Singapore Air Show Interview Embraer optimistic despite credit crunch turmoil

Singapore (Thomson Financial) - Embraer voiced optimism about the outlook for its business and the aerospace industry despite threats posed by economic weakness and the credit crunch.

The Brazilian aircraft manufacturer said it is experiencing good demand for its aircraft and does not anticipate a "dramatic" hit on the global economy and the industry from the credit turmoil in the US.

Although a US economic slowdown is "definitely happening", a full-blown recession is unlikely and the continuing strength of the Asian, Russian and Latin American economies should help to offset any global impact, according to Embraer's executive vice-president for the airline market, Mauro Kern Jr.

Global air passenger numbers have been growing at a higher rate than the world economy and Embraer is enjoying "very nice demand" for its families of regional and business jets, Kern said.

The company has an order backlog of 430 for its E-jet series and is delivering about 14 airliners a month, he said.

"Of course everyone needs to be a little bit cautious, but we don't see a dramatic situation developing," Kern told Thomson Financial News in an interview at the Singapore Air Show.

Although Embraer still produces its ERJ family of regional jets on production lines at its base in San Jose dos Campos in Brazil and via a joint venture in China, it says the future lies with its E-jet range of aircraft seating between 70 and 122 passengers.

The company has logged 700 firm orders and 700 options for the E-jet series from 44 different airlines since it launched the programme in 1999, against an original sales target of 650, Kern said.

The first member of the family, the 170, entered service in 2004 and the final member, the 195, has now clocked up 18 months of operations.

Embraer designed the aircraft to fit into a perceived gap in the market between its own ERJ series, which seats between 37 and 50 people, and larger airliners such as the Boeing 737 and the Airbus A320 family.

Kern said research carried out by the group a few years ago showed that more than 50 pct of all regional flights in north America departed with less than 100 passengers on board, despite the aircraft being used having the capacity to carry more.

The E-jet series was designed to reduce inefficiency and increase airline profitability by cutting out unneeded space, while retaining similar levels of onboard ambiance, he said.

The planes have a number of potential uses, including on feeder services between big hubs or for direct flights between medium sized cities. Customers to date include Air France and Air Canada, among others. Kern said the company envisages "significant" growth in demand for the E-jet family in the future.

"Using smaller planes with the same level of comfort makes more sense," he said.

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