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).

The CTA was a unit of the Brazilian Air Force, and was the national military research center for aviation and aerospace. It coordinated all technical and scientific activities related to aerospace on behalf of the Brazilian Ministry of Defense. The ITA was a government-sponsored engineering institution and one of the most prestigious colleges in Brazil. It was set up by the Brazilian government to nurture and develop engineering talent in the country. It was a part of the CTA, and its facilities, including its laboratories and R&D centers, were located on the CTA campus. Both the CTA and the ITA played an important role in the 1950s with respect to aeronautical training and development in Brazil...