As filed with the Securities and Exchange Commission on April 29, 2010

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OR

For the fiscal year ended: endedDecember 31, 20092012

OR

OR

Commission file number 333-132289

EMBRAER-EMPRESA BRASILEIRA DE AERONÁUTICA S.A.001-15102

EMBRAER S.A.

(Exact name of Registrant as specified in its charter)

EMBRAER – Brazilian Aviation Company Inc.

(Translation of Registrant’s name into English)

Federative Republic of Brazil

(Jurisdiction of Incorporation)incorporation)

Avenida Brigadeiro Faria Lima, 2170

12227-901 São José dos Campos, São Paulo, Brazil

(Address of principal executive offices)

Luciano Rodrigues Fróes

Head of Investor Relations

(55) 12 3927 4404

investor.relations@embraer.com

Investor relations department, (55) 12 3927 4404, investor.relations@embraer.com.br

(Name, Telephone, E-mail and/or facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:Act

Securities registered or to be registered pursuant to Section 12(g) of the Act.Act

None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.Act

Title of each class:class

US$500,000,000400,000,000 6.375% Guaranteed Notes due 2017 of Embraer Overseas Ltd.

Guaranteed by Embraer- Empresa Brasileira de AeronáuticaEmbraer S.A.

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2009:2012:

740,465,044 common shares, without par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x            Accelerated Filer  ¨            Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the International Accounting Standards Board  ¨    Other  ¨

Indicateprevious question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  x¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

i

ii

INTRODUCTION

In this annual report, “Embraer,” “we,” “us”“us,” “our” or “our”the “Company” refer to Embraer-Empresa Brasileira de AeronáuticaEmbraer S.A., formerly known as Rio Han Empreendimentos e Participações S.A. (as successor in interest to Embraer-Empresa Brasileira de Aeronáutica S.A., or former Embraer, as predecessor company, as a result of the merger of former Embraer with and into Embraer pursuant to the corporate reorganization described below), and its consolidated subsidiaries (unless the context otherwise requires). All references herein to the “real,” “reais” or “R$” are to the Brazilianreal, the official currency of Brazil. All references to “US$,” “dollars” or “U.S. dollars” are to United States dollars.

On March 31, 2006, our shareholders approved a reorganization of our corporate structure. The purpose of the reorganization was to, among other things, create a basis for the sustainability, growth and continuity of our businesses and activities by simplifying our capital structure and thereby improving our access to capital markets and increasing financing resources for the development of new products and expansion programs. For further information on our corporate reorganization, see “Item 4A. Information on the Company—History and Development of the Company—Corporate Reorganization.”

Presentation of Financial and Other Data

Financial Data

Our audited consolidated financial statements at December 31, 20082012 and 20092011 and for each of the years ended December 31, 2007, 20082012, 2011 and 20092010 are included in this annual report.

Our financial statements as of and for the years ended December 31, 2005 and 2006 have not been included in this annual report.

Our consolidated financial statements have been prepared in accordance with accounting principles generally acceptedInternational Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our consolidated financial statements for the year ended December 31, 2010 were our first annual consolidated financial statements that comply with IFRS as issued by the IASB. As permitted by the applicable rules, when making the transition from U.S. GAAP to IFRS, we did not include in this annual report our financial data as of and for the United Statesyear ended December 31, 2008, as they were prepared in accordance with U.S. GAAP and not IFRS.

After analyzing our operations and businesses with regard to the applicability of America,International Accounting Standards, or U.S. GAAP. Because we export more than 90%IAS, 21—“The Effects of our production and operateChanges in an industry that usesForeign Exchange Rates,” particularly in relation to the U.S. dollar as its currency of reference, our management believes that the U.S. dollar isfactors involved in determining our functional currency, management concluded that our functional currency is the U.S. dollar. This conclusion was based on an analysis of the following factors, as set forth in IAS 21: (1) the currency that mainly influences the sale prices of our goods and services, (2) the most appropriatecurrency of the countries whose competitive forces mainly determine the sale prices of our goods and services, (3) the currency that mainly influences prices of raw materials and other costs involved in providing our goods and services, (4) the currency in which to presentthe funds for financial operations are principally obtained, and (5) the currency in which revenue from operations is usually received. Items included in the financial statements of each of our subsidiaries are measured using the currency of the primary economic environment in which such subsidiary operates. Our audited consolidated financial statements. As a result, amounts for all periodsstatements included elsewhere in this annual report are presented have been remeasured intoin U.S. dollars, in accordance with the methodology set forth in Statement of Financial Accounting Standards guidance on foreign currency translations.which is our presentation currency. Our financial statements and financial data presented herein and prepared in accordance with U.S. GAAPIFRS do not reflect the effects of inflation.

Pursuant to the accounting standard guidance on foreign currency translations as it applies to us, non-monetary assets and liabilities, including inventories, property, plant and equipment, accumulated depreciation and shareholders’ equity, are remeasured at historical rates of exchange, while monetary assets and liabilities denominated in currencies other than U.S. dollars are remeasured at period-end rates. Export sales invoiced in currencies other than the U.S. dollar are remeasured at the respective exchange rate on the date of sale. Cost of sales and services, depreciation and other expenses relating to assets remeasured at historical exchange rates are calculated based on the U.S. dollar values of such assets and other non-U.S. dollar statement of income accounts are remeasured at the rate prevailing on the date of the charge or credit to income. Translation gains and losses are recorded under foreign exchange (gain) loss, net in our statement of income.

In our 2007, 20082012, 2011 and 20092010 consolidated financial statements, gains or losses resulting from the remeasurement of the financial statementsmonetary items and from foreign currency transactions have been reported in the consolidated statement of income as a single line items.

In our Form 20-F/A filed with the U.S. Securities and Exchange Commission, or SEC, on November 26, 2007, we restated our financial statements for the years ended December 31, 2004, 2005 and 2006.item.

For certain purposes, such as providing reports to our Brazilian shareholders, filing financial statements with theComissão de Valores Mobiliários (Brazilian securities commission), or CVM, and determining dividend payments and other distributions and tax liabilities in Brazil, we have prepared, and will continue to be required to

prepare, financial statements in accordance with Law No. 6,404 of December 15, 1976, as amended, or the Brazilian Corporate Law. Effective 2008, significant changes were introduced to the accounting aspects of the Brazilian Corporate Law by Law 11,638 of December 28, 2007. In addition, in 2008 certain changes to the accounting principles were introduced in 2008 andBrazil, as well as other changes to the accounting practices adopted in Brazil, or Brazilian GAAP, were introduced by theComitê de Pronunciamentos Contábeis (Brazilian Accounting Standards Setting Board) will, and have become effective in 2010. These changes to the accounting aspects of the Brazilian Corporate Law and Brazilian GAAP impacted our parent company financial statements as of and for the years ended December 31, 2012, 2011, 2010 and 2009 and the basis of our distribution of minimum mandatory dividends. Other than that, such changes had no effect toon our consolidated financial statements prepared in accordance with U.S. GAAPIFRS that are included elsewhere in this annual report. Our financial statements as of and for the years ended December 31, 2007, 2008 and 2009, prepared in accordance with the Brazilian Corporate Law, which are not included in this annual report, are not adjusted to account for the effects of inflation.

As a result of the reconciliation of amounts to the functional currency and other adjustments related to the differences in accounting principles between U.S. GAAP and Brazilian GAAP, the amounts of net income and shareholders’ equity as reported in our audited consolidated financial statements presented herein differ from those included in our statutory accounting records.

As a result of the listing ofBecause we list our common shares on theNovo Mercado segment of the BM&FBOVESPA S.A.-S.A.—Bolsa de Valores, Mercadorias e Futuros de São Paulo, or São Paulo Stock Exchange, sinceas of January 2009 we arehave been required to either translate into English our quarterly and annual financial statements including cash flow statements, preparedinto English. Foreign private issuers are not subject to the quarterly reporting requirements of Exchange Act Rules 13a-13 and 15d-13. Accordingly, foreign

private issuers that file annual reports on Form 20-F are only required to promptly furnish, in accordance with the Brazilian Corporate Law,a Form 6-K, such as in a press release or prepare such quarterly financial statements in accordance with,a relevant fact, material information that is (1) distributed to stockholders or reconciled to U.S. GAAPa national exchange, if made public by that exchange, or International Financial Reporting Standards, or IFRS.(2) required by its domestic laws to be made public.

Other Data and Backlog

In this annual report:

We calculate the value of our backlog by considering all firm orders that have not yet been delivered. A firm order is a firm commitment from a customer, represented by a signed contract and customarily accompanied by

a down payment, for which we have reserved a place on one of our production lines. Every time we refer to our backlog in this annual report, we only make reference only to firm orders and not to options. When we refer in this annual report to the number or value of commercial aircraft, we exclude two EMB 145s delivered to Satena Airline, a state-owned Colombian airline, in 2004. These aircraft have been included in our defense data. In July 2005, we started toWe also include the number of aircraft sold by the defenseour Defense and Security segment to state-owned airlines such as TAME and Satena, in our commercial aircraft backlog.

Special Note Regarding Forward-Looking Statements

This annual report includes forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, principally in Items 3 through 5 and Item 11 of this annual report. We have based these forward-looking statements largely on our current expectations and projections about future events and industry and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:

The words “believe,” “may,” “will,” “forecast,” “estimate,” “plan,” “continue,” “anticipate,” “intend,” “expect” and similar words herein are intended to identify forward-looking statements. We undertake no obligation 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 annual report might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. As a result of various factors such as those risks described in “Item 3D. Key Information—Risk Factors,” undue reliance should not be placed on these forward-looking statements.

PART I

Not applicable.

Not applicable.

The following table presents our selected financial data which has been derived from our consolidated audited financial statements prepared in accordance with IFRS as issued by the IASB and other data at and for each of the periods indicated. Selected financial data as of and for the years ended December 31, 2007, 20082012, 2011, 2010 and 2009 have been2009. The data for the year ended December 31, 2012 is derived from our consolidated financial statements, where were audited U.S. GAAPby KPMG Auditores Independentes, an independent registered public accounting firm, as stated in their report included in this annual report. For more details of our changing independent auditors, see “Item 16F. Change in Registrant’s Certifying Accountant.” You should read this selected financial data in conjunction with our audited consolidated financial statements and arerelated notes thereto included elsewhere in this annual report. The selected financial data presented for all other periods have been derived from our audited U.S. GAAP financial statements not included herein.

		At and for the year ended December 31,
		2009		2008		2007		2006		2005
		(in US$)
Earnings per Share
ADS – diluted(3)		1.36		2.16		2.64		2.10		2.54
Dividends per Share
Common share(1)(2)(3)		0.18164		0.32837		0.17361		0.21242		0.26080
Preferred share(1)(2)(3)		—		—		—		—		0.28688
ADS(1)(2)(3)		0.72656		1.31348		0.69443		0.84968		1.14752

		Year ended December 31,
Consolidated Statements of Income Data		2012				2011				2010				2009
		(in US$ millions)
Revenue			6,177.9				5,803.0				5,364.1				5,497.8
Cost of sales and services			(4,683.0	)			(4,495.9	)			(4,338.1	)			(4,428.4	)
Gross profit			1,494.9				1,307.1				1,026.0				1,069.4
Operating income (expense)
Administrative			(280.5	)			(262.5	)			(197.5	)			(191.3	)
Selling			(482.0	)			(419.3	)			(374.1	)			(304.6	)
Research			(77.3	)			(85.3	)			(72.1	)			(55.6	)
Other operating (expense) income, net			(42.8	)			(221.5	)			9.4				(138.5	)
Equity in losses of associates			(0.2	)			(0.3	)			—				—
Operating profit before financial income (expense)			612.1				318.2				391.7				379.4
Financial income (expense), net			(6.8	)			(90.7	)			17.5				10.2
Foreign exchange gain (loss), net			8.8				20.0				(1.1	)			(68.8	)
Profit before taxes on income			614.1				247.5				408.1				320.8
Income tax (expense) benefit			(265.5	)			(127.1	)			(62.7	)			158.1
Net income			348.6				120.4				345.4				478.9
Attributable to:
Owners of Embraer			347.8				111.6				330.2				465.2
Noncontrolling interest			0.8				8.8				15.2				13.7

		Year ended December 31,
Earnings per Share – Diluted		2012				2011				2010				2009
		(in US$, except for share data)
Net income attributable to owners of Embraer			347.8				111.6				330.2				465.2
Weighted average number of shares (in thousands) – diluted			725,023				723,667				723,665				723,665
Dilution – issuance of stock options (in thousands)			2,708				1,180				354				—
Weighted average number of shares (in thousands)			727,731				724,847				724,019				723,665
Diluted earnings per share			0.4780				0.1540				0.4562				0.6428

consequence, short-term repurchase transactions and bank certificates of deposits with high liquidity are now classified as cash equivalents, thereby causing us to reclassify those transactions as of December 31, 2007 and 2008 in order to provide for a same-basis comparison with transactions existing on December 31, 2009. See Note 3(d) to our audited consolidated financial statements.

(5)	Excludes non-recourse and recourse debt. Includes current portion of long-term debt.

(6)	Excludes non-recourse and recourse debt.

		At December 31,																At January  1, 2009
Consolidated Statement of Financial Position Data		2012				2011				2010				2009
		(in US$ millions)
Cash and cash equivalents			1,801.2				1,350.2				1,393.1				1,592.4				1,820.7
Financial investments			578.2				753.6				733.5				953.8				380.8
Other current assets			2,986.5				3,065.6				2,856.2				3,096.5				3,669.0
Property, plant and equipment			1,738.5				1,450.4				1,201.0				1,101.3				1,059.6
Intangible assets			958.9				808.3				716.3				725.5				689.9
Other long-term assets			1,427.1				1,430.2				1,490.9				1,420.0				1,331.2
Total assets			9,490.4				8,858.3				8,391.0				8,889.5				8,951.2
Short-term loans and financing			336.3				251.8				72.6				592.4				539.0
Other current payables			2,456.1				2,589.9				2,316.1				2,158.2				2,986.9
Long-term loans and financing			1,730.2				1,406.3				1,362.2				1,465.9				1,300.8
Other long-term liabilities			1,617.5				1,492.5				1,508.6				1,790.0				1,598.9
Company shareholders’ equity			3,258.3				3,007.3				3,028.4				2,792.7				2,455.6
Noncontrolling interest			92.0				110.5				103.1				90.3				70.0
Total shareholders’ equity			3,350.3				3,117.8				3,131.5				2,883.0				2,525.6
Total liabilities and shareholders’ equity			9,490.4				8,858.3				8,391.0				8,889.5				8,951.2

Exchange Rates

Prior to March 4, 2005, there were two principal legal foreign exchange markets in Brazil:

Most trade and financial foreign exchange transactions were carried out on the commercial rate exchange market. These included the purchase or sale of shares or payment of dividends or interest with respect to shares. Foreign currencies could only be purchased only in the commercial exchange market through a Brazilian bank authorized to buy and sell currency in these markets. In both markets, rates were freely negotiated.

Resolution No. 3,265 by theConselho Monetário Nacional (National Monetary Council), or CMN, dated March 4, 2005, consolidated the foreign exchange markets into one single foreign exchange market, effective as of March 14, 2005. All foreign exchange transactions are now carried out through institutions authorized to operate in the consolidated market and are subject to registration with the electronic registration system of the Central Bank of Brazil, or Central Bank. Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

Since 1999, the Central Bank has allowed thereal/U.S. dollar exchange rate to float freely, and during that period, thereal/U.S. dollar exchange rate has fluctuated considerably. At April 23, 2010, the selling exchange rate for U.S. dollars was R$1.7624 per US$1.00. In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian federal government will continue to let thereal float freely or will intervene in the exchange rate market through a currency band system or otherwise. Thereal may depreciate or appreciate against the U.S. dollar substantially in the future. See “Item 3D. —RiskKey Information—Risk Factors—Risks Relating to Brazil.”

The following table sets forth the selling exchange rate, expressed inreais per U.S. dollar, for the periods indicated.indicated:

		Exchange Rate of Reais to US$1.00
Year ended December 31,		Low				High				Average(1)				Period-end
2008			1.5593				2.5004				1.8346				2.3370
2009			1.7024				2.4218				1.9957				1.7412
2010			1.6554				1.8811				1.7601				1.6662
2011			1.5345				1.9016				1.6709				1.8758
2012			1.7024				2.1121				1.9588				2.0435

Source:

We will pay any cash dividends and make any other cash distributions with respect to the common shares inreais. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by the holders of American Depositary Shares, or ADSs, upon the conversion into U.S. dollars by the depositary of our ADS program of such distributions for payment to holders of ADSs. Fluctuations in the exchange rate between thereal and the U.S. dollar may also affect the U.S. dollar equivalent of thereal price of our common shares on the São Paulo Stock Exchange.

Not applicable.

Not applicable.

Risks Relating to Embraer

A downturn in commercial aviation may reduce our sales and revenue, and, consequently, our profitability, in any given year.

We expect that a substantial portion of our sales in the near future will be derived from sales of commercial aircraft, particularly the EMBRAER 170/190 jet family. Historically, the market for commercial aircraft has been cyclical due to a variety of factors that are both external and internal to the air travel industry, including general economic conditions.

The commercial airline industry has been negatively impacted by

In 2011, AMR Corporation, or AMR, the parent company of American Airlines, which currently operates a numberfleet of factors since 2001. First, the U.S. and world economies experienced an economic downturn that began in 2001 and was characterized by rapid declines in securities markets,216 ERJ 145 family aircraft through its wholly-owned subsidiary, American Eagle, filed for a decline in productivity and an increase in unemployment. Second, the terrorist attacks of SeptemberChapter 11 2001 caused an immediate decline in airline travel and a high level of financial uncertainty among the worldwide commercial airline industry.

In addition, airline travel decreased significantly in 2003 asbankruptcy. As a result of bothour customer American Airlines having filed for creditor protection under Chapter 11, we recorded a provision of US$317.5 million to cover losses estimated in relation to our financial guarantee obligations to the commencementvendor for 216 aircraft (ERJ 135, ERJ 140 and ERJ 145 models). During 2012, while the court was approving the proposed bankruptcy terms, we made payments of military action byUS$59.7 as a guarantee advance, which were presented as a reduction (disposals) of the United States and other countriesprovisions established in Iraq and2011. As of December 31, 2012, the concerns over outbreaksremaining balance for the additional provision of severe acute respiratory syndrome (SARS) in Asia and Canada. In response to these events, beginningguarantee obligations was US$211.8 million. The proposal for the restructuring of American Airlines was filed on September 8, 2012 with the court, which approved the conditions proposed in the fourth quarter of 2001, many airlines, including our largest customers at the time, reduced their flight schedules for the long-term and announced significant lay offs, and a number of airlines filed for bankruptcy protection.negotiations. As a result of the approval and formalization of the agreements between the parties, we agreed to modify, between 2001recognized the assets acquired and 2004, certain delivery schedules to adjustthe obligations assumed in relation to the changesoperation in our customers’ businessesthe amount of US$149.6 million. See “Item 5E. Operating and reduced scheduled commercial aircraft, executive jetFinancial Review and government transportation aircraft deliveries. In 2004, we reduced scheduled deliveries from 160 to 145 aircraft following US Airways’ second Chapter 11 filing in September 2004. In 2003 and 2004, we also re-evaluated our risk exposure related to aircraft valuations and customer credit risk, which resulted in charges to income of US$40.6 million and US$16.0 million, respectively.Prospects—Off-Balance Sheet Arrangements.”

Although the U.S. and world economies showed some signs of recovery starting in 2004, many airlines continued to face increased competition, escalating insurance costs, increased security costs, credit downgrades, liquidity concerns and bankruptcy, and later sharply higher fuel costs. For example, on January 5, 2010, Mesa Air Group, Inc., or Mesa, one of our important customers, filed for Chapter 11 protection from creditors. From 2000 to

2003, we have delivered 36 ERJ 145 aircraft to Mesa. As a result of our aircraft sales to Mesa and based on our risk assessment of this airline’s Chapter 11 filing, on December 31, 2009 we recorded a US$103.0 million charge against income, of which US$74.4 million are represented by collateral in the form of cash deposited in escrow, in recognition of estimated losses that we classify as probable with respect to financial guarantees extended by us in connection with sales of our aircraft to Mesa.

In the second half of 2007, the economies of the U.S. and many other countries began to experience downturns which were characterized by, among other factors, instability in securities’ value and capital markets, instability of currencies, a widespread reduction in demand, sharp reductions in the availability of credit and inflationary pressure.

By the second half of 2008, the additional effects of the severe economic downturns in our markets included significant reductions in air travel and contractions in corporate and personal spending which, as a result, have negatively impacted our product lines. Additional impacts of such downturns on the air transport industry have included a decrease in orders of executive jets and a decrease in the volume of financing available to our customers for aircraft purchases, particularly in the commercialCommercial Aviation and executive aviationExecutive Jets segments (see “Item 4B.4C. Information on theThe Company—Business Overview—Aircraft Financing Arrangements”). A continued downturn in general economic conditions could result in further reductions in air travel and decreased orders from our customers for our aircraft. Our customers could also defer or cancel their purchases of our aircraft. We cannot, at this time, predict the magnitude or duration of the impact that the above events will have on the air transport industry as a whole and on our business in particular.

In February 2009, we had to laylaid off approximately 20% of our labor force as part of our efforts to reposition Embraer in view of the current global economic crisis.downturn. The cost of these layoffs was approximately US$60.461.3 million. In addition, we also experienced someaggregate cancellations of 60 aircraft orders by several of our customers including the HNA Group, a Chinese airline, which reduced its firm orders for the ERJ 145 regional aircraft from 50 to 25, of which 18 had been delivered by March 31, 2010 (for more information on aircraft cancellations, see “Item 3D. —Our aircraft sales are subject to cancellation provisions that may reduce our cash flows”flow”).

We cannot guaranteeassure you that material cancellations will not occur in the future or that our other businesses will not be affected. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our revenue and backlog.

We depend on key customers and key suppliers, the loss of any of which could harm our business.

Commercial aircraft. As of MarchDecember 31, 2010, all of our firm orders in backlog for the ERJ 145 regional jet family were attributable to a Chinese company, the HNA Group. The aircraft will be assembled by our joint venture Harbin Embraer Aircraft Industry Company Ltd., formed with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., subsidiaries of China Aviation Industry Corp., or AVIC. In addition, as of March 31, 2010, approximately 52.4%2012, 49% of our firm orders in backlog for the EMBRAER 170/190 jet aircraftfamily were for the HNA Group from China and JetBlue Airways fromin the U.S. Furthermore, as of March 31, 2010, approximately 68.4% of our firm orders, Flybe in backlog for the EMBRAER 195 jet aircraft were forU.K., Azul the new Brazilian airline founded by David Neeleman.Linhas Aereas Brasileiras in Brazil and BOC Aviation in Singapore. We believe that we will continue to depend on a select number of key customers, and the loss of any one of which could reduce our sales and reduce our market share. Fewer sales could reduce our profitability.

Increasingly, due to the current global economic crisis,slowdown of the past few years, the commercial airline industry is seeking to reduce costs and increase efficiency, and is experiencing a consolidation process through mergers and acquisitions and alliances through code-sharing arrangements. Although it is expected that such consolidations and alliances may result in the creation of more stable and competitive airlines, they may also have the effect of reducing the number of existing and potential customers and, possibly, the number of purchases of our aircraft.

Defense aircraft. TheForça Aérea Brasileira, or Brazilian Air Force, is our largest customer of defense aircraft products. SalesRevenue from sales to the Brazilian federal government accounted for approximately 28%more than 60% of our defense salesDefense and Security revenue for the year ended December 31, 2009.2012. A decrease in defense spending by the Brazilian federal government due to defense spending cuts, general budgetary constraints or other factors that are out of our control could decrease our defense sales.Defense and Security revenue. We cannot assure you that the Brazilian federal government will continue to purchase aircraft or services from us in the future at the same rate or at all.

Key suppliers. Our risk-sharing partners develop and manufacture significant portions of our aircraft, including the engines, hydraulic components, avionics, interior and parts of the fuselage and tail. Once risk-sharing partners have been selected and program development and aircraft production have begun, it is difficult to substitute these partners. In some cases, the aircraft are designed specifically to accommodate a particular component, such as the engines,engine, which cannot be substituted by another manufacturer without significant delays and expenses.expense. This dependence of ours on these key suppliers makes us susceptible to the risks of performance, product quality and financial condition of these risk-sharing partners.

We cannot assure you that we will not experience significant delays in obtaining key equipment in our manufacturing process in the future. A large numberamount of the equipment employed by the aircraft industry is subject to export control regulations and, as such, deliveries are dependent on suppliers having secured the applicable export licenses. In 2007, deliveries of equipment for one of our defense products were temporarily suspended due to export control requirements. Although we work closely with, and monitor the production process of, our risk-sharing partners and major suppliers, the failure of our risk-sharing partners and other major suppliers to meet our performance specifications, quality standards or delivery schedules or to comply with regulatory requirements (including export control requirements) could affect our ability to deliver new aircraft to customers in a timely manner.

Our aircraft sales are subject to cancellation provisions that may reduce our cash flows.flow.

A portion of our aircraft firm orders is subject to significant contingencies both before and after delivery. Prior to delivery, some of our purchase contracts may be terminated, or all or a portion of a particular firm order may be canceled, for different reasons, including:

Our customers may also reschedule deliveries or cancel orders, particularly during an economic downturn. During 2009,In 2012, we experienced somehad revenue of US$41.7 million related to contractual fines charged from customers due to contract cancellations, compared to unusually high contractual fines charges of aircraft orders by our customers, including the HNA Group, a Chinese airline, which reduced its firm orders for the ERJ 145 regional aircraft from 50 to 25, of which 18 had been delivered by March 31, 2010. In addition, for a variety of reasons,US$67.1 million in 2009 we experienced another 35 cancellations in our commercial aircraft orders, which may have an impact on our results of operations starting in 2011 assuming our backlog remains at current levels until then. This compares to no cancellations in 2008 and 30 cancellations in 2007.2011. Although these cancellations occurred primarily in our commercial aviationExecutive Jets business, we cannot guarantee that in the future we will not experience material cancellations in our other aircraft segments. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our sales and revenue, and, consequently, our profitability, for that year. A substantial number of cancellations or extensions of delivery schedules could reduce our sales and revenue for a given year, which in turn would reduce our cash flow and backlog.

CertainSome of our aircraft sales may be subject to financial and residual value guarantees and trade-in options that may require us to make significant cash disbursements in the future.

We have in the past guaranteed, and may in the future guarantee, the financial performance of a portion of the financing for, and the residual value of, some of our aircraft that have already been delivered. Financial guarantees are provided to financing parties to support a portion of the payment obligations of purchasers of our aircraft under their financing arrangements to mitigate default-related losses. These guarantees are collateralized by the financed aircraft.

Residual value guarantees typically ensure that, in15 years after the 15^th year afteraircraft delivery date, the relevant aircraft will have a residual market value equal to a percentage of the original sale price. More recently, residual value guarantees have been issued to ensure a residual market value 10 years after the aircraft delivery date. Most of our

residual value guarantees are subject to a limitation (a

“cap” “cap”) and, therefore, on average, our residual value guarantee exposure is limited to 18%16% of the original sale price. In the event of an exercise by a purchaser of its residual value guarantee, we will bear the difference, if any, between the guaranteed residual value and the market value of the aircraft at the time of exercise.

Assuming all customers who are supported by off-balance sheet financial guarantees defaulted on their aircraft financing arrangements, and also assuming we were required to pay the full aggregate amount of outstanding financial and residual value guarantees and were unable to remarket any of the aircraft to offset our obligations, our maximum exposure under these guarantees (less provisions and liabilities) would have been US$1,600.2631.9 million (or, subtracting provisions and liabilities already recorded in the amount of US$114.0 million as reflected in Note 25 to our audited consolidated financial statements, US$517.9 million) under these guarantees as of December 31, 2009.2012. As a result, we would be obligated to make substantial payments that may not be recoverable through proceeds from aircraft sales or leases, particularly if in the future we are not able to remarket any of the aircraft to offset our obligations or financing defaults occur with respect to a significant portion of our aircraft. The value of the underlying aircraft is more likely to decrease and third parties are more likely to default during economic downturns. For further discussion ofsee our exposure to these off-balance sheet arrangements, seeguarantees in Note 3537 to our audited consolidated financial statements.

In addition, in connection with the signing of purchase agreements for new aircraft, we maysometimes provide trade-in options to our customers.customers in purchase agreements for new aircraft. These options provide a customercustomers with the right to trade in existing Embraer aircraft upon the purchase and acceptance of a new aircraft. We had one trade-in option outstanding in 2011, which was cancelled in 2012, before it was exercised. In 2008,2012, we were required to accept fouraccepted 7 aircraft, with a total value of US$56.7 million, for trade-in and by April 2009 we were required to accept eight additional commercial aircraft that were subjectpursuant to trade-in options. Currently,options signed in 2012 with respect to 14 aircraft. As a result, we are currently subject to trade-in options relating to five7 aircraft, including two options entered into in 2010 as a result of trade-ins tied to contractual obligations with customers and to their taking delivery of certain new sales.aircraft. In addition, other aircraft may become subject to trade-in due to new sales agreements. The trade-in price is determined inbased on the manner discussed under “Item 5A. Operating Results—Critical Accounting Estimates—Guarantees and Trade-In Rights” for commercial aircraft.new aircraft sold, as well as other factors, including a market value assessment performed by independent third party appraisers. We may be required to accept trade-ins at prices that are above the market price of the aircraft, which would result in financial loss for us when we remarket the aircraft.

We continuously re-evaluate our risk for therelated to financial guarantees and trade-in obligations based on a number of factors, including the estimated future market value of our aircraft based on third-party appraisals, including information developed fromon similar aircraft remarketing in the secondary market and the credit rating forof the customers. In this regard,respect, based on our risk assessment of Mesa’s Chapter 11 filing, on December 31,in 2009 we recorded a US$103.0 million charge against income, of whichreserved US$74.4 million are represented byof collateral in the form of cash deposited in escrow in recognition of estimated losses that at the time we classifyhad classified as probable with respect to financial guarantees extended by us in connection with sales of our aircraft to Mesa.

In 2011, we made a total net provision of US$362.8 million related to exposure from financial and residual value guarantee obligations from Mesa Airgroup (US$45.3 million) and AMR (US$317.5 million). Of this amount, US$107.4 million was accounted for under financial (expenses) income, net, and, therefore, does not impact our operating margin. The remaining US$255.4 million was accounted for under other operating income (expense), net, and, therefore, impacted our operating margin for the year. In 2012, we made an additional provision of US$6.0 million, which is accounted for under operating income (expense), net.

Any future unexpected decrease in the market value of the aircraft covered by trade-in rights or financial guarantees would decrease our ability to recouprecover the amounts payable to satisfy our obligations and cause us to incur additional charges to income. If we are required to pay amounts related to such guarantees, we may not have sufficient cash or other financial resources available to do so and may need to seek financing to fund these payments. We cannot assure you that the then-prevailing market conditions would allow us to resell or lease the underlying aircraft at its anticipated fair value or in a timely manner. Consequently, honoring our financial guarantee or trade-in obligations could require us to make significant cash disbursements in a given year, which, in turn, would reduce our cash flow in that year.

Any decrease in Brazilian federal government-sponsored customer financing, or increase in government-sponsored financing that benefits our competitors, may decrease the cost-competitiveness of our aircraft.

Historically, when purchasing our aircraft, our customers have benefited from export financing incentives provided by Brazilian government-sponsored export programs. The most important of these government programs iswas a system of interest rate adjustments called thePrograma de Financiamento às Exportações (the Export Financing Program), or ProEx program.ProEx.

As a result of past disputes between the Canadian and Brazilian governments at the World Trade Organization, or WTO, regarding the granting of export subsidies relating to sales of aircraft, the Brazilian federal government ultimately amended the ProEx, program so that any ProEx payments would not decrease the effective interest rate below the interest rate permitted by the WTO, and the Canadian government has also made changes to theirits financing arrangements for sales of aircraft by Bombardier, Inc., or Bombardier, a Canadian aircraft manufacturer.

Although the ProEx program is currently in compliance with WTO rules, other export financing programs available to our customers may be subject to challenge in the future. If, in the future, ProEx program or another similar Brazilian export financing program is not available, or if the terms of ProEx are substantially changed such that our customers’ export financing costs become higher than those offered by other export credit agencies, or ECAs, that support our competitors exports, our competitiveness in the future, or if its terms are substantially reduced, our customers’ financing costs could be higher and our cost-competitiveness in the regionalcommercial jet market could decrease.

Any future government subsidies supporting any of our major competitors may cause the cost-competitiveness of our aircraft to suffer and our sales to decline.

In July 2007, Brazil and the Organization for Economic Co-operation and Development, or OECD, countries entered into an agreement known as the Aircraft Sector Understanding to establish a “level-playing field” for official export financing support of aircraft. Export Credit Agencies, orfor aircraft exports. ECAs from signatory countries are required to offer the same basic financial terms and conditions when financing sales of competing aircraft.aircraft that compete with those produced by the jet manufacturers of their respective countries. The effect of the agreement is to encourage aircraft purchasers to focus on the price and quality of aircraft products offered by aircraft manufacturers rather than on the financial packages offered by their respective governments. As a result of the above agreement, financing support by the Brazilian federal government to the potential purchasers of our aircraft will contain similar terms and conditions offered to such purchasers by The Boeing Company, or Boeing, Airbus S.A.S., or Airbus, and Bombardier or any other competitor from a signatory country to such purchasers.the Aircraft Sector Understanding of the OECD. By the end of 2007, theBanco Nacional de Desenvolvimento Econômico e Social (Brazilian Social and Economic Development Bank), or BNDES, started to offer financing to our customers under terms and conditions required by the agreement.OECD’s Aircraft Sector Understanding. To the extent we do not continue to maintain the pricing advantage and quality of our aircraft, our future sales may be negatively affected. In addition, aircraft manufacturers from countries which are not signatories to the agreement may be able to offer financing packages which will negatively affect the cost competitiveness of our products.

Any future government subsidies supporting any of our major competitors may cause the cost-competitiveness of our aircraft to suffer and our sales to decline.

Budgetary constraints of theThe Brazilian federal government couldmay reduce funds available to our customers under government-sponsored financing programs.

From 19962004 through 2009,2012, approximately 28%18.0% of the total value of our Commercial Aviation export deliveries was subject to financing support by the BNDES and the Export Guarantee Fund (Fundo de Garantia à Exportação). As, or FGE, a government agency,special fund linked to the Ministry of Finance and managed by the BNDES relies on funds allocated by the Brazilian national budget.to foster exports. We cannot ensure that the Brazilian federal government will continue to provide sufficient funding in the national budget for the financing of our aircraft or that other sources of funding will be available to our customers. The loss or significant reduction of funds available to our customers, without an adequate substitute, could lead to fewer deliveries and result in lower profitability for us.

We may face a number of challenges resulting from the development of new products and the possible pursuit of strategic growth opportunities.

As we continue to develop new products, we may need to reallocate existing resources and coordinate with new suppliers and risk-sharing partners. From time to time, there is significant competition within the aviation industry for skilled personnel in general and engineers in particular. To the extent such competition reoccurs, we may be unable to recruit and retain the necessary number of highly skilled engineers and other personnel we require. Failure to coordinate our resources in a timely manner or to attract and retain skilled personnel could slow down our development efforts and cause delays in production and deliveries of our aircraft, which would delay recognition of revenue.

We may pursue strategic growth opportunities, including joint ventures, acquisitions or other transactions, to expand our business or enhance our products and technology. We may face a number of challenges, including difficulties in identifying appropriate candidates, assimilating their operations and personnel and maintaining internal standards and controls, as well as the diversion of our management’s focus from our ongoing business. We cannot assure you that we will be able to meet these challenges or that our business will not face disruptions.

We may havebe required to refund cash contributions in connection with the production or development of the EMBRAER 170/190 jet family, the Phenom 100/300 jet family and the Legacy 450/500 jet familyour aircraft if certain milestones for each of theseour aircraft are not reached.