After sitting on a secret MoU since May, Embraer was able to tell the world this week of what could well end up as one of the largest contracts ever seen in the regional aircraft industry. It was thus a decidedly happy Maurício Botelho, Embraer's president and chief executive officer, who spoke to Alan Dron on prospects for his company.
Q: You have just announced 25 firm orders and 175 options for the EMB-145 regional airliner from Continental Express. Perhaps an obvious question, but just how important was that contract for the programme as a whole?
A: Its importance goes beyond the order itself. It goes toward assuring a long-term basis for the programme. This will bring in other potential customers that we've been talking to. If they do not now go faster [in negotiations] they will lose their slot positions. It's a lever for the future.
Q: What do you feel will make airlines buy the EMB-145 in preference to its competitors? Will it sell largely on the basis of price?
A: We did a survey of the 100 busiest US airports. Some 85% of take-offs had as their destinations airports that were within 1,110km (600nm) range. Our aircraft, which has an acquisition price in the range of an advanced turboprop and lower than that of our main jet competitor, can provide lower operational costs than even the turboprops from 460km onwards. We think it's a matter of economic evaluation. If you then take into account a passenger perception that he associates the idea of turboprops with obsolescence, that he wants to have the comfort, speed and reliability of a jet and if the aircraft can provide that at turboprop costs, it is evident to us that our 145 will take a significant portion of the market.
Q: How do you see sales being divided up between the various continents?
A: The US first, followed by Europe, then South America and Australia roughly equal. We think the Australian market will be very relevant. It's a large country with a small population but sophisticated passengers and long, thin routes.
Q: When it announced its EMB-145 order, Continental Express said it would use them on hub-and-spoke. Do you foresee other airlines, particularly in Europe, using the EMB-145 and similar types to establish more direct city pairings that would not be otherwise profitable?
A: Very much. It's a market that's opening up very fast, especially when you see the deregulation that is coming to European skies.
Q: Embraer has just come through the privatisation process. How has the staff coped?
A: Very well. Any private organisation that wants success bases its efforts on people - there's no other way to be effective, productive and aggressive. When you transform a state-owned company, you have to take care of your people, challenge them and take care of their career planning, plus give them proper remuneration based on their results. We're 18 months into privatisation and have had several very relevant achievements. In the first half of 1996, our losses were $49 million compared with $207 million in the same period last year. Administration and overhead costs have come down very sharply over the same period, from $179 million to $55 million. We will make a loss of $50-60 million this year compared with $300 million in 1995. We expect to be profitable next year.
Source: Flight Daily News
