Embraer Legacy airplane

Embraer Mulls China Return with Factory for Passenger Jets

Sept. 11, 2017
The plant would be the company’s first overseas factory for passenger planes.

Embraer SA is likely to consider building a commercial-aircraft factory in China in two years, Chief Executive Officer Paulo Cesar de Souza e Silva said, marking a potential shift in strategy after the company shut down its private-jet plant in the Asian country in 2016.

The Brazilian planemaker will wait for the rollout of its first E195-E2 aircraft in 2019 before it starts deliberating on the China plan, Silva said in an interview Friday in Singapore. The plant would be the company’s first overseas factory for passenger planes.

“We may consider it if we have the right partner and enough interest for our jets,” he said. “We see potential for a little bit over 1,000 aircraft of the size that Embraer manufacturers for the next 20 years in China. We have 80 percent of that market.”

Embraer, which spent last year battling a corruption scandal and falling private-jet deliveries, is looking to an aviation market that is expected to surpass the U.S. as the world’s biggest in less than a decade. In the market for commercial planes, Embraer will face stiff competition from the smallest single-aisle jets made by Boeing Co. and Airbus SE, as well as a locally-built regional jet  ARJ21 from state-owned Commercial Aircraft Corp of China Ltd.

China Market

In providing its 20-year demand forecasts, Boeing said this week that China will need 7,240 planes valued at almost $1.1 trillion. Seventy-five percent of that will be for narrow-body aircraft as full-service and discount carriers expand routes for both leisure and business travel.

Embraer is pitching lower operating costs with its E195-E2, saying the plane -- with 132 seats in a single-class configuration -- will have demand in China and Southeast Asia.

Around 330 Embraer aircraft are flown by customers in 17 Asia-Pacific countries at present, the planemaker said in an email.

The last time Embraer set up a factory in China -- to make executive jets -- it didn’t end well. Blaming lack of government incentives for dwindling demand, the company and its joint-venture partners said in June 2016 that they would phase out the plant in Harbin, which produced ERJ 145 regional jets and Legacy 650 business aircraft.

Demand is poised to rebound in the next three to five years as more airports are built to facilitate these aircraft, Silva said. China has about 450 private jets, while Brazil has 750 and Mexico more than 800, he said.

Embraer, based in Sao Jose dos Campos, Brazil, expects demand in Asia for its new KC-390 military transport and tanker, which was designed to replace Lockheed Martin Corp.’s C-130 Hercules, Silva said. The manufacturer is currently in talks with Portugal and expects an order this year, he said. It’s also in talks with New Zealand and five other countries in Europe and Latin America, he said without elaborating, adding some in Asia have shown interest for the aircraft.

“Step by step, Embraer will also be more present in Asia market for defense,” Silva said.

By Kyunghee Park and Fabiola Moura

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Licensed content from Bloomberg, copyright 2016.

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