Spotlight on: Embraer's Fred Curado

For a chief executive approaching a major fork in the road, Fred Curado is surprisingly calm.

Curado, who recently completed his third year at the helm of Embraer, is spending an increasing amount of his time studying the Brazilian manufacturer's strategic options. After focusing his first three years on operational improvements and expanding Embraer's business jet product line, Curado realises now is the time to focus on positioning its commercial aircraft product line for the future.

But while Curado expects to decide by year-end on launching at least one new commercial aircraft product, he does not see the juncture Embraer now sits at as critical. "I think the word critical may be a bit strong," he says. "We have a stable situation. We're not going down the drain or anything like that."

Curado: "We have to be very confident to go against the 737 and A320," Curado says. "It's not only about the power of Airbus and Boeing but about the power of those two products. Those two products are very reliable. The customer base of those two products has to be respected."

Curado stresses that Embraer's current E-jet family is well positioned against all its competitors, including long-time rival Bombardier, as well as the newcomers, China's Comac, Japan's Mitsubishi and Russia's Sukhoi. He claims that even without swapping out the GE CF34 variants that power the E-jet family, the E-195 can match the new 110-seat Bombardier CSeries CS100 while the E-175 can match the new Mitsubishi MRJ on "any cost basis".

Both the CS100 and MRJ will be powered with new-generation geared turbofan engines from Pratt & Whitney.

"There's nothing wrong with our airplanes - they are the best that can be bought and will be the best for many years in that size. We must be pragmatic and rational in what we do because we are standing our ground. We're not losing market share," Curado says.

But he adds that Embraer needs to closely monitor Airbus and Boeing as the two big manufacturers ponder a response to the larger of the two CSeries variants, the 130-seat CS300. Airbus and Boeing are now looking at re-engining its A320 and Next Generation 737 families or developing a totally new narrowbody.

Embraer could compete in this sector by launching a new clean-sheet aircraft larger than the E-195, or it could decide to focus first on refreshing the E-jet family with new engines and potentially other improvements.

"There are important movements out there - obviously the CSeries and there is talk about Airbus and Boeing re-engining. Clearly both are going to do something - maybe a different strategy, maybe the same strategy; maybe different times, maybe the same times. I don't know [what path Airbus and Boeing will take but] we are monitoring that, we are studying," Curado says. "This market is not driven by CSeries. This market is driven by whatever Airbus and Boeing does. They are two important variables."

He adds that while Embraer has not launched a clean-sheet commercial aircraft in more than a decade it has been busy "investing heavily in technology". It has 16 new technology projects ongoing and Curado expects some of these technologies will be used in a new clean-sheet aircraft and/or an updated E-jet.

"Basically we think we'll be ready to do what we want when we're ready to launch it. We haven't been just sitting and waiting. We've been testing and monitoring. We have been looking at three avenues. And the answer is actually in the markets, not inside our brains," Curado says.

He has already ruled out one of three avenues - a new large turboprop. Embraer closely studied the turboprop market, a sector in which it has not participated since it stopped producing the EMB-120 Brasilia, but concluded it is not worth taking on the ATR and Bombardier duopoly.

"At this stage it's not very encouraging, the prospects of a new-generation turboprop," Curado says. "The market is there, but a third player is just too many for this time. And if you do that, of course given that you have limited resources, it prevents you from doing something else."

Curado has also ruled out the E-195X, which would have been straight stretch of the CF34-powered E-195. He says that when Embraer initially discussed the concept of a larger E-195 with potential customers "everyone was in love" with the aircraft as it "would be absolutely breathtaking in terms of economics".

But the airlines in the user group requested more range and other performance improvements. Curado says Embraer could not meet these requests and came to the conclusion the E-195X would be "too much of an underperformer".

Instead Embraer is looking at stretching the existing aircraft at the same time as introducing a new powerplant and possibly other upgrades. But Curado says that even with a more powerful engine Embraer would likely to be able to stretch the existing airframe by only two rows, which would expand the E-195's capacity in maximum density configuration from 122 to 130 seats.

To come to market with an even larger aircraft, Embraer would need to invest in a clean-sheet design. Curado declines to say what size category Embraer is looking at for its clean-sheet concept and says this would partly depend on how Embraer decides to position the E-195 following a potential re-engining.

But he says any new aircraft would definitely be larger than the existing E-195 and stresses that a decision to take on Airbus and Boeing will only be made after very careful thought and deliberation.

"We have to be very confident to go against the 737 and A320," Curado says. "It's not only about the power of Airbus and Boeing but about the power of those two products. Those two products are very reliable. The customer base of those two products has to be respected."

He points out that it takes a few years for any new aircraft to reach maturity, which gives existing products an inherent advantage. Curado says the E-Jets, which were certificated from 2004 to 2006, only reached maturity from a dispatch reliability perspective a couple of years ago. He sees no reason why they cannot match what the 42-year-old 737 and 22-year-old A320 have achieved in terms of longevity and customer acceptance.

"I think the longevity of the E-Jets will be something of that span. What it takes is a very balanced airplane. The E-Jet is very balanced," Curado says. "The airplane is modern. The avionics, the architecture for the cockpit is modern. It's a nice platform for upgrades. We have this powerful product line now."

In particular Curado sees no reason to change the E-Jet's cross-section. He says if the fuselage was narrowed, comfort would be lost, while if it was widened drag and fuel burn would be negatively impacted. "I think we are at a sweet spot in size of the aircraft section," Curado says. "It's hard to imagine a better four abreast cross-section than the E-Jets. It's optimised. It's comfortable. It has a lot of luggage space. It's not too heavy. It's really a nice tube. For four abreast that's the airplane."

But Curado adds that "we recognise products always need to be improved and once the whole industry is moving of course it calls from action from our side."

While Embraer will not tinker with the cross-sections of the E-Jets, Curado says other possible tweaks to the wing and shape could improve the aircraft's aerodynamics. He says there are several small improvements being studied that combined could improve fuel burn by a few percentage points.

But new engines are by far the biggest change under consideration, generating an estimated 12-15% fuel burn improvement. Embraer is in talks with General Electric, Pratt & Whitney and Rolls-Royce over potentially supplying new powerplants for the E-170/175 and E-190/195. Curado says all three engine manufacturers are promising similar benefits and claim they are ready to launch re-engining projects with Embraer.

"Today all three have similar numbers," Curado says. "It will come down to what is the actual final committed fuel burn, what is the actual final committed maintenance cost. It has to be a combination of acquisition cost, fuel burn, maintenance cost, availability of engine and weight. The fuel burn can't come at the expense of anything else. Those variables will play against each other."

© Embraer

Embraer has not yet decided whether to re-engine all four members of the family at once or initially opt only to re-engine the E-170/E-175 or E-190/E-195. Curado says Embraer will stick to having one engine for the entire family, but two variants would again be required if Embraer opted to re-engine all four aircraft types. He says Embraer also has not yet decided whether to package other updates with the new engines.

Curado says launching an updated/re-engined E-Jet and a clean-sheet aircraft is "a possibility", but quickly adds: "Well, maybe not at the same time." While he now expects to make a decision on both options by the end of the year, he stresses that "I'm not in a hurry to make a decision" and "we are not desperate".

Curado find it amusing that some analysts think he has not been focusing enough on commercial aircraft since taking over from Mauricio Botelho, Embraer's long-standing dynamic chief executive who in 12 years took the company from a small niche turboprop manufacturer to its current number three position among commercial aircraft manufacturers.

"I ran commercial for eight years," Curado says, referring to his former position as executive vice-president airline market. "If I have any bias it's commercial."

But he acknowledges Embraer has focused the past three years on growing its executive aviation business. Executive aviation is now a $1 billion business, compared with the $600 million business it was when Curado took the helm.

Curado expects executive aviation, which last year accounted for 16% of the company's revenues, to account for 20-25% of Embraer's revenues within the next few years. But after bringing several new business jets to market and launching development of others, Curado is ready to start focusing more on other sectors. "We now have critical mass. We are now part of the executive jet industry," he says.

Embraer's military business has also grown rapidly under Curado, becoming a $650 million business compared with the $225 million it generated in 2006. Curado expects Embraer's defence and services business, which includes maintenance and training, to account for another 20-25% of its revenues over the next few years. Last year the two sectors combined accounted for 20%.

Curado does not expect there will be a big spike in defence revenues until 2016 or 2017, or after the new KC-390 military transport aircraft enters production. Embraer last year won a contract from the Brazilian government to develop the KC-390, which Curado points out "will be a high value item" and "is a much bigger airplane than the Super Tucano".

The Super Tucano trainer is Embraer's only aircraft specifically developed for the defence sector as all its other military products are derivatives of its commercial or business aircraft products.

Curado expects commercial aviation will continue to be Embraer's main business, accounting for 50-60% of the company's revenues. Commercial aviation accounted for a 62% slice of the pie in 2009 and a 67% slice in 2008. The drop is due partly to growth in other sectors but also the economic downturn, which has driven a sharp decline in commercial aircraft deliveries.

Embraer delivered 122 commercial aircraft in 2009 and expects to deliver only 90 commercial aircraft in 2010. But Curado says that after being depressed for the past 30 months, the commercial market "is coming back gradually" and there are now several active sales campaigns. "I think we are bottoming out with the commercial jet deliveries this year," he says.

Asked if he foresees Embraer returning to the peak it reached in 2008, when it delivered 162 commercial aircraft, Curado responds: "I certainly hope so. The infrastructure is there."

He says that in the meantime Embraer has become a much leaner and more efficient company, having introduced since 2007 several operational improvements. "The good thing is the company has strengthened itself, and meanwhile we kept investing," he says.

While the legacy of Botelho can never be matched, Curado has quietly made his own mark, especially on the operational side, and is ready to make the biggest decision for Embraer since Botelho boldly decided in 1999 to launch the E-170.

Source: Flight International