Four years after delivering the first C-390 Millenium military cargo plane to the Brazilian Air Force (FAB), Embraer finally sees concrete progress in the commercialization of the largest aircraft it has ever developed to other countries. Until 2022, the company had only signed contracts with Portugal (in 2019), Hungary (2020) and the Netherlands (2022). On the other hand, only last year, it reached agreements with Austria, the Czech Republic and South Korea. There are still talks with Saudi Arabia and India.
Announced in 2009, the C-390 program cost US$4.5 billion (approximately R$22 billion) and was developed in partnership with the FAB. Despite impressing with its technical quality, the plane – which is called KC-390 when it has the option of mid-flight refueling – had been disappointing the financial market in terms of sales.
Now, however, there is a positive expectation with the possibility that orders, which have already become more frequent, will increase in volume. In India, for example, Embraer is competing to sell 40 to 80 planes. At the moment, the Brazilian company is negotiating a local partner to be its representative in the country – a requirement made by the Indian government.
Embraer Defense & Security holds C-390 Millennium Day in India
Embraer Defense & Security holds C-390 Millennium Day in India
There are also negotiations with Saudi Arabia, where a fleet of 60 aircraft needs to be retired (23 of them ready to be replaced by the C-390). To sell to the country, Embraer may have to establish a final assembly line for the plane there or transfer maintenance, training and parts manufacturing activities.
These requirements are common in sales of equipment to the armed forces. Another difficulty is market restrictions. If Embraer intended to sell, for example, a freighter to Israel, its aircraft could not have any parts manufactured in a country considered an enemy of Jerusalem. Today, the Brazilian company's market is made up of countries aligned with the United States.
According to Alberto Valerio, an analyst at UBS BB, the company has made progress in political negotiations and in adapting the planes according to government demands. This process is time-consuming, he adds, but it is now having an effect.
According to Alberto Valerio, an analyst at UBS BB, the company has made progress in political negotiations and in adapting the planes according to government demands. This process is time-consuming, he adds, but it is now having an effect.
The company also strengthened its defense sales team abroad. The president of Embraer Defense & Security, João Bosco Costa Jr, who took office just over a year ago, established a sales director in Europe and expanded the team that reports to this professional, with employees in South Korea, Saudi Saudi and the Netherlands. Before that, defense commercials were concentrated in Brazil.
The restructuring of the sales team replaces the model that was planned for Embraer Defense before the pandemic. Until the beginning of 2020, when the agreement to sell Embraer's commercial aviation division to Boeing was in place, the idea was that a joint venture (JV) formed by the two companies, but with control of the Brazilian company, would be responsible for commercializing the C-390.
This JV would set up an assembly line in the US, which would allow direct sales to the US government. For Embraer to sell a military aircraft to the US today, it needs an American company to negotiate.
Meet the Embraer freighter
Load capacity is 23 tons; the plane has 2 names: C-390 and KC-390 (in the version that can be refueled in the air)
With the new sales team, Bosco Costa Jr. hopes to increase the sales pace. “We have very positive prospects for the C-390. We have high expectations that new operators will choose the model in 2024 and 2025. We are imagining a better 2024 than 2023″ (read more here).
The sale of a greater volume of freighters is important to dilute fixed production costs and increase Embraer's defense area margin, which could increase the company's value on the stock exchange, according to market analysts.
Today, the defense segment is the company's smallest, having been responsible for just 9.6% of net revenues in the first nine months of 2023. In the same period in 2014, when it reached its best moment in the last 20 years, this number reached to 26%.
Until 2022, stock analysts celebrated the fact that, with the C-390 ready, Embraer's defense division had, at least, stopped generating expenses for the company. With cost revisions and an accident with one of the prototypes, the project had previously worried investors, and the expectation was that the division would have an increasingly smaller stake in the company.
“We still see little value in the defense area, but if you asked me last year about expectations for the segment, I would have said that it was difficult for the company to achieve anything. Today, I already think that, although difficult, it can happen”, he says
Alberto Valerio.
Austrian Ministry of Defense selects the C-390 Millennium as its new military transport aircraft
Austrian Ministry of Defense selects the C-390 Millennium as its new military transport aircraft
According to him, there was great expectation surrounding the C-390 since the plane began to be developed, and orders for dozens of units were expected to be placed. What was seen, however, were timid orders. Portugal bought five freighters and Hungary two. The Netherlands, Austria and the Czech Republic selected the model to acquire, respectively, five, four and two aircraft. “What we saw were crumbs,” says Valerio.
In Brazil, there was also great disappointment. In 2021, the Air Force unilaterally decided, under the justification of budget constraints, to reduce its order from 28 to 15 freighters. After months of negotiations, it was agreed that there would be 19 units – despite the contract providing that the order value could be reduced by a maximum of 25%, which meant the sale of 21 units.
The company's calculations, however, still indicate that, over the next 20 years, 490 freighters will have to be replaced worldwide, a market worth US$60 billion (almost R$300 billion) in which the C-390 is capable. to stand out.
Fabricante entregou o primeiro cargueiro, também chamado de KC-390, há quatro anos, mas até 2022 as compras foram a conta-gotas Luciana DyniewiczO Estado de São PauloPortal Estadão 08 Janeiro 2024 Nota DefesaNetParte 1 – KC-390 – Vendas do maior avião da Embraer, começam finalmente a...
www.defesanet.com.br
