigibles, flew the airplane he had designed before a large crowd in France. The flight is considered the first by a fixed-wing aircraft in Europe.

Years after his death, Brazil's military used his fame to generate nationalist sentiment and support for their drive to launch an aircraft industry. In 1969, the military dictatorship then ruling Brazil founded Embraer, building aircraft for the air force and later a 19-seat passenger turbo-prop that was technologically advanced but proved a commercial failure.

Success for Embraer came in the mid-1990s with the ERJ-145, a 50-seat jet that was bought by Continental Express and other airlines. It gave Embraer a foothold in the then-promising regional market for small and medium-size jets.

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