[EMBRAER logo]
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S/A
ANNOUNCES ITS LONG TERM MARKET OUTLOOK AND
ITS DELIVERIES SCHEDULED FOR 2002-2004
Sao Jose dos Campos, November 22, 2002 - Embraer (BOVESPA: EMBR3, EMBR4) (NYSE:
ERJ), one of the leading commercial aircraft manufacturers, announced today
during the Third Annual Investor & Analyst Meeting held at its Sao Jose dos
Campos Plant the following information to the market.
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Market Outlook
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Commercial Aviation
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The Company estimates the following world deliveries for the next 20 years
in the regional jet market:
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Segment 2003-2012 2013-2022 2003-2022
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30-60 1,745 1,765 3,510
61-90 1,175 1,415 2,590
91-120 1,090 1,420 2,510
Total 4,010 4,600 8,610
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The total world jet deliveries (30-120 passenger segments) is estimated to
reach 8,610 aircraft, with a total market value of US$180 billion in the
next 20 years.
The following is a geographical breakdown of the 20-year market outlook:
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Region Number of Aircraft %
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USA 4,795 56%
Europe 1,810 21%
Asia Pacific 490 6%
China 640 7%
Africa & Middle East 250 3%
Latin America 625 7%
Total 8,610 100%
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Corporate Aviation
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Embraer estimates the total market in Corporate Aviation during the next 10
years to reach 7490 aircraft, similar to the average forecast of other
companies operating in this market for the same period.
The Supermidsize corporate jet segment of the market is estimated to reach
an annual average of 163 deliveries during the next 10 years. The large
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corporate segment is estimated to reach an annual average of 96 deliveries
during the same period. Embraer estimates to reach a 10% market share in
the aggregate of these two segments.
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Delivery Forecast
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Embraer estimates the following delivery schedule for the period 2002-04,
including deliveries to commercial aviation, corporate aviation and
governmental transportation:
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2002 2003 2004
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132 148 155
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The 2002 delivery total is estimated to be reduced by three aircrafts as
this week one commercial aviation customer informed us about its intention
to postpone to April 2003 the delivery of two aircraft. The same decision
by this customer was taken in relation to other manufacturers. One
corporate customer informed us that it probably would not receive one
Legacy during this year, rescheduling the delivery for the beginning of
next year. Therefore, the 2003 delivery schedule is estimated to be
positively impacted by these three additional aircraft.
The following table presents the estimated breakdown of 2003-2004
deliveries:
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% of deliveries 2003 2004
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145 Family 74% 55%
170 Family 12% 29%
Legacy / Defense* 14% 16%
Total 100% 100%
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(*) Includes aircraft for governmental transportation.
For 2003, 85% of the deliveries scheduled represent firm orders. For 2004, this
amounts to 80%. The remainder of deliveries represent aircraft, that Embraer is
in the negotiating process to convert to firm orders.
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Financial Support For Sales
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Embraer announced on its third quarter earnings release that the following
structure was created in order to offer financial support for sales:
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EMBRAER S.A.
(Brazil)
Manufacturer
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Embraer Spain Holding Co. SL
(Spain)
Holding
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ECC Leasing Co. Ltd. ECC Investment Switzerland, AG
(Ireland) (Switzerland)
Leasing Holding
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ECC Insurance & Financial Co. Ltd.
(Cayman Islands)
Captive Insurance
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Embraer`s wholly-owned subsidiary ECC Leasing Co. Ltd was created with the
mission of managing and remarketing a portfolio of aircraft that Embraer may
acquire through trade-ins and repurchase obligations and provide remarketing
services for third parties in connection with its sales campaign. ECC Leasing
Co. Ltd. does not intend to lease new aircraft. For such transactions, it will
be necessary to obtain specific Board approval.
ECC Insurance & Financial Co. Ltd, regulated by the Cayman Islands Monetary
Authority, was established to provide a vehicle for Embraer to self-insure
against contingent losses that Embraer may face related to Embraer's financial
guarantees.
Embraer has received IRB (Instituto de Resseguros do Brasil - Brazilian
Reinsurance Institute) transaction approval for US$252.5 million in premium
payments (self-insurance funding) over the next five years covering 100% of te
exposure related to financial guarantees associated with deliveries within such
period. The initial capital invested in ECC Insurance is US$2.6 million. The
insurance policy issued associated with aircraft deliveries up to September 30,
2002 is expected to be funded with US$185.6 million in premium payments over the
next five years. The IBNR (Incurred But Not Recorded) provision recorded was
US$3.4 million during the third quarter 2002. New declarations and endorsements
(new premiums) are expected to occur on a quarterly basis, as new aircraft are
delivered.
Embraer expects the following transactions to occur involving these
subsidiaries: (i) the transfer of existing aircraft portfolio held by EFL to ECC
Leasing Co. with a book value of US$43 million; and (ii) the repurchase in 2003
of approx. US$50 million in aircraft - 10% of total previously disclosed
exposure. Based on the Company's current estimates, no relevant losses or gains
are expected to occur with transactions involving
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these aircraft. The Company believes that future sales may be increasingly
subject to trade-in options.
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Hedging Strategy
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Considering that: (i) Embraer has a firm backlog of US$9.6 billion; (ii) 97% of
its revenues are in US$; (iii) 75% of the R&D expenses are in R$; and (iv) 32%
of its total cash disbursements are in R$, the main objective of the Company's
hedging strategy is to optimize the natural hedge of its cash flow.
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For additional information please contact:
Embraer - Empresa Brasileira de Aeronautica S/A
The presentations made by our management are available on our website at
www.embreaer.com.br in the Investor Relations Section, item "Third Annual
Investor & Analyst Meeting".
Gustavo Poppe
(55 12) 3927 1106
gustavo.poppr@embraer.com.br
Milene Petrelluzzi
(12) 3927 3054
milene.petrelluzzi@embraer.com.br
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This document includes forward-looking statements or statements about events or
circumstances which have not occurred. We have based these forward-looking
statements largely on our current expectations and projections about future
events and financial trends affecting our business and our future financial
performance. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things: general economic,
political and business conditions, both in Brazil and in our market;
expectations of trends in the industry; our investment plans; our capacity to
develop and deliver products on the previously agreed dates; and existing and
future government regulations.
The words "believes," "may," "will," "estimates," "continues," "anticipates,"
"intends," "expects" and similar words are intended to identify forward-looking
statements. We undertake no obligations 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 press release might not occur. Our actual
results could differ substantially from those anticipated in our forward-looking
statements.
We provide estimates in this press release about the size of, and our share of,
the regional jet, corporate aviation and maintenance service markets. In the
process of making these estimates we have relied upon statistics and other
information from third-party sources that we believe are reliable, such as, but
not limited to, third party projections of GDP growth, inflation rates, and
other world economic growth estimates, as well as projections that include
revenue passenger miles, available seat per mile and fare prices. Based on this
third party data, we make our own estimates of inflation rates and GDP for the
United States and most countries in Europe and Asia, as well as a number of
other factors, which we use to ultimately estimate the size of the market for
regional jets, corporate jets and maintenance spending. Deriving these estimates
requires us to make numerous assumption and qualitative judgments that we
currently believe are reasonable. However, these assumption or judgments may
prove to be inaccurate or in error, in which case our estimates will no longer
be valid. We are not obligated to update any of the estimates that we provide in
this press release based on changes to any third party data or other factors
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that would change our underlying assumptions. In addition, we have not
independently verified the data provided by third parties or by industry or
general publications.
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