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Thu, Nov 06, 2008

Report: Embraer Considers Step Into Large Airliner Market

Company Tries To Downplay Remarks... Not Quite Successfully

An executive with Brazilian planemaker Embraer said this week the company is reviewing the business case to develop a larger narrowbody aircraft, including a possible partnership with another manufacturer... but the company later took steps to downplay the resulting speculation.

Reuters reports Embraer CFO Antonio Luiz Pizarro Manso commented during a Tuesday conference call the company is considering whether or not to enter the 110-130 seat airliner market. That segment is now dominated by smaller variants of the Boeing 737 and Airbus A320 Family, though Embraer rival Bombardier hopes to poach orders from those manufacturers with its upcoming CSeries.

"Whether we should develop a larger plane, alone or with partners, is something that we will have to decide," Pizarro Manson said during the call announcing Embraer's Q3 earnings. "Right now, we think the market is well supplied by the existing models... So our strategy is to wait a bit, especially to see what kind of engine can be developed for such a project."

The plot thickens somewhat when you consider comments made by Airbus CEO Thomas Enders earlier this week, during a stop in Sao Paulo, Brazil. Enders said Monday the European planemaker was always open to a potential partnership with Embraer... one day before a planned visit to Embraer's production facility.

Pizarro Manso tried to downplay those remarks, to little avail. "We're always engaged in talks, but there is nothing specific at the moment," he said, noting Airbus parent company EADS is a partner in Embraer's unit in Portugal.

The resulting clamor in the commercial aerospace industry forced Embraer to 'clarify' the issue Wednesday.

"With reference to statements attributed to its Executive Vice-President, Finance and CFO, Antonio Luiz Pizarro Manso, during the conference telephone call for presenting the results of the third quarter of 2008, held on November 4, Embraer publicly clarifies that, at the present time, it is not seeking to associate with any other aircraft manufacturer in the world, neither does it have a project for developing large airplanes."

However, that stern rebuke was followed by a decidedly mixed message:

"Market trends for commercial jets have been constantly monitored by Embraer, which always seeks placement opportunities for its current product line. Furthermore, the Company has an engineering department devoted to preliminary studies of new programs and pre-competitive technological development... initiatives for associating with other companies or for launching products could be considered, based on a thorough study of possible scenarios, and they would be promptly announced to the market."

On Monday, Embraer announced it lost $22.6 million net in the third quarter of 2008. The company said it has not received any order cancellations due to the global financial downturn, though the situation may soon force some customers to postpone deliveries.

In happier news, Embraer also said it anticipates a market for 875 regional aircraft in the emerging Chinese market.

FMI: www.embraer.com

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