Questions for MARCO TÙLIO PELLEGRINI, President & CEO of Embraer Executive Jets
Given the current global economy and the figures published in 2016 by General Aviation Manufacturers Association (GAMA), the business aviation market is undergoing turbulent times. Has business aviation had its golden age and is it undergoing profound change?
The business aviation industry’s performance depends on global economic growth. The current global economic scenario and political instability promote the lack of confidence. It does not mean an undergoing profound change, but we also are observing potential changes in customers’ behaviors (not only in aviation but in other industries as well) moving from the asset ownership to the service. In the current or future scenario we believe we are well positioned, especially in possible new model of business jet use based on high utilization aircraft to offer a new style of air transport. New business models could provide more alternatives for business aviation to reach a larger audience.
How do you see the future of this industry and will it be, over time, radically different from what we know today, both from the perspective of markets and the way it operates?
We believe that new business models will significantly increase demand for the segment. There is a huge gap between airlines and current business aviation utilization. Considering business aircraft as a productivity tool, new technologies that enhance connectivity, communication and comfort may offer many more people a premium service that complements regular point-to-point transportation. In the future, customers will continue require product with high reliability, ease of maintenance and low operating costs. I’m glad that Embraer Executive Jets today already meets these requirements, by leading a new generation of light and midsize jets that were designed with advanced technologies for high utilization. We have been able to listen to our customers’ feedbacks not only to design our products, but also to build award-winning global customer support and service network. We are prepared for a promising future.
What is the state of the pre-owned aircraft market and what impact does it actually have on the sales of your aircraft?
The pre-owned business-jet inventory is still high, but we have seen the volume decreasing slightly. Combined with the lack of confidence in the market, it clearly impacts sales activities for the entire industry. On the other hand, the pre-owned market also offers opportunities to our current customers for services, including interior refurbishment, new exterior paint, Wi- Fi capability upgrades or additional navigation features. In addition, the DNA inherited from our commercial aviation heritage makes our products among the best in terms of reliability and residual value.
Has the recent announcement of a possible explosion of debt in China caused you to revise your market forecasts in this country, and in Asia in general?
The Company forecasts a global demand of 8,400 new business jets, valued at USD 244 billion. The total market opportunity comprises all manufacturers and projects a compound annual growth rate (CAGR) of 3% per year over the next 10 years, approximate to the past decade. The analysis foresees that demand is likely to exceed the last decade’s deliveries of 8,166 business jets, valued at USD 198 billion. The new deliveries forecast is a reflection of the decelerated growth in emerging markets, resulting from a strong dollar, low commodity prices, slowdown in China and India, as well as a volatile financial and political scenario in Latin America. In addition, the US and Europe are expected to remain the largest markets. Moreover, the small and medium jet segments are expected to represent the majority of the market deliveries, with 61%.
Today, what regions in the world dominate your sales?
The U.S. will continue to be the largest market for the business aviation market. Today, it represents nearly two thirds of the global demand.
How does the European market’s behavior affect Embraer?
Europe is an important market for Embraer Executive Jets, mainly for large- cabin aircraft. Close to one-third of Embraer’s executive jets fleet is in operation in the region and we expect to maintain a strong presence there. The European market is flat today, but it is still the second largest market in the world.
Since 2015, the ultra-long-range aircraft segment has been hit by market volatility. What was the impact on your aircraft family and despite it all do you think that this aircraft segment will continue to dominate the market?
We are well-positioned in all segments in which we compete. In just a decade, we designed and certified a broad portfolio of business jets to meet customers’ varied needs. Because of a strategic decision, we have not yet designed a product for the ultra-long-range market, given that today customers are well served by the current players. What we have seen today, however, is that some operators are evolving from ultra-long-range aircraft to midsize aircraft that offer the same level of comfort and connectivity without compromising their missions. Although a significant amount of the revenue remains in the ultra-long-range segment, we are confident that scenario will change with the increasing demand in the midsize market. For instance, 99.5% of U.S. bizjet missions are under 3,125 nautical miles, which the Legacy 500 can perform perfectly.
So, in the medium term, are you planning a higher-category aircraft between the Legacy 600/ 650 and Lineage 1000E?
We are constantly studying market opportunities, but no new program has been announced yet.
Legacy 500 and Legacy 450 are now both on the market. It was your last important program on business aviation division. How many aircraft are currently in service and what has been the feedback from users?
We see the Legacy 500 and the Legacy 450 as game-changers for their respective categories. The market has responded to them and we are ramping up production, including the addition of a new assembly line in Melbourne. A fleet of over 60 aircraft is already in operation worldwide. Customers’ satisfaction has been excellent and we are excited with the field performance of the fleet. A high level of dispatchability and maturity has been noted since the entry into service of both aircraft.
Can you give us an update on the Phenom 100EV and Legacy 650E programs?
Both programs are performing smoothly and are on track for certification this year. The first Phenom 100EV will be delivered in the first quarter of 2017. The aircraft will enjoy dual launch customers, each with unique operating requirements. Mexico’s Across, a premium business aviation services provider, will benefit from the aircraft’s hot-and-high performance out of its base at Toluca International Airport (TLC) and Emirates Flight Training Academy, the new world class training facility set up by Emirates Airlines to address the industry’s growing demand for pilots.
Faced with a market segment hit by the economic downturn, what is the future of the Lineage 1000E within your aircraft family? Will you develop a new Lineage with the E2 version?
The Lineage 1000E is of notable value among the larger business aircraft currently available, but one look at the manufacturer’s other remarkable executive jets clearly illustrates that every Phenom, Legacy and Lineage is designed to provide class-leading performance and comfort along with state-of-the-art technologies at a cost that transforms the definition of each corporate jet sector. In terms of sales, the Lineage 1000E is gaining traction in the U.S. market with customers who desire a combination of a large cabin and long-range capability. Using the new E2 platform is a possible step, but there is no decision on that yet.
Will you significantly expand the Melbourne site?
Melbourne has played a strategically important role in the success of Embraer’s business aviation operation, which has been the most prominent effort in the company’s diversification effort since Embraer Executive Jets was formed in 2005. Not only is Melbourne a prime location in which to build a loyal, lasting relationship with the world’s large business aviation market, it also is part of Florida’s Space Coast community, which has supported every one of NASA’s historic space programs, a heritage that grants Embraer access to the most concentrated population of engineers in North America. Embraer’s growth in Melbourne has been nothing short of impressive. Our 21st-century facility for the assembly of the Phenom 100, Phenom 300, Legacy 450 and 500 business jets along with the International Customer Center and Engineering & Technology Center already employs over 600 people and we expect to double this number soon. We are committed to maintaining an investment in the business aviation market, and our presence in Florida is part of this vision.
By Frédéric Vergnères
Copyright : Embraer