Aviation Day Organized By Banco Ita

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  • 1. Embraer Business

2. Embraer Business The aerospace business is supported by 5 pillars High TechnologyQualified PeopleGlobal Business Cash IntensivenessFlexibility 3. High Technology 4. High TechnologyThe Virtual Reality CenterProvides visualization of theaircraft structure and systemsduring the project phase,using 3D electronic models. Reduces the developmentcycle. 5. High Technology Digital Mock-Up EMBRAER 170 6. High Technology Digital Mock-Up ERJ 145 7. Qualified People 8. Qualified People25% of the 11,048 employees, are engineersPhD Educational Levels0,2%Graduate29,3% Post Graduate High School4,7%64,5% Master 1,3% 9. Qualified PeopleMore than US$ 60 million invested in training and qualification in the last 3 years.21 24,51819992000 2001 10. Global Business 11. Global BusinessCivil & Defense Aircraft flying in 58 countries in 5 continents. 12. Global Business Current Fleet of Regional Aircraft ERJ Operators Turboprop Operators Europe 285 aircraft 40 customersNorth America 920 aircraft Asia 35 customers Pacific60 aircraft20 customersLatin America & CaribbeanAfrica & 260 aircraft Middle East 85 customers 55 aircraft10 customers 13. Global Business Operations in Brazil, United States, Europe, Asia and Australia USA UKWeybridge DallasChinaNashvilleAtlanta FranceBeijing Palm Beach Gardens Le Bourget Fort Lauderdale SingaporeBrazilSingapore Gavio PeixotoBotucatu AustraliaMelbourneSo Jos dos Campos Eugnio de Melo 14. Cash Intensiveness 15. Cash IntensivenessIn the last 5 years the Company invested almost US$ 1 billion in research & development and productivity.296213 147122 104 81199619971998199920002001 16. Cash Intensiveness US$ 1.3 Billion Investments in the Next 5 YearsUS$ millions 20022003 2004 2005 2006 2002-2006Research & Development 213 191180174176 934 Comercial138 105 61 34 27 365Corporate 15 622227Defense 5172109130139 501Others 9 888841 PP&E11871 59 50 51 349TOTAL 331 262239224227 1,283 17. Cash intensivenessRisk Sharing concept with partners allows the decrease in development cycle and investment riskFamily launched in July 1999 Roll out in October 2001 First Flight in February 200231 months from launch to first flight 18. Cash Intensiveness In 2000 Embraer increased its global presence with a US$ 446 million Global Offering:Funds of US$ 244 in a Primary offering for the EMBRAER 170/190 programCompany positioned in the international capital markets 19. Cash IntensivenessNearly two-thirds of the EMBRAER 170/190 program development costs borne by Risk-Sharing Partners Development cost for the new EMBRAER 170 family program: Cash Contribution from Risk Sharing Partners $ 260 Net Proceeds from IPO$ 240 Funds From Cash Flow $ 60$ 560 Risk Sharing Partner Development Cost$ 290 Total Cost of the EMBRAER 170/190 Program$ 850 20. Cash IntensivenessAfter Sept 11 Embraer supported some aircraft deliveries, which increased the accounts receivables to US$ 672 million.Inventories increased to US$ 1,022 million.Representing a change in the net cash position to a net debt position of US$ 23 million. 21. Cash Intensiveness1,022842 732 749764 737 660696 672 574373260198 129 4Q001Q01 2Q01 3Q01 (23)4Q01 Net Cash (Debt)InventoriesAccounts Receivable 22. Cash IntensivenessActions have been taken and the expectations for the accounts receivables and inventories are:1,0221,006842 879 636535495 202 17713010020 3Q01 4Q01 1Q02 E 2Q02 E Inventories Receivable (Aircraft) Receivable (Spare Parts & Others) 23. Flexibility 24. FlexibilityEmbraer has the agility and flexibility to adjust its production in accordance with market demand. ERJ 135/145 Deliveries 25. FlexibilityNew Delivery Forecast 160161145 135 96593241996 1997 1998 1999 2000 2001 2002 2003 26. FlexibilityTo cope with the new scenario, Embraer adjusted its total labor force and laid off 14% (1,800) of its employees. Total of Employees11,048 10,334 8,302 6,7376,0874,3194,4943,849199419951996 19971998199920002001 27. FlexibilityFlexibility incorporated into the production line allowed an increase in efficiency and decrease in production lead timeLead Time in Months 8,0 6,06,0 5,54,95,0 1996 1997 1998 1999 2000 2001 28. FlexibilityEmbraer presents one of the highest "revenue per employee" in the industry.Revenue per employee US$ thousand 307 242 247254 172101 1996 19971998 1999 2000 2001 29. Airline Market Trends and Outlook 30. Airline Market Evolution - USA40% Domestic ATA Regional RAA RPM Growth (Yr/Yr % Change) 25% 10%-5% 8183 85 87 89 91 93 959799Source: RAA, ATA 31. US Regional Enplanements IncreasingPassengerU.S. Regional Airlines Enplanements (Millions)% of Domestic Traffic1,000 RegionalMajor 800600400200 14% 12% 3% 7% 0 19701985 2000 2010F Source: RAA, FAA 32. Airline Market - USADomestic ATA 17% Regional RAA13%14%9% 7% 6% 5% 5% RPM Growth - Yr/Yr % Change2% 2%3%1% 0%-1%-1%-3%-3%-2% -2%-13%-18% -21%-23%-33% Jan/01FebMarAprMay Jun/01 Jul Aug SepOctNov Dec/01Source: Top Regionals, ATA 33. American Airlines Traffic American Domestic American Eagle12% 10% 8%5%5%RPM Growth (Yr/Yr % Change)4% -3%-4% -7% -10% -10% -11% -13% -15% -22%-23%-27%-36% Jan- SepOct Nov Dec Year JanFeb MarAug/2001 20012001 20012001200120022002 2002Source: American Airlines 34. Continental Airlines Traffic ExpressJetContinental Domestic23% 15%14% 14%14% 11%RPM Growth (Yr/Yr % Change) 6%4% 5%-3% -5%-8%-10% -11%-13%-17% -22%-32%Jan-Sep OctNovDec YearJanFeb MarAug/20012001 20012001 20012001 20022002 2002Source: Continental Airlines 35. Airline Market Evolution - Europe40% Intra-European AEA Regional ERAA RPK Growth (Yr/Yr % Change) 20% 0% 1995 1996 1997 19981999 2000 Source: ERAA, AEA 36. Airline Market - EuropeIntra-European13%Regional ERAA 9%9%7%7% 7% 7%6%6%RPK Growth - Yr/Yr % Change 6% 5% 6% 5% 4%4%4%1% 1% -3%-3% -7%-13%-14% -15%Jan/01FebMar Apr May Jun/01 Jul Aug SepOctNovDec/01 Source: ERAA, AEA 37. Regional Jet Presence - USA Jan 2002 Jan 1995 Source: Back OAG (ERJ 145/140/135, CRJ-100/200, 328Jet routes) 38. Regional Jet Presence - EuropeJan 2002Jan 1995 Source: Back OAG (ERJ-145/140/135, CRJ-100/200, 328Jet routes) 39. Capacity Management (After Sep 11th) Parked aircraft Delivery schedules re-negotiated, except for regionaljets (small unit of capacity)Rightsizing capacity vs. demand: regional jets beingused in the USA to maintain presence in markets withdecreased demandFocus on return to profitability in a low yieldenvironment (Cash Management) 40. Industry in Transition after Sep 11th Rightsizing capacity vs. demand: Routes transfered to RJsJet ReplacementTurboprop Replacement Source: Back OAG (American, Continental, Delta, United, and US Airways) 41. Industry in Transition after Sep 11th Rightsizing capacity vs. demand: Routes transferred to RJs Source: Back OAG Air France, Alitalia and British Airways 42. Parked Aircraft Worldwide 1398 aircraft in storage5 ERJ 145/140/135Turboprop 41%Jets > 151 Seats Jets 30-60 Seats 4% 3% Jets 121-150 Seats Jets 61-90 Seats17% 16%Jets 91-120 Seats 19% 43. US Regional Aircraft Size Increasing Average Seating CapacitySeats per 50 Aircraft 403020100 1990 1995 2000 2010F Source: FAA, RAA, Embraer 44. European Regional Aircraft Size Increasing Average Seating CapacitySeats per 80 Aircraft 70 60 50 40 30 20 10 0 1990 1995 2000 2010F Source: FAA, RAA, Embraer 45. Filling the Seat Capacity GapSeat Capacity 160 Narrow Body Large Aircraft 120 EMBRAER 170/190 8050 Seat37 - 44 SeatERJ 145 40ERJ 135/140 30 Seat Tprops 0 200 400 600800 1000 1200 1400Stage Length (nm) 46. Market Forecast 47. Market Forecast 2002 - 2021World Deliveries by Segment - JetsSegment 2002 - 2011 2012 - 2021 30 - 601,810 1,73561 - 901,085 1,28591 - 120 1,190 1,590TOTAL4,085 4,610 World (30-120 seat segment): 8,695 jets (US$200 Billion) 48. Market Forecast2002-201130 120 Seats: 4,085 JetsEurope96024% USA, Canada& Caribbean 2,130China 52%2757% Asia Africa &Pacific LatinMiddle East America 245130 3453% 6% 8% 49. Industry Consolidation AirbusAirbus BoeingBoeing McDonnell Douglas ATRATR Jetstream AIR AvroBAE / Avro EMBRAER EMBRAER Canadair BRAD BRADDe HavillandFokker SAABFairchild Fairchild-DornierDornier 50. 30-60 Seat Segment Competitors (Jets) ERJ 135 CRJ 200?ERJ 140 328 JetERJ 145 51. 61-90 Seat Segment Competitors (Jets) ?728 JetEMBRAER 170 CRJ 700 CRJ 900 EMBRAER 175 52. 91-120 Seat Segment Competitors (Jets)717 737-600EMBRAER 190 A 318 928? EMBRAER 195 53. ERJ 145 Family Orderbook Firm Options DeliveriesFirmTotal BacklogERJ 135 12147 168 8932 ERJ 140 17445 219 32142 ERJ 145 570 267 837 410 160Total865 3591,224 531 334 March/2002 54. New Jet Family 55. EMBRAER 170/190 Family70 Seats 78 Seats98 Seats108 Seats 56. Partnership Evolution80s: 500 + Suppliers 57. Partnership Evolution90s: 4 Risksharing Partners 350 SuppliersGAMESA (SPAIN) SONACA (BELGIUM) C&D (USA) ENAER (CHILE) 58. Partnership Evolution00s:GAMESA(SPAIN)HAMILTON16 Risksharing Partners WING, STUB, CONTROLEMPENNAGES ANDREAR FUSELAGE SUNDSTRAND(USA)22 Suppliers SURFACES & PYLON, WINGLET TAIL CONE & APU CENTRALFUSELAGE II EMBRAER (LEADER)LATECOEREKAWASAKI (JAPAN)CENTER (FRANCE) SONACA (BELGIUM) FUSELAGE IIICENTRALFUSELAGE I &DOORS LATECOEREEMBRAER(FRANCE) (BRAZIL) SAINT GOBAIN RADOMEWING TO(USA)FUSELAGEFORWARDFUSELAGE FAIRINGENGINE &GEAE (USA)NACELLES EMBRAER SYSTEMSHAMILTON SUNDSTRAND (USA)HONEYWELL (USA)PARKER (USA)C & D (USA)LIEBHERR (GERMANY)GEAE (USA) 59. EMBRAER 170/190 Program ProgressWing and fuselage matingRoll outGo-ahead 1st metal cut1st flight 1999 20002001 200226 months32 28 13 months 60. February 19th, 2002 1st Flight 61. Cycle to First FlightJune 1999 February 2002EMBRAER 170 May 1998 August 2002 Competitor T1T2 T3 T4 T1T1T2 T3 T4 T1 T2 T3 T4T1T2 T3 T4T1 T2 T3 T4 1998199920002001 2002Actual Plann