Embraer: The Brazilian Aircraft Manufacturer's Turnaround and Growth
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Case Code: BSTR243 Case Length: 31 Pages Period: 1969-2006 Pub Date: 2007 Teaching Note: Available |
Price: Rs.500 Organization: Empresa Brasileira de Aeronáutica S.A Industry: Aerospace Countries: Brazil Themes: Turnaround |
Abstract Case Intro 1 Case Intro 2 Excerpts
"Embraer is one of the hottest manufacturers in the industry today. They're willing to push into areas that others haven't explored."
- Donald Burr, the founder of People Express Airlines
"A lot of people have tried and failed. But since 1960 only one new company and one new country have successfully entered the commercial aircraft market."
- Richard Aboulafia, an analyst at the Teal Group Corporation
"Years ago our competitors said: 'How dare those ugly ducklings from South America try to sell a jet in the Northern Hemisphere' Fortunately, they underestimated us."
- Satoshi Yokota, Embraer's Executive Vice-President for
Engineering and Development, in 2006.
Embraer Launches New Business Jet
In May 2006, Empresa Brasileira de Aeronáutica S.A. (Embraer) announced the launch of its new business jet, the Lineage 1000 (Lineage). The Lineage's design was based on Embraer's successful E-190 regional passenger jet6 platform, and the aircraft had the capacity to seat between 13 and 19 passengers, depending on the cabin design. The cabin could be split into five zones, and customers could choose from a variety of interior design options, which included putting in a standup shower and a full-size bed. The Lineage was a long haul plane, with a range of 4,200 nautical miles.
Embraer called the Lineage an 'ultra-large' business jet, and was expected to position it against the Boeing Business Jet.
The first Lineage aircraft, which was priced around $41 million, was scheduled to enter service in late 2006.
The Lineage was the newest addition to Embraer's range of business jets, which included the Legacy 600, the Phenom 100, and the Phenom 300. As of mid-2006, Embraer was the fourth largest aviation company in the world (in terms of aircraft deliveries), behind Airbus SAS (Airbus), The Boeing Company (Boeing), and Bombardier Aerospace (Bombardier) (Refer Exhibit I for a note on the aviation industry and the profiles of major aircraft manufacturers). In addition to business jets, Embraer also manufactured commercial, military and agricultural aircraft (Refer Exhibit II).
Embraer was set up in the late 1960s, as a public sector enterprise by the Brazilian government.
After some initial successes, the company ran into trouble in the late 1980s, and was privatized in 1994. Under private management, Embraer concentrated on developing regional jets, which pitted it directly against Canada-based Bombardier (the first company to introduce regional jets) in the aviation market. Embraer made a major foray into business jets with the successful launch of its Legacy 600 in 2000. After this, analysts said that the company was well positioned to take advantage of the rapidly growing market for small and mid-sized aircraft and business jets in the early 2000s. In 2005, Embraer had a net income of $446 million from revenues of $3.8 billion, and employed nearly 17,000 people (Refer Exhibit III for Embraer's key performance indicators)....
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