Embraer: The Brazilian Aircraft Manufacturer's Turnaround and Growth

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Case Details:

Case Code : BSTR243
Case Length : 31 Pages
Period : 1969-2006
Pub Date : 2007
Teaching Note : Available
Organization : Empresa Brasileira de Aeronáutica S.A
Industry : Aerospace
Countries : Brazil

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Embraer is one of the hottest manufacturers in the industry today. They're willing to push into areas that others haven't explored."

- Donald Burr, the founder of People Express Airlines¹, in 2004.²

"A lot of people have tried and failed. But since 1960 only one new company and one new country have successfully entered the commercial aircraft market."

- Richard Aboulafia, an analyst at the Teal Group Corporation³, in 2005.⁴

"Years ago our competitors said: 'How dare those ugly ducklings from South America try to sell a jet in the Northern Hemisphere' Fortunately, they underestimated us."

- Satoshi Yokota, Embraer's Executive Vice-President for
Engineering and Development, in 2006.⁵

Embraer Launches New Business Jet

In May 2006, Empresa Brasileira de Aeronáutica S.A. (Embraer) announced the launch of its new business jet, the Lineage 1000 (Lineage). The Lineage's design was based on Embraer's successful E-190 regional passenger jet⁶ platform, and the aircraft had the capacity to seat between 13 and 19 passengers, depending on the cabin design. The cabin could be split into five zones, and customers could choose from a variety of interior design options, which included putting in a standup shower and a full-size bed. The Lineage was a long haul plane, with a range of 4,200 nautical miles.

Embraer called the Lineage an 'ultra-large' business jet, and was expected to position it against the Boeing Business Jet⁷.

The first Lineage aircraft, which was priced around $41 million⁸, was scheduled to enter service in late 2006.

The Lineage was the newest addition to Embraer's range of business jets, which included the Legacy 600, the Phenom 100, and the Phenom 300. As of mid-2006, Embraer was the fourth largest aviation company in the world (in terms of aircraft deliveries), behind Airbus SAS (Airbus), The Boeing Company (Boeing), and Bombardier Aerospace (Bombardier) (Refer Exhibit I for a note on the aviation industry and the profiles of major aircraft manufacturers). In addition to business jets, Embraer also manufactured commercial, military and agricultural aircraft (Refer Exhibit II).

Embraer was set up in the late 1960s, as a public sector enterprise by the Brazilian government.

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1] People Express Airlines was a low cost airline that operated in the US between 1981 and 1987.

2] Jonathan Wheatley, Diane Brady and Wendy Zellner, "Brazil's Embraer Hits the Stratosphere," BusinessWeek, April 19, 2004.

3] An aerospace and defense consulting firm based in the US.

4] Russ Mitchell, "The Little Aircraft Company That Could," Fortune, November 14, 2005.

5] Geri Smith, "Embraer: An Ugly Duckling Finds Its Wings," BusinessWeek, July 31, 2006.

6] Regional passenger jets are small aircraft usually seating between 70 and 110 people, and generally used by airlines on short haul flights or on low traffic routes.

7] The Boeing Business Jet family, introduced in the late 1990s, consisted of a series of aircraft based on the Boeing 737 design platform. The jets could seat between 25 and 50 passengers depending on the cabin configuration.

8] Dollars ($) refers to US dollars in this case study.