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September 13, 2010
Brazilian aircraft manufacturer Embraer plans to deliver 120 of its Phenom small business jets and 17 of its larger Legacy and Lineage jets in addition to 90 airliners in 2010. The number would be higher except that ramp-up of the Phenom 300 production line has been slower than anticipated because of both internal and vendor-related problems, according to Embraer executives.
While demand for its jets remains strong, the company has seen its backlog dwindle from $20.9 billion in 2008 to $16.6 billion in 2009 to $15.2 billion as of the end of the first half of 2010. However, some of the reduction in backlog is because of the delivery of a high volume of Phenom 100 entry-level jets in the past 18 months. The company now has nearly 160 of the Phenom 100s in service; only about 10 Phenom 300s have been delivered since the model was certified in late 2009. The company has 550 Phenom orders on the books, from 44 countries. As of mid-2010, business jets represent about 12 percent of the company’s $249 million in net income.
Embraer officials believe that by the end of 2010 they will own some 50 percent of the entry-level and light business jet market—a remarkable feat for a company that delivered its first jet in that category less than two years ago. Some of the market share has come at the expense of Cessna. The Phenom 100 and 300 compete directly with Cessna’s Mustang and smaller Citation CJ products. According to Embraer, it had 3.3 percent of the overall business jet market in 2008, but that number jumped to 14 percent in 2009. Meanwhile, Cessna’s share of market dropped from 40 percent to 33 percent. Besides Embraer, the only other company to gain market share in that period was Gulfstream, which saw its share climb from 6 percent to 9 percent.
At an early September media event for aviation journalists at its headquarters in Sao Jose dos Campos, Brazil, Embraer released a 10-year forecast for all business jets predicting the delivery of 10,000 jets worth some $190 billion. The industry delivered 8,000 jets worth some $155 billion in the 10-year period from 2000 through 2009. Actual performance during that time was higher than projected in 2000—even though the forecasts from then did not predict the precipitous decline in purchases beginning in 2008.
Entry-level and light jets will account for about 40 percent of deliveries in the coming decade, making Embraer’s Phenom product line an important part of the company’s product line.
Certification of the super mid-size Legacy 650 is scheduled for late 2010. The Legacy 650 is a longer-range version of the Legacy 600, of which 190 units have been delivered. The 650 features the new Honeywell Primus Elite advanced cockpit, better sound proofing, and about 10 percent more thrust than the 600—in addition to greater range. The new cockpit and sound suppression will be available on the 600 beginning in 2011.
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