Competitive Embraer spreads its wings at home and abroad

The government hopes to build on aircraft maker’s success, reports Joe Leahy

Parked on the tarmac at Embraer’s Gavião Peixoto airport, with its slightly drooping wings, is the prototype of Brazil’s latest proposed export product – theKC-390 military transport plane.
A queue of people in military uniforms and civilian dress from around the world waits to enter through a passenger side door to assess whether they will buy the plane for their air forces.
With capacity to carry three jeeps or 80 soldiers and to be used as a tanker for in-flight refuelling, the jet transporter will replace the Hercules C-130 from Lockheed Martin of the US in Brazil’s military. Five other countries are also said to be interested in the aircraft, including Colombia, Portugal and Argentina.
The ambitious project is typical of a company that is Brazil’s highest-profile industrial exporter. Aside from defence, Embraer is the world’s third-largest commercial aircraft maker. It has placed Brazilian aviation on the map through a willingness to tap into global supply chains rather than seek protection from them.
“Philosophically,we are formore free trade,” says Frederico Fleury Curado, Embraer chief executive. “Embraer is a living example of how free trade works.” Brazil has long been a country with a vibrant aviation industry. Aside from manufacturing and exporting aircraft, the domestic market is one of the world’smost active for jet liners, executive aircraft and helicopters. Brazil has the second-largest fleet of executive jets in the world and the second-largest of agricultural aircraft after the US, according tothe government.

The country could also become a focus for international airport builders and operators. The government has auctioned off concessions for themain airports in São Paulo, Rio de Janeiro, Brasília and BeloHorizonte, the capital of the populous state of Minas Gerais, to domestic and international private sectoroperators.
President Dilma Rousseff is no win the process of trying to upgrade more regional airports by encouraging private
investment.
“There are about 700 airports in Brazil, but those operating on commercial terms number only 100. We want to reach 270,” says Wellington Moreira Franco,ministerof civilaviation.
In a country in which businesses and investors groanabout the “Brazil cost” – the country’s overwhelming burden of taxes, bureaucracy, inefficiency and corruption that increases overheads – the aviation industry has been able to showit is still possible to compete.
Indeed, the sector is too global and competitive for a single company or even country to attempt to go it alone and try to develop all its own technology, saysEmbraer’sMrCurado.
Apresentation on theKC-390 to Congress shows the array of global partners involved in the project, from German company Liebherr, which is supplying the air-conditioning system, to US-based Rockwell Collins, which is providing the basica vionics.
Proof that Embraer is globally competitive is that it is ranked third in its own market, Brazil, and therefore not dependent on protection or local content rules imposed on airlines in the country. “We don’t believe in protectionism. We would not have survived if we had depended on protectionism,” saysMrCurado. “Brazilhas to be part of the global supplychain.”
The country’s airport building programme could go some way to helping internationalise further the aviation industry, says Cesar Cunha Campos, director of FGV Projetos, aconsultancy.
In a paper on the government’s regional airport programme,he says the aimis to attract $2.9bn, mostly from the private sector, to upgrade the 270 regionalairports in the first phase.
If the government can mobilise the investment, the benefits to the economy will be immediate. “In 2010, according to the Airports Council International of North America, airports accounted for 8 per cent of USGDP and for7per cent of jobs growth, demonstrating, a significant return on investment,”he says.
Proper planning is crucial. Kuala Lumpur began building a new international airport with a projected cost of $2.5bn.This blewout to $4.4bn because of constant changes in design and delays.
MrMoreira says it is important to create an attractive investment environment, so Brazil can overcome its limitations in terms of transport infrastructure.
Outdated regulations, such as one limiting foreign direct participation in airports to 20 per cent, need to be changed. “The regulations will have to be clear and respected,”he says.

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