Can Embraer deliver as jet backlog grows?

After privatization in 1994, the company inaugurated its first mid-range jet, the 45-passenger E145. And five years later, Embraer unveiled plans for four new jets seating 80-110 passengers for short and medium range routes so airlines could stop risking unfilled seats on larger planes that use much more fuel.

Embraer's fortunes took off after JetBlue Airways Corp. ordered dozens of the jets, putting them in use on the company's shorter U.S. routes in 2005. The Brazilian company's backlog, stuck in the $10 billion range for years, jumped significantly as other airlines followed suit.

Embraer's success has raised speculation that the company could face competition and lose market share if the world's two biggest plane makers — Boeing and Airbus — decide to build smaller planes to compete in the niche carved out by Embraer and Bombardier.

Curado thinks competition from China is more likely. China Aviation Industry Corp. is developing the ARJ-21, a regional passenger jet with up to 85 seats. The maiden flight of China's first homegrown commercial jet is scheduled for next March, with mass production to begin in 2009.

Curado questioned when the China Aviation could provide support for its own planes outside China, predicting it would take decades for the company to become a serious international jet player. But Bombardier is cooperating with China Aviation on the development of a jet that would seat between 90 and 149 passengers.

In the meantime, Embraer is adding new models to its line of executive jets to cash in on the expanding market. Orders for its Phenom executive jets typically seating between four and six passengers stand at more than 500, up from 400 at the end of the first quarter, with deliveries to begin starting next year.

Curado hopes the executive jet segment will make up more than 20 percent of Embraer sales in five years.

The company suffered a blow last year when the U.S. Army decided against using Embraer jets for a new spy plane because Lockheed Martin Corp. couldn't fit all of the electronics in the E145.

Embraer came back with a new idea for military cargo jet to replace aging C-130 Hercules planes used by Brazil's air force and others around the world.

The company estimates it would cost $600 million to launch its C-390 Military Airlifter program with deliveries beginning as early as 2012, but Curado said no decision will be made for at least a year while executives gauge military interest.

"It is only a concept, a paper concept, it happens to be a very interesting one," Curado said. "We are investing a limited amount of money for the predesign stage to define the idea, and are talking to potential customers and fine tuning that idea."

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