Global Credit Crisis May Hit Smaller Manufacturers Hard

The International Air Transport Association predicts the world's airlines will lose a total of $5.2 billion this year, and Airbus alone says up to 27 percent of its order backlog may be at risk. What does this mean for manufacturers of smaller airliners?

Embraer, the world's third-largest manufacturer of commercial jets behind Airbus and Boeing, was quoted Monday by Reuters as saying none of its customers have cancelled orders yet. The Brazilian company is sticking with its projections of between 195 and 200 deliveries of its popular regional jets during 2008.

Company president and CEO Frederico Fleury Curado told a media briefing in Singapore yesterday that the availability of credit is the biggest risk.

"We see signals that the customers' financing options are getting scarce," he said. "But so far we have had no direct impact. If this crisis goes on longer and deeper, then everyone will be affected. But we will have to wait and see."

Fleury Curado added that the credit crunch is affecting airlines the most. "We're seeing less impact on our business jets as those individuals and corporations that we target have easier access to credit, unlike the airlines."

One potential order on Embraer's short list may prove to be an omen. The planemaker is still in negotiations to sell several of its larger E-Jets to Aerolineas Argentinas, despite that carrier's widely publicized financial straits.

Embraer very much wants to build an assembly plant in Argentina, and hopes to sell the Argentine government about two-dozen Embraer 190s for the nation's two flag carriers, Aerolineas and Austral.

FMI: www.embraer.com