2004 - Presentation Made In Canada With Canaccord Capital

CanadaAnalyst &InvestorsMeeting

March 2004Canada

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.

This presenta t ion inc ludes forward-look ing s ta tements or s ta tements about events or

c i rcumstances wh ich have no t occur red . We have based these fo rward-look ing s ta tements

largely on our current expectat ions and pro ject ions about fu ture events and f inanc ia l t rends

a f fec t ing our bus iness and our fu ture f inanc ia l per formance. These fo rward-look ing

s ta tements are sub jec t to r isks , uncer ta in t ies and assumpt ions, inc lud ing, among o ther

th ings: general economic, pol i t ica l and business condi t ions, both in Brazi l and in our

market .

The words “ be l ieves,” “ may,” “ will,” “ es t imates,” “ cont inues,” “ ant ic ipates,” “in tends, ”

“ expec ts” and s imi lar words are in tended to ident i fy forward-look ing s ta tements . We

under take no ob l igat ions to update publ ic ly or rev ise any forwar d-look ing s ta tements

because o f new in format ion, fu ture events or o ther fac tors . In light o f these r isks and

uncer ta in t ies , the forward-look ing events and c i rcumstances d iscussed in th is presenta t ion

might not occur. Our actual resul ts could d i f fer substant ia l ly f rom those ant ic ipated in our

fo rward-look ing s ta tements .

Forward Looking Statement


High Technology

Qualified People

Global Presence

Flexibility

Cash Intensiveness

Fundamentals

Aeronautical Industry Fundamentals

CUSTOMER SATISFACTION

Backbone of our entrepreneurial action

Airline Market Status, Trends

and Outlook


Share of US Domestic Passenger Enplanements

S o u r c e : A v S t a t A s s o c i a t e s , I n c . a n a l y s i s o f U . S . D O T d a t a .

91%84%

71%65%

7%

16%19%

5% 9% 13% 16%3%

0%

20%

40%

60%

80%

100%

1980 1990 2000 2002

Majors Low Cost/New Entrants Regionals

Market Evolution - USA


Share of Intra-European RPKs

86% 82% 82% 81% 79% 78% 73% 73%

8%

14% 17% 17% 17% 18% 17% 19% 19%

8%

1%1% 1% 2% 4% 5%

0%

20%

40%

60%

80%

100%

1995 1996 1997 1998 1999 2000 2001 2002

Majors Low Cost Regionals

S o u r c e : A E A , E R A , A T I2002 Low Cost Data Est imated

Low Cost: easyJet + Go + Ryanair

Market Evolution - Europe


• Fundamental Correct ion – Not a Tradit ional Cycle

• Decreasing Average Fare Values

• Decreasing Capacity (USA)

• Increasing Low Cost Carrier Critical Mass

• Increasing Regional Jet Critical Ma s s

• Pressure on Exist ing W orldwide Airline Model

• Major USA Airl ines trying to re-invent the m selves

• Regional aff i l iates strongly being used as defensive tools

(point-to-point X hub and spoke)

• Low cost carriers also being inserted in the current “major”

airl ine model

An Industry in Transition


37 Seats

44 Seats

50 Seats

50 Seats (2,000 nm range)

Responding to Market Needs


Jan 1995 – 336 Routes

Jan 2003 – 944 RoutesSource: BACK OAG ( Southwest, Jetblue, Airtran and Frontier )

Low Cost Networks - USA


Source: BACK OAG ( Ryanair, easyjet, Buzz and GO)



Low Cost Networks - Europe


RA

SK

Capacity

Traditional Main Line Full Service Model

Regional Regional

Jet ModelJet Model

Low CostModel

. . . increase capacity to match market growth,

or/and expand their air services to secondary city pairs

LCC Next Steps...


.... Natural Growth, or Capacity Rightsizing,There is a need for adding another component

E - Jet

Model

Regional

Jet Model

Traditional Main Line Full Service ModelR

AS

K

Capacity

Low CostModel

Beyond the Current Model...


34 % of flights depart with loads

appropriate

for 100-110 seat aircraft27 % of flights depart

with loads appropriate

for 70-80 seat aircraft

Passengers per Departure

<50<50 5050 100100 140140

17%

3%

2%

4%

9%

14%

17%

13%

8%7%

4%

2%

Pe

rce

nta

ge

o

f T

ota

l D

ep

art

ure

6060 7070 8080 9090 110110 120120 130130 >150>150

S o u r c e: Back ( U S D O T T 1 0 0 J a n - S e p 2 0 0 2 )

The Need for 70-110 Seat Jets in the USA


Replacement o f Ageing AircraftFleet in Service (61-120 seat segment - Dec/2002)

S o u r c e : F l e e t P C ( S c h e d u l e d A i r l i n e s , Ac t i ve in S e r v i c e a n d A l l P a s s e n g e r C o n f i g u r a t i o n)

372

208

108

277

330

453

304

0

100

200

300

400

500

0 - 5 6 - 10 11 - 15 16 - 20 21 - 25 26 - 30 >30

Aircraft Age (Years)

Nu

mb

er

of

Air

cra

ft

689 aircraft with more than 20 years

(34 % of total fleet in service)

Market Opportunities - Global


70 – 78 Seats

78 – 86 Seats

98 - 106 Seats

108 – 118 Seats

Fleet Management Flexibility and Load Factor Optimization

E-conomics – Aircraft Commonality


Large Baggage

CompartmentMockup

Highest

Volume / Pax

Cross Section


Cross Section Comparison

EMBRAER 170/190


*Based on Total Operat ing Costs; Average OW net fare 500 s m USD 90; 600 s m USD 98

USA Environment

EMBRAER 170 78 seat

EMBRAER 17586 seats

EMBRAER 190106 seats

EMBRAER 195118 seats

PROFITBREAK-EVEN*

40 PAX (51%) 38 PAX

44 PAX (51%) 42 PAX

57 PAX (54%) 49 PAX

62 PAX (53%) 56 PAX

*Based on Total Operat ing Cost

500 s m for EMBRAER 170 /175

600 s m for EMBRAER 190 /195

E-conomics – Profitable by Design


E - Jet Model

N e w EmbraerE-Jet family

N e w EmbraerE-Jet family

Regional Regional

Jet ModelJet ModelTraditional Main

Line Full Service Model

Low CostModel

Filling an Untapped Market


Roll Out – EMBRAER 190


Feb 9th, 2004

EMBRAER 190 RollOut Ceremony


March 12th, 2004

EMBRAER 190 1 s t Flight

Airline Market

Forecast


World (30-120 seat segment): 8 ,450 jets (US$180 bill ion)

World Deliveries by Segment - Jets

4,750

1,700

1,600

1,450

2014 - 2023

8,450

2,950

2,900

2,600

2004 - 2023

3,700 (*)TOTAL

1,25091 – 120

1,30061 – 90

1,15030 - 60

2004 - 2013Segment

Market Forecast 2004-2023

( * ) Open demand àà approximately 2,900 a/c


AsiaPacific

480

6%

AsiaPacific

480

6%

China

635

8%

China

635

8%

USA, Canada& Caribbean

4,740

56%

USA, Canada& Caribbean

4,740

56%

30 - 120 Seats: 8,450 Jets

Europe,

Middle East

& Africa

1,970

23%

Europe,

Middle East

& Africa

1,970

23%Latin

America &Caribbean

625

7%

LatinAmerica &Caribbean

625

7%

Market Forecast 2004-2023

Commercial Backlog


181

144

20

17

Firm

Backlog

7101,393502891Total

5311,150475675ERJ 145

741142094ERJ 140

1051297122ERJ 135

DeliveriesTotalOptionsFirm(as of December 31s t , 2003)

ERJ 145 Family Orderbook


260150110EMBRAER 190

550305245Total

453015EMBRAER 195

245125120EMBRAER 170

TotalOptionsFirm(as of December 31s t , 2003)

EMBRAER 170/190 Family Orderbook

Corporate Aircraft Market Status, Trends

and Outlook


Corporate Aviation: a crowded marketplace

L e a r 4 5 $ 1 0 , 3 M G L O B E x p $ 4 4 , 4 M

F 7 X $ 3 5 , 8 M

G 500 $ 3 7 , 5M

G 550 $ 4 5 , 8 M

G 400 $ 3 2 , 5 M

G L O B 5 0 0 0 $ 3 3 , 5 M

Chal 6 0 4 $ 2 4 , 9 M

F 9 0 0 C $ 3 0 , 4 M

F 9 0 0 E X $ 3 4 , 3 M

G 2 0 0 $ 2 0 , 2 M

C h a l 3 0 0 $ 1 7 , 4 M

F 5 0 E X $ 2 0 , 0 M

F 2 0 0 0 $ 2 2 , 6 M

H o r i z $ 1 8 , 0 M

C i t X $ 1 9 , 4 M

G 1 0 0 $ 1 1 , 8 M

L e a r 6 0 $ 1 2 , 7 M

8 0 0 X P $ 1 3 , 0 M

L 4 5 X R $ 1 0 , 8 M

E n c o r e $ 7 , 6 M

E x X L S $ 1 0 , 2 M

Lear 31 $6 .6M

B 4 0 0 A $ 6 , 6 M

B r a v o $ 5 , 7 M

C J 1 $ 4 , 0 M

C J 2 $ 5 , 2 M

P r e m i e r $ 5 , 6 M

S J 3 0 $ 5 , 5 M

S o v e r e i g n $ 1 3 , 5 M A C J $ 4 7 M

B B J 2 $ 6 5 M

B B J 1 $ 5 2 M

L A R G E U L O N G R A N G EL I G H T M I D L I G H TE N T R Y M I D S I Z E S U P E R M I D S I Z E G L O B A L

G 300 $ 2 5 , 5M

G 150 $ 1 3, 5 MLear 40 $ 7 ,7M

C J 3 $ 6 , 0 M

F 2 0 0 0 E X $ 2 3 , 8 M

L e g a c y $ 2 1 , 2 M

G 450 $ 3 3 , 0M

G 350 $ 2 7 , 5M

Note: Prices - BC&A May03Except for G 350


Legacy Competitive Environment

G 1 5 0 $ 1 3 , 5 M

G 1 0 0 $ 1 1 , 8 M

L e a r 6 0 $ 1 2 , 7 M

8 0 0 X P $ 1 3 , 0 M

S o v e r e i g n $ 1 3 , 5 M

M I D S I Z E

C i t a t i o n X $ 1 9 , 4 M H o r i z o n $ 1 8 , 0 M

S U P E R M I D- S I Z E

F 2 0 0 0 $ 2 2 , 6 M F 5 0 E X $ 2 0 , 0 M

C h a l 3 0 0 $ 1 7 , 4 M G 2 0 0 $ 2 0 , 2 M

F 2 0 0 0 E X $ 2 3 , 8 M L E G A C Y $ 2 1 , 2 M

F 9 0 0 E X $ 3 4 , 3 M F 9 0 0 C $ 3 0 , 4 M

C h a l 6 0 4 $ 2 4 , 9 M G l o b 5 0 0 0 $ 3 3 , 5 M

G 4 5 0 $ 3 3 , 0 M G 4 0 0 $ 3 2 , 5 M

G 3 5 0 $ 2 7 , 5 M G 3 0 0 $ 2 5 , 5 M

L A R G E

Note: Prices - BC&A May03

Except for G 350


Legacy - A New, Breakthrough Concept

Based on a proven airplane platform, The Legacy

Family provides the ideal balance of comfort,

performance and cost in three versions:

• Executive

• Shuttle

• Shuttle HC


Supermidsize category

10 20 30 40 50ft

m 3 6 9 12 15

Challenger 30023‘8”(7,22m)

25‘(7,62m)

Horizon

G20024‘6”

(7,46m)

42’6”(12,94m)


Large category

10 20 30 40 50ft

m 3 6 9 12 15

Falcon 200026‘4”

(8,01m)

G40041’

(12,49m)

42’6”(12,94m)


Market Forecast

DeliveriesCategory

1,250Super Mid-Size

900Large

975Mid-Size

Embraer Forecast (10yrs): 6,525 aircraft

3,400Other segments

15%

15%

10%

16%

21%

12%

9%2% E N T R Y

L I G H T

M I D L I G H T

M I D S I Z E

S U P E RM I D S I Z E

L A R G E

U L T R A L O N GR A N G E

G L O B A L

15%

15%

10%

16%

21%

12%

9%2%

15%

15%

10%

16%

12%

9%2% E N T R Y

L I G H T


L A R G E


G L O B A L

D e l i v e r i e s S h a r e

15%

15%

10%

16%

21%

12%

9%2% E N T R Y

L I G H T

M I D L I G H T

M I D S I Z E


L A R G E


G L O B A L

15%

15%

10%

16%

21%

12%

9%2%

15%

15%

10%

16%

12%

9%2% E N T R Y

L I G H T


L A R G E


G L O B A L

15%

15%

10%

16%

21%

12%

9%2% E N T R Y

L I G H T

M I D L I G H T

M I D S I Z E


L A R G E


G L O B A L

15%

15%

10%

16%

21%

12%

9%2%

15%

15%

10%

16%

12%

9%2% E N T R Y

L I G H T


L A R G E


G L O B A L

D e l i v e r i e s S h a r e

4%6%

5%

22%

5%

23%

20%

15%

E N T R YL I G H T

M I D L I G H T

MIDSIZE

S U P E RMIDSIZE

L A R G E


G L O B A L

R e v e n u e S h a r e

4%6%

5%

22%

5%

23%

20%

15%

E N T R YL I G H T

M I D L I G H T

MIDSIZE

S U P E RMIDSIZE

L A R G E


G L O B A L4%

6%

5%

22%

5%

23%

20%

15%

E N T R YL I G H T

M I D L I G H T

MIDSIZE

S U P E RMIDSIZE

L A R G E


G L O B A L

R e v e n u e S h a r e

Defense Market


Defense Market Product Line

S U P E R T U C A N O A M X- T F-5 BR M2000 BR

E R J S / L E G A C Y E M B 1 4 5 A E W & C EMB 145 RS/AGS E M B 1 4 5 M P / A S W ( P- 99)


International leading position for Special Mission Aircraft


U.S. Army

ACS – Aerial Common Sensor

RC-12

RC-7

Replacement of the RC-12and RC-7 by a single and

more capable platform

EMBRAER is teamed with Lockheed Martin for the

ACS Program


U.S. Navy

Replacement of the EP-3 Aries II

The U.S. Navy joined the U.S. Army’s ACSProgram in July 2003

EMBRAER is teamed with Lockheed Martin for the EP-3

Replacement Program

Backlog & Delivery Forecast


Backlog

US$ bi l l ion

1.23.0 4.1

6.4

11.4 10.79.0

10.6

11.3

12.7 12.713.2

17.5

1996 1997 1998 1999 2000 2001 2002 2003

Options

Fi rm Orders

1.23.0

4.1

17.7

24.1 23.422.2

28.1


4

32

59

96

160 161

131

101

160170

1996 1997 1998 1999 2000 2001 2002 2003 2004 E 2005 E

Jet Deliveries


Deliveries Forecast

53% 48%

37%

12% 15%

35%

2004 2005

ERJ 145 Family EMBRAER 170 Family Corporate

53% 48%

37%

12% 15%

35%

2004 2005

ERJ 145 Family EMBRAER 170 Family Corporate

160 expected deliveries for 2004 and 170 for 2005

Global

Presence


Global Presence

Operations in Brazil, United States, Europe, Asia and Australia

BrazilGaviã o Peixoto

BotucatuSã o José dos Campos

USANashvi l le

Pa lm Beach GardensFort Lauderdale

FranceLe Bourget

ChinaBeijingHarb in

AustraliaMelbourne

SingaporeSingapore


Roll-out Ceremony

First Chinese made ERJ-145

Dec 16 th , 2003

Social Responsibility


Employees

3.8494.494

6.737

8.302

10.33411.048

12.22712.941

1996 1997 1998 1999 2000 2001 2002 2003

BRAZIL 12.086

USA 482

CHINA 165

Singapore 10EUROPE 189

AUSTRALIA 09

This Year:

780

Employees


Foccus on Training

More than US$ 96 million invested intraining and development in the last 5 years

21 18 1425

18

1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3

In–house courses:

• 18 - month graduate course in Aeronautical Engineering

• 2 - year MBA course focused on international trade

US$ million


Health & Environment

EnvironmentISO 14001 Certificate

(Mar/2002)

Health & SecurityCertification OHSAS 18001

(Mar/2002)

2003FinancialResults


Delivery of jets

4

32

59

96

160 161

131

101

1996 1997 1998 1999 2000 2001 2002 2003


Net Revenues and Gross Margin

77% 36% 50% 6%A n n u a l

V a r i a t i o n

-14%

2,143.5

1,353.5

1,837.3

2,927.0

2,525.82,762.2

37.7%

39.4%39.6%

32,0%32,0%

28,3%

1998 1999 2000 2001 2002 2003

US$ mill ion

-15%


Net Revenue per Segment and Market

E x p o r t s

95%

Brazi l

5%

Defense

Aviation

12%

Customer

Services and

other related

business

8%

Executive

Aviation

11%

Commercial

Aviation

69%

REVENUES PER SEGMENT

FY2003

GEOGRAPHIC BREAKDOWN

FY 2003


274.9

469.6

651.4

462.1

368.0

171.7

12 .8%

18.6%

22.3%

16.7%

20.0%

12.7%

1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3

Income from Operations

250% 114% 26% 41%A n n u a l

V a r i a t i o n-28%

US$ mill ion

-41%


Net Income

4 ,618% 61% 37% 2%A n n u a l

V a r i a t i o n -32%

136.0

222.6

328.4320.7

234.5

145.3

6.3%

8.8%

11.2%11.6%

10.7%

12.8%

1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3

US$ mill ion

-39%


Foreign Currency

76%

Brazilian Currency

24%

Debt

Total Debt of US$1,043.7 mill ion

Considering Currency Swaps:

Average cost in R$ = 16.7% pa (76.5% CDI)

Average cost in US$ = 4.6 % pa


Debt Maturity

2 0 61 1 5

1 0 51 0 1

5 1 7

1 0 4 4

Total Short Term 2005 2006 2007 2008 on

In US$ mil l ion

S h o r t T e r m

5 0 %L o n g T e r m

5 0 %

Loan Average Maturity : 2 years and 2 months


Net Cash (Debt) Position

US$ mill ion

(212)

43

(178)

222104

-22

-333-415

733

1998 1999 2000 2001 2002 Mar .31 ,

2003

June

31,2003

Sep.31 ,

2003

Dec.31 ,

2003


Short-term Trade Accounts Receivable

US$ mill ion

117160

597

736

913

790

981

356

1999 2000 2001 2002 Mar.31,2003 June 30,

2003

Sep. 30,

2003

Dec. 31,

2003


Inventories

1 0 2 1 1 0 2 9

1 1 7 31 1 2 7

8 8 0

1 0 3 8

6 1 6

7 7 3

1999 2000 2001 2002 Mar . 31 ,

2003

J u n e 3 0 ,

2003

S e p . 3 0 ,

2003

D e c . 3 1 ,

2003

US$ mill ion


Capex and Productivity


US$ mill ion

PP&E & R&D

64.8

111.0

143.8

114.2

60.1

173.2158.5

113.7

69.6

18.8

1999 2000 2001 2002 2003

P P & E

R & D


Planned Investments

R&D Tota l

- Commercial Aviation

- Corporate Aviation

- Others

Defence

20052004

174

139

16

19

42

119

72

27

20

54

Product ivi ty and P P & E 64 81

T O T A L 280 254

US$ mill ion

Defence Investments are funded by thei r contracts and are not inc luded

in the R & D e x p e n s e s, but in Cost of Sales and Serv ices.

2004 - Presentation Made In Canada With Canaccord Capital

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Transcript of 2004 - Presentation Made In Canada With Canaccord Capital