Embraer Gets China Order For 100 Jets

August 30, 2006

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Brazil's Embraer on Wednesday signed a deal with airline HNA Group for 100 jets valued at USD$2.7 billion at list prices -- its biggest order to date in China.

Embraer said HNA, the fourth-largest airline in China, agreed to buy 50 ERJ 145s, which seat 50 passengers, with deliveries beginning in September 2007.

Embraer will build the aircraft at the Harbin Embraer Aircraft Industry joint venture in China.

The jet maker also sold 50 Embraer 190s, a new-generation regional jet with up to 106 seats. Embraer will build the 190s at its plant in Sao Paulo state, with deliveries starting in December 2007, the company said in a statement.

"We feel jubilant announcing this deal, which confirms our long-term vision and strategy aimed at becoming an important company on the Chinese market," Embraer head Mauricio Botelho said in the statement.

Analysts said the deal was very positive for Embraer as its order backlog rose to a new benchmark of around USD$13 billion from USD$10 billion and could boost its delivery forecast for next year, now at 150 aircraft, compared with this year's projected 145 jets.

"Embraer had an affiliate in China which until now had no role. It is very important that some planes will be made there. It gives them an edge in the region," said Pedro Galdi of brokerage ABN Amro Real in Sao Paulo.

Analysts said a big deal with a Chinese state company is also good for Embraer as it comes amid stagnating demand in the United States, where many airlines have suffered losses, and in Europe, where profits are getting tighter.

Embraer clearly beat rival Bombardier of Canada to the Chinese market by having a production line there.

"The plant is a big advantage. Now if Bombardier wants to get in there, they'd have to cut their prices. As for the 190 model, it is in a niche of its own and so far has no competition," said Galdi.

Last month, Embraer announced the sale of the 190s and five 195 model aircraft to Mandarin Airlines, a subsidiary of China Airlines.

At about the same time, Embraer also said it would significantly boost its technical support network in the Asia- Pacific region, creating a parts logistics center and installing a full flight simulator for its jets starting from the second half of next year.