Embraer: The Brazilian Aircraft Manufacturer's Turnaround and Growth
|
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
Excerpts
Privatization and Turnaround
In December 1994, Embraer was privatized by the Brazilian government. Even after the privatization, the government retained a golden share with veto power which gave it control over strategic issues like sale of shares to foreign investors, employee relationships, and the terms of sale of aircraft to the military.
Control over the company was acquired by a syndicate of Brazilian investors, consisting of the Bonazo Group (a holding company with interests in industrial and financial ventures) and two of Brazil's largest government-owned pension funds, Previ and Sistel. Each of these investors held 20 percent of the voting capital of the company...
Focus on Regional Jets
When Botelho became the CEO of Embraer, with projects running behind schedule, most of the company's new product development initiatives were in a shambles. Consequently, Embraer had few products that showed commercial potential. An exception was the ERJ-145 project , which had been launched in 1989. The ERJ-145 was a 50-seat regional passenger jet, which was being designed to compete against Bombardier's comparable CRJ-200 aircraft...
The E-Jet Era
The success of the ERJ-145 demonstrated the potential for regional jets and prompted Embraer to consider manufacturing a full range of regional jets to tap more segments of the market. For a better understanding of the regional jet market, Embraer surveyed more than 60 airlines around the world. The survey indicated that the segment for mid-sized regional jets was greatly under-served. Bombardier was the leader in the 50-seat jet segment, while Boeing and Airbus competed in the 130-seat segment. However, no aircraft were available in the 70 to 110-seat segment. This also seemed to be the segment with the maximum potential. (According to analyst estimates, more than 60 percent of all flights in the US had been taking off with passenger headcounts in this range.)...
The Embraer - Bombardier Face-Off
Competition in the market for regional jets intensified in the late 1990s. Until the launch of the ERJ-145, Bombardier had been the dominant player in the regional jet market, with its family of CRJ aircraft. (Bombardier's CRJ-100, delivered to Lufthansa in 1992, had been the first 50-seat jet aircraft in aviation history.) At the end of 2005, Bombardier had more orders and deliveries than Embraer. But Embraer had more orders on hand. Besides, the net increase in the number of orders over the previous year was higher for Embraer than for Bombardier. The regional jet market had also been growing very rapidly since the mid 1990s (According to Fortune, a prominent business magazine, the market for regional jets had grown by 1,000 percent in Europe and around 1,400 percent in the US between 1995 and 2005)...
Business Jets and Microjets - The Emerging Trend
In the early 2000s, analysts were predicting a growing market for microjets - small aircraft with a takeoff weight between 5000 and 10,000 lbs, seating less than 20 passengers. These aircraft were usually bought by companies for their higher level executives, or by operators of air taxi services, although some were bought for personal use as well. Business jets, on the other hand, were not necessarily small, although they too were used for similar purposes...
The Outlook for Embraer
Embraer was one the largest and most successful companies in Brazil. In the years 1999, 2000 and 2001, it was Brazil's largest exporter. According to the company's website, between 1995 and 2005, Embraer had accounted for eight billion dollars of Brazil's trade balance. Analysts acknowledged that Embraer contributed significantly to Brazil's economic development and had had a positive impact on the country's international image...
Exhibits
Exhibit I: The Aviation Industry and Profiles of Major Aircraft Manufacturers
Exhibit II: Embraer's Products
Exhibit III: Embraer: Key Performance Indicators
Exhibit IV: Brazil and its Economy
Exhibit V: Deliveries and Order Backlog: Regional Jets Versus Turboprops
Exhibit VI: Orders and Deliveries of Regional Aircraft
Exhibit VII: Embraer: Revenue by Region and Segment
Exhibit VIII: Embraer's Restructuring
Exhibit VIII A: Embraer's shareholding pattern as of December 30, 2005
Exhibit VIII B: Embraer's shareholding pattern after the restructuring
Exhibit VIII C: Embraer's capital structure after the conclusion of the first stage of restructuring
Exhibit VIII D: New Embraer's structure after the Merger
Buy this case study (Please select any one of the payment options)
| Price: Rs.500 |
Price: Rs.500 | PayPal (11 USD) |
