Embraer to boost output in 2011 and 2012 - Suppliers Share Wrap

Embraer expects to ramp up regional jet production over the next two years to return deliveries to pre-downturn levels. The manufacturer delivered 162 regional jets in 2008 but cut production to 122 in 2009. It expects to deliver just 90 regional jets this year, essentially matching the 91 deliveries made last year.

By 2012, Embraer hopes to increase output to up to 160 regional jets.

Like Airbus and Boeing, Embraer is expecting the economic recovery and rebuilding of airline passenger traffic levels will lead to a resurgence in ordering. However, 2010 is due to be another tough year for the manufacturer, with its order backlog continuing to decline.

Since 2007, Embraer’s firm order backlog for aircraft has dropped from 400 aircraft to just 265 at the end of 2009. Business aircraft deliveries have surged (from 36 in 2008 to 115 in 2009), but the segment is less profitable than the commercial sector. Embraer’s Very Light Jet programme took off in 2009.

Airbus and Boeing have shrinking order books as well, as the larger manufacturers are producing aircraft at near record levels. But they have the luxury of significantly greater order backlogs. Production schedules for most Airbus/Boeing aircraft types are full for at least the next two years, allowing them to ramp up production even while questions about the economic recovery remain.

Embraer’s 2010 outlook is for revenue of USD5 billion, approximately 10% down on revenue earned in 2009. The commercial aircraft segment is still expected to be the company’s primary earner. Regional jet sales are projected to account for USD2.6 billion of the company’s revenue, compared to USD1.1 billion from business aircraft and USD650 million each from its defence and aeronautical services units.

The Brazilian aircraft manufacturer's shares rose 2.2% yesterday, while Bombardier rose 2.6%, Boeing gained 0.3% and EADS fell 0.4%.

Selected Aviation suppliers’ daily share price movements (% change): 17-Jun-2010