2006 - embraer a&i meeting airline market

Airline Market Airline Market OutlookOutlook

The Future Role of The Future Role of 30 to 12030 to 120--seat seat

Commercial Commercial AircraftAircraft

New York New York Wednesday, April 12Wednesday, April 12thth, 2006, 2006Frederico Fleury Curado

Executive Vice-President, Airline Market

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.

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


Current Scenario

Key Global Market Trends

Important Issues in the 30-120 Seat Segment:

RJ 50: an intrinsic part of the air transportation system

E-Jets: matching aircraft capacity to market demand

Market Forecast

Contents


0% 1% 2% 3% 4% 5% 6% 7% 8%

China

Asia Pacific

Middle East

Africa

Russia & CIS

Europe

Latin America

USA, Canada & Caribbean

World

RPKGDP

Source: Global Insight and Embraer

Positive World Economic Scenario2006-2025 economic scenario is sustaining Air Travel Demand growth

Projected Traffic and Economic Growth by Region (Average Annual Growth)


0

1000

2000

3000

4000

5000

6000

700019

95

1996

1996

1998

1999

2000

2001

2002

2003

2004

2005

2006

F

2007

F

Bill

ion

(RPK

& A

SK)

62%

64%

66%

68%

70%

72%

74%

76%

78%

80%

% (L

oad

Fact

or)

RPK ASK Load Factor

Increased Air Travel DemandTraffic is recovering at strong growth rates but in another environment

Source: ICAO - Contracting States - Scheduled Airlines

6.3% yoy 7.7% yoy 6.4% yoy


Revenue EnvironmentWorld yields are improving, but trend in real terms remains down

Source: ICAO (Contracting States - Scheduled Airlines), Global Insight (USA CPI Inflation) and IATA Economics

World real yields in 2005 are 28% lower than 1994 values in an environment where LCCs pricing power is the main driver.

65

70

75

80

85

90

95

100

105

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F 2006F 2007F

Inde

x (1

994=

100)

World Nominal Yield

World Real Yield (adj. for US inflation)


End of Cheap Jet Fuel

Lack of spare oil production capacity remains high price trend

Source: EIA – Energy Industry Administration (Mar 31st, 2006)

4550556065707580859095

Jan0

5

Mar

05

May

05

Jul0

5

Sep0

5

Nov

05

Jan0

6

Pric

e (U

S$/B

arre

l)

Crude OilJet Fuel

50

55

60

65

70

75

80

85

1970

1975

1980

1985

1990

1995

2000

2005

Mill

ions

of B

arre

l per

Day

CapacityDemand

For coming years oil barrel is expected to stay at US$60 level and jet fuel around US¢170/gallon

Current price40% higher thanJan/05


World Financial Net ResultsNet results improving. Strong net profit expected for 2007.

2005 2006F 2007F

-0.1 -0.4 0.5

Europe

MEast & Africa

Source: IATA Economics

2005 2006F 2007F

-6.0 -2.2 7.2

World

2005 2006F 2007F

2.9 2.0 3.1

Asia Pacific

2005 2006F 2007F

0.2 0.2 0.4

Latin America

2005 2006F 2007F

-10.8 -5.4 1.1

North America

2005 2006F 2007F

1.8 1.4 2.1

Values in US$ Billion


Higher Competitive EnvironmentLCC will keep capturing market share from Network carriers

Source: Back Aviation and Embraer

76%60%

19%

29%

11%

57%

31%

5%12%

2000 2005 2010E

Network LCC Regional

USA Domestic RPM Intra Europe RPK

72%65%

11% 19%

17% 16%

50%

34%

16%

2000 2005 2010E


52% 49% 45%

48% 51% 55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2000 2005

OthersAirlines

Top 15Airlines

Higher Competitive EnvironmentTop 15 capacity market share declined 13%

Wor

ldTo

tal A

SK S

hare

(%)

Source: Back AviationTop 15 Airlines: American, Delta, United, Continental, British Airways, Northwest, Lufthansa,

Air France, Southwest, Japan Airlines, Singapore, US Airways, Qantas, Air Canada, All Nippon

13%


Strong Effort to Reduce CostsLabor cost reduction has not been enough

Source: ATA – Air Transport Association (USA Majors and National Passenger Carriers - 3Q05)

3%6%3%-3%6%% y-o-y

11.8411.4610.8310.5210.9010.31(¢/ASM)Total

3.253.072.512.332.652.40(¢/ASM)Other

0.170.190.190.220.250.29(¢/ASM)Maintenance Material

0.250.250.250.230.210.19(¢/ASM)Landing Fees

0.980.930.900.880.920.90(¢/ASM)Professional Services

1.511.601.661.641.621.52(¢/ASM)Ownership

32%33%18%-12%-4%% y-o-y

2.571.941.461.231.401.46(¢/ASM)Fuel

-11%-10%-3%3%9%% y-o-y

3.103.483.863.993.863.55(¢/ASM)Labor

200520042003200220012000

USA: fuel expenses are burning airline´s cost savings


3

4

5

6

7

8

2001 2002 2003 2004

Shor

t-hau

l uni

t cos

t (U

S¢/A

SK)

Network

Jetblue

Southwest

USA

3

5

7

9

11

13

2002 2003 2004

Shor

t-hau

l uni

t cos

t (Eu

ro¢/

ASK

)

Europe

Network

easyJet

Ryanair

LCC & Network Cost ConvergenceThe cost gap is closing

Source: IATA Economics


0%

10%

20%

30%

40%

50%

Pricing

Convenient fl

ight sch

edules

Frequen

t flye

r pro

gramme

Airline sa

fety r

ecord

Best f

or my c

onnectin

g flight

Airline re

putation

Aircraf

t type

Connection tim

eAirli

ne network

Ponctuality

of flights

AmericasEurope

Asia PacificAfica & Middle East

Source: IATA - 2005 Corporate Air Travel Survey

Top 10 factors of airline choice for SHORT-HAUL flights by regionPricing:

• 1st - Americas• 1st - Europe• 3rd- Asia Pacific• 6th- Africa&ME

Convenient Flight Schedules:

• 2nd - Americas• 2nd - Europe• 4th - Asia Pacific• 3rd - Africa&ME

What the Passengers Want Pricing and convenient flight schedules are main passengers priorities


6,018routes with less than two

average daily frequency

USA & EuropeAverage Daily Frequency by RouteRoutes operated exclusively by Jet Aircraft from 91 – 175 seats up to 2000 nm

34%

41%

17%

6%2%

0 - 0,5 0,5 - <2 2 - <5 5 - <10 >=10

Average Daily Frequency

% o

f Rou

tes

Source: Back Aviation (OAG 4Q05)

Opportunities for RightsizingAdditional opportunities are still in the marketplace


49% of flightsdepart with loads appropriate

for 70-110 seat aircraft

Source: Back Aviation (T100)

2005 USA Domestic Flights (Jet aircraft ≥ 100-seat)

1 1

57

16

20

17

10

6 6

3

8

0

5

10

15

20

25

<50 50 60 70 80 90 100 110 120 130 140 ≥150Pax per Departure

% o

f Flig

hts

Airlines could improve efficiency by better matching demand with aircraft capacity

Opportunities for Rightsizing


USA domestic average seats per aircraft is decreasing

118

120

122

124

126

128

130

2000 2001 2002 2003 2004 2005 2006

Seat

s pe

r Airc

raft

Capacity Adjustment Already Under Way

Source: 2006 FAA Report

The replacement of old / inefficient NB fleet and the deployment of new generation RJs are providing more flexibility and efficiency for airlines.


610

305

522

214

316

214 205

0

100

200

300

400

500

600

700

0-5 6-10 11-15 16-20 21-25 26-30 >30

Aircraft Age (Years)

Num

ber o

f Airc

raft

(Uni

ts)

Ageing World Fleet in Service (61-120 seats)

Source: Back Aviation (Dec/05)

• 31% of total world fleet is

more than 20 years old and

shall start to be replaced in

the coming years.

• Old technology equipment:

inefficient and expensive

aircraft to operate.

735aircraft older than

20 years

Old Jets Replacement Opportunities

Where is the RJ 50

market going?


Regional Airlines – Europe

TP 19953026 routes723 aircraftAv. stage length:200 nm (370 km)

TP 20052810 routes666 aircraftAv. stage length: 231nm (428 km)

RJ 20051722 routes294 aircraftAv. stage length: 387 nm (717 km)

RJ 1995273 routes37 aircraftAv. stage length:414 nm (767 km)

Last 10 years: RJ fleet grew 700% and TP shrank by 8%

Source: Back Aviation (OAG Jan/06; RJ: ERJ 145 Family, CRJ 100/200 and 328JET)


Regional Airlines – USA

RJ 20052888 routes1358 aircraftAv. stage length: 395 nm (732 Km)

TP 2005902 routes740 aircraftAv. stage length:159 nm (295Km)

TP 19951908 routes1599 aircraftAv. stage length: 179 nm (332 Km)

RJ 1995180 routes36 aircraftAv. stage length: 391 nm (724 Km)

Last 10 years: RJ fleet grew 3600% and TP fleet shrank 54%

Source: Back Aviation (OAG Jan/06: RJ: ERJ 145 Family, CRJ 100/200/440 and 328JET)


RJ 50 in the USA – Main Trends

Source: Embraer

Mature Market – no additional major orders

USA scope relaxation shifted demand to bigger RJs

RJ50s will keep their importance as hub feeders and long thin point-to-point routes

...

But, can the RJ50 market get sustained?

Main Trends that we already know:


Source: Back Aviation (T100 and OD1A: RJ: ERJ 145 Family, CRJ 100/200/440 and 328JET). 2006 FAA Report (DOT Form 41 & Form 298C)

USA Hub & Spoke System

1. RJs are responsible for 22% of all USA domestic passengers2. RJs: 3 connecting passengers for each local passenger

Hubs are largely dependent on RJs


0

20

40

60

80

100

120

140

160

180

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

New

Mar

kets

per

Yea

r

TP Replacement Jet Complement/Replacement New Routes

RJ 50 Evolution - USA

New Markets Opened per Year

• Scope Clauses• TP avoidance factor• RJ phenomena

Sep 11, 2001

• Scope Clausesrelaxation

• Low density marketopportunities

• RJs as single serviceproviders

Source: Back Aviation (OAG ; RJ: ERJ 145 Family, CRJ 100/200/440 and 328JET)

• Sep 11 impact(right-sizing)

• Replacing old andinneficicent jets


New Market Opportunities - USA

Source: Back Aviation (OAG 2005)

136 potential markets without any direct service

Selection Criteria:

1. Market Demand: 25-75 PDEWs without direct flights

2. Distance Profile: 250 -- 1500 mi3. Revenue Environment: Yield >= RJ Yield

New market opportunities

Note: RJ Yield Curve = 2005 Yields for ExpressJet and Pinnacle – 1 coupon)


New Market Opportunities – EU

Source: Back Aviation (OAG) and Embraer

0 40 80 120 160 200

2001-2005

1996-2000

Markets

Primary-Primary

Primary-Secondary

Secondary-Secondary

Point-to-Point – new routes to secondary cities/airports is increasing


Source: China Airline Traffic Statistics 2004. Only domestic routes less than1,500 nm

RJ 50 Market Opportunities – China Most of the routes have low demand density and low frequencies.

59% of total routes have less

than 1 daily frequency and

less than

135 pax/day


Yak-40Jet – 30 seats

122 aircraftAverage Age: 31 yrs

RJ 50 Market Opportunities – Russia

Tu-134

Turboprop - 50 seats122 aircraft

Average Age: 34 yrs

Jet - 76 seats123 aircraft

Average Age: 28 yrs

Jet - 120 seats54 aircraft

Average Age: 17 yrs

30-60Seat Segment

244 aircraft33 years old

(average)

An-24

61-90Seat Segment

91-120Seat Segment

Yak-42

Old Fleet Replacement

Source: BACK (Fleet PC Feb06)


RJ 50 Parked Aircraft

Source: Back Aviation (Fleet PC Mar31,2006)

90CRJ100/200/440USA, Canada & Caribbean

5ERJ145Latin America

2ERJ145

15CRJ00/200/440Europe

1ERJ 145Africa

Parked (as of Mar/06)

Aircraft TypeRegion

6%

1%

10%

% of Fleet Parked

113

8

105

Parked (as of Mar/06)

Total

ERJ145

CRJ100/200/440WORLD

Aircraft TypeRegion


RJ 50 Residual Value (RV) EvolutionRV by Quarter at 12 Years Age

ERJ 145s are sustaining Residual Values

Source: MBA Avitas Airclaims, et al

0.001.002.003.004.005.006.007.008.009.00

10.00

2002

Q420

03Q1

2003

Q220

03Q3

2003

Q420

04Q1

2004

Q220

04Q3

2004

Q420

05Q1

2005

Q220

05Q3

2005

Q420

06Q1

2006

Q2U

S$ M

illio

n

ERJ 145CRJ-200


RJ 50s Future

1. Will remain the backbone of USA hub feeding system

2. Potential for increasing frequencies in the USA and EU

3. New market opportunities in the USA and EU

4. Potential in China, Russia and other markets

5. Secondary market developing

6. ERJ 145 retaining Residual Values


ERJ 145 Family Orderbook

45

10

20

15

FirmBacklog

8491,073179894Total

667834157677ERJ 145

741142094ERJ 140

1081252123ERJ 135

DeliveriesTotalOptionsFirm Orders(as of December 31st, 2005)


ERJ 145 Family

The Evolution of Regionals

The 70 to 110-seat jet market evolution



0%

5%

10%

15%

20%

25%

30%

35%

<50 50 60 70 80 90 100 110 120 130 140 ≥150

Pax/Dep 2000 Seats/Dep 2000Pax/Dep 2005 Seats/Dep 2005

USA Domestic: Pax & Seats per DepartureJet aircraft (70-150 Seats)

% o

f Flig

hts

USA Industry is becoming more efficient through better matching demand with aircraft capacity

Pax/dep

Seats/dep2000

2000

2005

2005


0

1000000

2000000

3000000

4000000

2000 2005 2000 2005 2000 2005

Num

ber o

f Flig

hts

20-40% 41-60% 61-80% 81-95%

USA Dom.: Further Capacity Adjustment Opportunities

Load Factor distribution for USA domestic jet flights

RJ 50 70-110 Narrow-body (120-150)

There are further opportunities in the capacity adjustment process



0

100000

200000

300000

400000

RJ 50 NB 120-150

Num

ber o

f Ann

ual F

light

s

LFactor: 81-95% LFactor: 20-60%Source: Back Aviatio (T100 2005)

USA Dom.: Detail of Capacity Adjustment Opportunities

0

1000000

2000000

3000000

4000000

2000 2005 2000 2005 2000 2005

Natural Growth Right-sizing

E-Jets: The 70 to 110-seat market evolution


RightRight--sizingsizing

41%

Natural Natural GrowthGrowth

45%

0%

25%

50%

75%

100%

Source: Back Aviation (OAG 4Q05 routes)

% of Routes (4Q05)

New New RouteRoute

14%

E-Jets Family @ USA and Canada



28 E17078 routesAvg. Stage Length: 532 nm (985 km)






Dec/05: 89 EMBRAER 170/190 in service228 routes

Avg. Stage Length: 556 nm (1030 km)



E-Jets Family @ USA and Canada


% of Routes (4Q05)

RightsizingRightsizing

57%


39%

New New RouteRoute

4%

0%

25%

50%

75%

100%


E-Jets Family @ Europe



1 E1706 routesAvg. Stage Length: 456 nm

Dec/05: 21 EMBRAER 170 in service187 routes

Avg. Stage Length: 464 nm (859 Km)

Dec/05: 21 EMBRAER 170 in service187 routes

Avg. Stage Length: 464 nm (859 Km)




E-Jets Family @ Europe


E-Jets Family @ Asia & Middle East

Source: Back Aviation (OAG Feb/06)




% of Routes (Feb06)

RightsizingRightsizing

71%


New New RouteRoute

29%

0%

25%

50%

75%

100%






RA

SK /

M

Capacity

Regional Airlines

Beyond the Current Models...

There is a need for a new TOOL

Network Airlines

Low Cost Carriers

E-JetsE-Jets


E-Jets Family – Efficiency to all Business Models

Regional Network Low Cost

Source: 4Q05 Embraer Orderbook and Back Aviation (OAG 4Q05 routes)


70 to 110-seat Jets Future

1. Traffic growth on RJ 50 routes

2. Capacity increase on regional routes at peak hours

3. Mainline like services on regional routes

4. Right-sizing of low load factor narrow body flights

5. Replacement of old and inefficient jets

6. Expansion into medium density markets

7. Similar or higher service level compared to narrow body existing fleets

LOW

CO

STN

ETW

OR

KR

EGIO

NA

L


The E-Jets Family

The 70 to 110-seat market evolution


Operators 12Aircraft in Service 131Flight Hours 286,200Flight Cycles 192,132

E170/190 Family

EIS Statistics – E-Jets Family

Note: As of Mar 28th 2006


E-Jets Family Orderbook

* ECC leasing (Dec 31th, 2005)

Aircraft Customer Firm Orders Delivered Firm

BacklogALITALIA 6 6 0CIRRUS 1 1 0FINNAIR 10 4 6GECAS 8 7 1LOT POLISH 6 6 0PARAMOUNT* 2 1 1REPUBLIC 48 37 11SAUDIA 15 2 13SWISS 15 0 15TAME 2 0 2US AIRWAYS 85 28 57AIR CANADA 15 14 1LOT POLISH 4 0 4GECAS 3 0 3AIR CANADA 45 3 42COPA 12 2 10FINNAIR 6 0 6GECAS 20 0 20JETBLUE 101 7 94REGIONAL CAE 6 0 6TAME 1 0 1FLYBE 14 0 14SWISS 15 0 15

440 118 322

170

195TOTAL

190

175

Market Forecast

2006-2025


Embraer Market Forecast

TOTALTOTAL

91 91 –– 120120

61 61 –– 9090

30 30 -- 6060

SegmentSegment

3,2003,200

1,2501,250

1,3001,300

650650

2005 2005 -- 20142014

7,8007,800

3,0003,000

2,8502,850

1,9501,950

2005 2005 -- 20242024

7,9507,950

3,4503,450

2,9502,950

1,5501,550

2006 2006 -- 20252025

Source: Embraer

Worldwide Jet Deliveries by Capacity Segment

30 to 120-seat segment value = US$ 180 billion

3,3503,350

1,5501,550

1,3001,300

500500

2006 2006 -- 20152015


Embraer Market Forecast (2006-2025)

AsiaPacific

4105%

China5907%Africa &

Middle East2804%

USA, Canada& Caribbean

4,23053%

30 - 120 Seats: 7,950 Jets

Europe1,45018%

LatinAmerica

4656%

Russia & CIS5257%

Source: Embraer


Jet Fleet Evolution (30-120 seats)Fleet in Service – Current and Embraer´s Projection

Source: Back Aviation and Embraer

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1995 2000 2005 2015 2025

Num

ber o

f Airc

raft

30-60 61-90 91-120 Projected Fleet in Service

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.70 airlines. 43 countries. 1 manufacturer. EMBRAER70 airlines. 43 countries. 1 manufacturer. EMBRAER

Thank youThank you

2006 - embraer a&i meeting airline market

Documents

embraers written consent

property of embraer

forwardlooking statements

f 2007f2005

embraerthe information

forwardlooking events

f 2007f0

billionthe information