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Airline Market Outlook
Embraer’s Positioning in the 30 to 120 Seat Segment
6th Annual Analyst & Investor MeetingNovember 18th, 2005
São Jose dos Campos SP, Brazil
Frederico Fleury CuradoExecutive Vice-President, Airline Market
� Key Global Market Trends
� Competitive Environment
� Regional Jets Sustained Operation
� Embraer Market Forecast
Contents
This presentation includes forward-looking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our market. The words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,”“expects” and similar words are intended to identify forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.
Forward Looking Statement
Source: US Bureau of Economics Analysis and DOT Form 41
• Disconnection fromForecast Ground Rules
• Historically > 0.90% of GDP, Passenger Revenueis below 0.70%.
• RPM is becoming a more complex function of GDP and Yield.
Key Global Market Trends
• Traffic Recovery
0
50
100
150
200
250
300
2000 2001 2002 2003 2004 2005F
Network Low Cost Regional
Intra-Europe (RPK Billion)
0
100
200
300
400
500
600
2000 2001 2002 2003 2004 2005F
Network Low Cost Regional
U.S. Domestic (RPM Billion)
Source: Airlines, Embraer
Key Global Market Trends
• LCC Expansion• Around 70% of all domestic passengers
in North America and Europe have
access to low cost carriers services.
• LCCs hold air fare pricing power.
• Passengers are more stringent on air
travel value proposition.
• Shift in Market Share
• US: LCCs and Regionals expanding.
• Intra-Europe: LCCs expanding and
Regionals concentrating on secondary/
/business markets development.
85%76%
64%51%
87%
72%65%
50%
11%
35%
3% 5% 9% 12% 8%17% 16% 15%
5%
37%
27%
19%12%
19%
0%
20%
40%
60%
80%
100%
1995 2000 2005E 2010E 1995 2000 2005E 2010E
Network Low Cost Regional
Source: Airlines, Embraer
US Domestic (% RPK) Intra-Europe
Key Global Market Trends
• Domestic U.S. Pax YieldsDown Sharply from 2000
• No evidences or expectation of a sizable
recuperation.
• Passenger unit revenue trends weak
domestically but strong internationally
• Several factors (cold weather, wars, higher
import rates, increased China demand and
refinery capacity) led to higher prices.
• Projected oil prices: an upward shift from
historical levels to around US$50-60 long
term. Jet fuel prices expected to be around
US¢150-170.
• Crude Oil and Jet Fuel Prices
10
20
30
40
50
60
70
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Cru
de
Oil
(U
S$/
Bar
rel)
020406080100120140160180200
Jet
Fu
el (
US
¢/G
allo
n)Source: EIA
60%of flights
4 8 13 13 8 7 5 2 220150
5
10
15
20
25
50 60 70 80 90 100 110 120 130 140 >150
%
Passengers per DepartureSource: US DOT/Embraer
• Fleet Right-Sizing
• 60% of all US domestic flights depart with load factor more appropriate to 70-110 seat aircraft.
• 95% of all North American narrow-body flights are within 1,700nm range.
• 85% of city pairs exclusively served by narrow body jets have less than two daily frequencies.
Key Global Market Trends
810 Aircraft olderthan 20 Years35% of total fleet in service451
320
492
233
361
212237
0-5 6-10 11-15 16-20 21-25 26-30 30Aircraft Age (Years)
• Replacement Crisis – Ageing Fleets (61 to 120 seats)
Source: BACK/Fleet PC (Jan/05)
• 35% of total fleet is more than 20 years in service and
shall start to be replaced in the coming years.
• Old technology equipments, most of them no longer in
production.
• Inefficient and expensive aircraft to operate.
� New Passenger Profile � Different Set of Values
� Ultra Competitive Environment
� Strong Focus on Cost Reduction, Reduced Investments
� Cash is King
� Maximum Utilization of Assets (fleet optimization and flexibility)
� Clash of 3 models (LCC x Network x Regional)
� It´s about cost and efficiency
� It´s about value proposition
� Fast Scope Clauses Relaxation /
/ Closing the 70-110 Seat Gap
(Bottom-Up and Top-Down)
Not Another Cycle, but a Fundamental Change
70 to70 to
110 Seats110 Seats
B76
7
B77
7
A31
9
A32
0
B73
7
B75
7
B74
7
B73
7
B76
7
ER
J135
CR
J200
ER
J145
CR
J700
CR
J700
E-1
70
Seat Capacity
25 50 75 100 125 150 175+
B75
7
B73
7
MD
82
B77
7
B73
7
B75
7
B76
7
B73
7
B73
7
MD
11
ER
J135
ER
J145
A33
0
A31
9
A32
0
DC
-10
B75
7
B75
7
DC
-9
DC
-9
B74
7
A33
0
CR
J440
AV
RO
A31
9
A32
0
A32
1
B73
7
B75
7
A33
0
B76
7
B73
7
CR
J700
E-1
70
CR
J200
ER
J145
B76
7
MD
88
B77
7
MD
90
B75
7
B73
7
B73
7
B73
7
B76
7
A34
0
ER
J135
CR
J700
CR
J200
ER
J145
A30
0
B75
7
B76
7
MD
83M
D80
B77
7
B73
7
ER
J135
ER
J140
ER
J145
CR
J700
70 to70 to
110 Seats110 Seats
70 to70 to
110 Seats110 Seats
B76
7
B77
7
A31
9
A32
0
B73
7
B75
7
B74
7
B73
7
B76
7
ER
J135
CR
J200
ER
J145
CR
J700
CR
J700
E-1
70
B76
7B
767
B77
7B
777
A31
9A
319
A32
0A
320
B73
7B
737
B75
7B
757
B74
7B
747
B73
7B
737
B76
7B
767
ER
J135
ER
J135
CR
J200
ER
J145
CR
J200
ER
J145
CR
J700
CR
J700
CR
J700
E-1
70C
RJ7
00E
-170
Seat Capacity
25 50 75 100 125 150 175+
B75
7
B73
7
MD
82
B77
7
B73
7
B75
7
B76
7
B73
7
B73
7
MD
11
ER
J135
ER
J145
B75
7B
757
B73
7B
737
MD
82M
D82
B77
7B
777
B73
7B
737
B75
7B
757
B76
7B
767
B73
7B
737
B73
7B
737
MD
11M
D11
ER
J135
ER
J135
ER
J145
ER
J145
A33
0
A31
9
A32
0
DC
-10
B75
7
B75
7
DC
-9
DC
-9
B74
7
A33
0
CR
J440
AV
RO
A33
0A
330
A31
9A
319
A32
0A
320
DC
-10
DC
-10
B75
7B
757
B75
7B
757
DC
-9D
C-9
DC
-9D
C-9
B74
7B
747
A33
0A
330
CR
J440
CR
J440
AV
RO
AV
RO
A31
9
A32
0
A32
1
B73
7
B75
7
A33
0
B76
7
B73
7
CR
J700
E-1
70
CR
J200
ER
J145
A31
9A
319
A32
0A
320
A32
1A
321
B73
7B
737
B75
7B
757
A33
0A
330
B76
7B
767
B73
7B
737
CR
J700
E-1
70C
RJ7
00E
-170
CR
J200
ER
J145
CR
J200
ER
J145
B76
7
MD
88
B77
7
MD
90
B75
7
B73
7
B73
7
B73
7
B76
7
A34
0
ER
J135
CR
J700
CR
J200
ER
J145
B76
7B
767
MD
88M
D88
B77
7B
777
MD
90M
D90
B75
7B
757
B73
7B
737
B73
7B
737
B73
7B
737
B76
7B
767
A34
0A
340
ER
J135
ER
J135
CR
J700
CR
J700
CR
J200
ER
J145
CR
J200
ER
J145
A30
0
B75
7
B76
7
MD
83M
D80
B77
7
B73
7
ER
J135
ER
J140
ER
J145
CR
J700
A30
0A
300
B75
7B
757
B76
7B
767
MD
83M
D83
MD
80M
D80
B77
7B
777
B73
7B
737
ER
J135
ER
J135
ER
J140
ER
J140
ER
J145
ER
J145
CR
J700
CR
J700
Competitive
Environment
ERJ 135ERJ 135
ERJ 140ERJ 140
ERJ 145 and 145XRERJ 145 and 145XR
CRJ200 / 440CRJ200 / 440
328JET328JET
30-60 Seat Jet Competitors
45
32
17
7
52
48 47 45 45.64548
5252
48
5556
55 54.4
68
83
93
53
0
10
20
30
40
50
60
70
80
90
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 'Sep/2005
Acc
um
ula
ted
Mar
ket
Sh
are
(%)
Market Share (30-60 seat segment)
Source: Embraer
ARJ21ARJ21
CRJ900CRJ900
EMBRAER 175EMBRAER 175
EMBRAER 170EMBRAER 170
CRJ700CRJ700
RRJRRJ
61-90 Seat Segment Competitors
Market Share (61-90 seat segment)
2723
36.23633
2830
67
100
57.9
64
100
77
70
73
72
2.50 3.40
20
40
60
80
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 'Sep/2005
Acc
umul
ated
Mar
ket S
hare
(%)
Source: Embraer
B717B717
EMBRAER 190EMBRAER 190
EMBRAER 195EMBRAER 195
B737-600B737-600
A318A318
ARJ21ARJ21
RRJRRJ
91-120 Seat Segment Competitors
45
16
131111
58.556
21.324
26
100 100 100
44
3338
42
29
4249
5645
20.220
0
10
20
30
40
50
60
70
80
90
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 'Sep/2005
Acc
um
ula
ted
Mar
ket
Sh
are
(%)
Market Share (91-120 seat segment)
Source: Embraer
30Y30Y 50Y50Y 70Y70Y 90Y90Y 110Y110Y 130Y130Y
Scope
PotentialNew Entrants
Embraer Commercial Jets Unique Position
Regional Jets
Sustained
Operation
(30-60 seat segment)
ERJ 145 Family
50 Seats(2,000 nm range)
50 Seats
44 Seats
37 Seats
TP Complement
6%
RJ Replacement
5%
RJ Complement
3%
Jet Complement
18%
TP Replacement
18%
Jet Replacement
22%
New Routes
28%
0%
25%
50%
75%
100%
1371 routes
Average Stage Length = 460 miles
Source: BACK/OAG (Jan/05)
ERJ 145 Family Network - USA
ERJ 145 Family Network
Source: BACK/OAG (Jan/05)
< 1 hour1 – 2 hours
2 – 3 hours
> 3 hours
179 (15%)41 (14%)< 1 hour
Number of Routes
380 (30%)87 (31%)2 - 3 hours
48 (4%)0> 3 hours
639 (51%)157 (55%)1 - 2 hours
Jan/2005Jan/2000
US Regional System Network
Source: BACK/OAG (Jan/05 ; combined city effect not considered)
21%
44%
35%
27%
15% 15%
0%
10%
20%
30%
40%
50%
AA CO DL NW UA US
% % routesroutes in in eacheach major US major US RJsRJs operatoroperator networknetwork withoutwithout directdirect competitioncompetition
• High percentage of RJ service is on monopoly routes
• 75% of all RJs monopoly routes are operated with less than 2 daily frequencies
0
500
1,000
1,500
2,000
2,500
25 - 75 75 - 150 150 - 315 315 - 500 >500
Passenger Per Day Each Way (PPDEW)
Nu
mb
er o
f M
arke
tsConnecting Flight (Greater than90% of total PPDEWs inConnecting Flight)
Direct & Connecting Flight
Direct Flight (Less than 10% oftotal PPDEWs in ConnectingFlight)
50-seat RJMarket
Opportunities:1949
connectingmarkets
US Domestic Market (Year 2004)
Source: US DOT OD1A (Back Aviation)
ERJ 145 Family Network - Europe
Source: BACK/OAG(Jan/05)
TP TP ComplementComplement
13%
JetJet ReplacementReplacement
18%
JetJet ComplementComplement
17%
TP TP ReplacementReplacement
21%
NewNew RoutesRoutes
31%
0%
25%
50%
75%
100%
424 routesAverage Stage Length = 430 miles
- Typical European airline OEW
- Full PAXPassengers at 90.7 kg (200 lb)
- Cruise at LRC
- Airport Temp. at 20.5ºC / ISA+5.5ºC (85% Summer)
- 85% Summer Winds
- JAR OPS Reserves100 nm alternate
ERJ 135
• ERJ 135: Steep Approach Capable (London City Airport)• Still Air Range: 600 nm
New Routes Development - London City
New Routes Development - China
China Eastern5 ERJ 145
Chengdu
Sichuan Airlines5 ERJ 145 Guangzhou
China Southern6 ERJ 145
Source: BACK/OAG(1Q05)
ERJ 145 - AeroLitoral - Mexico
0%
25%
50%
75%
100%
Source: BACK/OAG(Jan/05)
CENCENCENCENCENCENCENCENCEN
HMOHMOHMOHMOHMOHMOHMOHMOHMO
LMMLMMLMMLMMLMMLMMLMMLMMLMM
CULCULCULCULCULCULCULCULCUL
CJSCJSCJSCJSCJSCJSCJSCJSCJS
CUUCUUCUUCUUCUUCUUCUUCUUCUU
TIJTIJTIJTIJTIJTIJTIJTIJTIJ
MEXMEXMEXMEXMEXMEXMEXMEXMEXGDLGDLGDLGDLGDLGDLGDLGDLGDL
BJXBJXBJXBJXBJXBJXBJXBJXBJX
MTYMTYMTYMTYMTYMTYMTYMTYMTY
17%
25%
41%
New New RoutesRoutes
TP TP ReplacementReplacement
TP TP ComplementComplement
JetJet ReplacementReplacement
17%
• The ERJ 145, on average, attracts 10 more paxper flight on every route it replaces the Saab.
• Since the incorporation of the ERJ 145s, AeroMexico’s market share, on disputed routes, has increased by 9 p.p.
ERJ 145 Family Worldwide Fleet SR and CR
SR=98.8% (15 min. delay)
CR=99.7% (completion)
Schedule Reliability & Completion Rate12 Months Moving Average
REF.Aug/2005
ERJ 145 Family Orderbook
51
16
20
15
FirmBacklog
8431,122228894Total
661883206677ERJ 145
741142094ERJ 140
1081252123ERJ 135
DeliveriesTotalOptionsFirm Orders(as of September 30th., 2005)
The 30-60 Seat Jet Segment Summary
• Market has reached maturity (established customer base)
• The lowest trip cost: increased frequencies (market presence) and
reduced risks to new markets development (long and thin routes with
monopoly services – better pricing power)
• Secondary market starting to develop
• Less than 10 ERJs temporarily parked
• Will remain the backbone of US Regional fleet (small density
markets)
The E-Jets Family
ErgonomicsEconomics Engineering Efficiency
Program Status
EMBRAER 170 Certified by CTA/FAA/EASA
CTA
EASAFAA
EMBRAER 170/175 Canadian Certification
•Canadian Certification Granted on July 15th, 2005.
Additional Cold Soak tests performed for the Canadian authorities
Florida, July 2005, -35 °CMcKinley Climatic Lab, Eglin Air Force Base
PR 22/Jul/05
EMBRAER 190 – Certified by CTA and FAA
CTA TC on August 30th, 2005.
PR 01/Sep/05
FAA TC on September 2nd, 2005.
EMBRAER 195 – Development & Certification Schedule
Q1 Q2 Q3 Q42000 2001 2002 2003 2004 2005
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Initial Definitions Phase
Joint Definition Phase
First Flight
Certification Tests
Type Certification
Q1 Q2 Q3 Q4
1st Delivery
2006
Detail Design and Manufacturing
PR 10/May/05
� 1ST Flight – Dec’07th 2004
E-Jets Operators
USA●US Airways●Republic
DeltaUnited
●JetBlue
CANADA●Air Canada
PANAMA●Copa
ECUADOR●Tame
FINLAND●Finnair
UK●Flybe
GERMANY●Cirrus
POLAND●LOT
ITALY●Alitalia
SWITZERLAND●Swiss
Saudi Arabia●Saudi Arabian Airlines
India●Paramount
China●Hong KongExpress
● Current Operators ● Near Future operators (as of Oct 24th, 2005)
France●Régional
Embraer 170 Network at
RightsizingRightsizing
41%
Natural Natural GrowthGrowth
51%
NewNew RouteRoute
8%
0%
25%
50%
75%
100%
% of Routes (3Q05)
Source: BACK/OAG (3Q05 routes)Average Stage Length = 635 sm (552 nm)
Embraer 170 Network at
RightsizingRightsizing
43%
Natural Natural GrowthGrowth
54%
NewNew RouteRoute
3%
0%
25%
50%
75%
100%
% of Routes (3Q05)
Source: BACK/OAG (3Q05 routes)Average Stage Length = 640 sm (556 nm)
Embraer 170 Network at
RightsizingRightsizing
29%
Natural Natural GrowthGrowth
59%
NewNew RouteRoute
12%
0%
25%
50%
75%
100%
% of Routes (3Q05)
Source: BACK/OAG (3Q05 routes)Average Stage Length = 429 sm (373 nm)
RightsizingRightsizing
50%
Natural Natural GrowthGrowth
50%
0%
25%
50%
75%
100%
Embraer 175 Network
NewNew RouteRoute
% of Routes (4Q05)
Source: BACK/OAG (4Q05 routes)Average Stage Length = 410 sm (357 nm)
Embraer 170 Network
RightsizingRightsizing
37%
Natural Natural GrowthGrowth
61%
NewNew RouteRoute
2%
0%
25%
50%
75%
100%
Source: BACK/OAG (3Q05 routes)
% of Routes (3Q05)
Average Stage Length = 609 sm (529 nm)
EMBRAER 190 Initial Network
78%
22%
0%
25%
50%
75%
100%
Source: BACK OAG (Oct 05)
From
To
Equipment 73G E90 73G E90 73G E90 73G E90 73G E90 73G E90
Jun/05 60 0 30 0 30 0 22 0 22 0 45 0
Jan/06 62 0 30 0 0 31 0 31 0 31 13 31
Jun/06 30 30 30 30 0 31 0 31 0 31 6 46
Panama City
Cartagena
Guatemala City
Managua Managua
Panama City
San Andres
Panama City
Guayaquil
Panama City Panama City
Barranquilla
From
To
Equipment 73G E90 73G E90
Jun/05 0 0 0 0
Jan/06 0 30 0 0
Jun/06 0 30 0 31
San Salvador San Jose
Panama City San Pedro Sulas
New RouteNew Route
RightsizingRightsizing
200 400
COPY
EMBRAER 190 Initial Network
Source: jetBlue website, BACK OAG (Oct/05) and ATI News
RightsizingRightsizing
New RoutesNew Routes
New Success Stories To Be Written Shortly
Firm order of 2 E170 and 1 E190
plus 4 options
Firm order of 12 E170 plus 8 options Firm order of 4 E170
Firm order of 15 E170
New Success Stories To Be Written Shortly
Firm order of 2 E170 and 3 E175Firm order of 14 EMBRAER 195
Firm order of 6 firm E190
EMBRAER 170/175 EIS Statistics
Operators 8
Aircraft in Service 87
Flight hours 167,700
Flight Cycles 115,200
• Operating Summary
(as of Oct 14th, 2005)
IS 19/Oct/05
EMBRAER 170/190 Family Order Book
29-603129EMBRAER 195
335
183
13
110
FirmBacklog
92810383427Total
2404219185EMBRAER 190
922-22EMBRAER 175
81324133191EMBRAER 170
DeliveriesTotalOptionsFirm Orders
(as of September 30th., 2005)
Embraer
Market
Forecast
Worldwide Jet Deliveries by Capacity Segment
4,6004,600
1,9001,900
1,6501,650
1,0501,050
2016 2016 –– 20252025
7,9507,950
3,4503,450
2,9502,950
1,5501,550
2006 2006 -- 20252025
3,3503,350TOTALTOTAL
1,5501,55091 91 –– 120120
1,3001,30061 61 –– 9090
50050030 30 -- 6060
2006 2006 -- 20152015SegmentSegment
Embraer Market Forecast (2006-2025)
30 to 120-seat segment value = US$ 180 billion
AsiaPacific
410
5%
China590
7%Africa &
Middle East280
4%
USA, Canada& Caribbean
4,230
53%
30 - 120 Seats: 7,950 Jets
Europe1,450
18%
LatinAmerica
465
6%
Russia& CIS525
7%
Embraer Market Forecast (2006-2025)