UPDATE 2-Embraer eyes $200 bln global business jet market

Fri Jun 6, 2008 8:40am EDT
(Recasts, adds background)
By Tim Hepher
PARIS, June 6 (Reuters) - Luxury business jets are the hottest item in global aviation as top-end customers desert traditional airlines and sales of more than $200 billion are expected over the next decade, Brazil's Embraer said on Friday.
A boom in demand for small luxury jets shows little sign of abating despite economic slowdown in the United States, the company said.
"We are not seeing a drop in busines because of the economy today," Colin Stevens, vice marketing of marketing and sales in Europe, Middle East and Africa, told a press briefing. "In Russia and emerging markets we are seeing business pick up."
Clients include not only wealthy Middle East and Russian buyers but also companies wanting to avoid the costs and hassles involved in connections and delays at clogged airports. As congestion rises demand for hassle-free transport has supported the resale value of executive jets, Embraer said.
"Customers recognise that this is an asset that appreciates and are seeing it as an investment as well," Stevens said.
Embraer (ERJ.N: Quote, Profile, Research) EMBR.SA, which began as military aircraft manufacturer and is now one of the world's top producers of regional jets, has also been investing heavily in private planes since 2002 in a bid to diversify its revenue base.
It expects executive jets to generate $200 billion in sales over the next 10 years, including $61 billion in Europe, Middle East and Africa, Steven said. The number one market is the United States.
It claims a market share of 15 percent.
Embraer was founded in 1969 by Brazil's air force to make military training and patrol planes. It was privatized in 1994 and shifted its focus to regional jets and then business jets.
Its competitors include Canada's Bombardier (BBDb.TO: Quote, Profile, Research), Textron's (TXT.N: Quote, Profile, Research) Cessna, Dassault Aviation (AVMD.PA: Quote, Profile, Research), General Dynamics Corp's (GD.N: Quote, Profile, Research) Gulfstream and the Hawker Beechcraft business owned by Onex Partners (OCX.TO: Quote, Profile, Research) and GS Capital (GS.N: Quote, Profile, Research).

MARKET FORECAST
Embraer says it has won its first firm orders for two newly launched models of executive jet, the Legacy 450 and Legacy 500.
"We have signed some (firm contracts). We had over 110 letters of intent; how many of those fall away we don't know yet, but hopefully we should have a good indication by Farnborough," Stevens said.
Britain's Farnborough air show starts on July 14.
The new jets, which sell for $15-18 million, were launched last month and will seat 7 to 12 passengers plus two crew members.
They take Embraer's line-up of executive jets to six. It already offers a super midsize model, the Legacy 600, two very light jets, the Phenom 100 and 300 and an ultra-large luxury private model, the Lineage 1000.
Embraer is targeting 25 percent of its total revenues from business jets by 2010.
It expects to deliver the first Phenom 100 in the second half of the year, with the first $3 million aircraft going to a private client in the United States, said Antonini Puppin Macedo, who runs new product planning for executive jets.
The plane has a cabin outfitted by BMW Designworks and can seat up to eight people. A slightly larger version, the nine-seat Phenom 300, will go into operation a year later.
Embraer says it has received more than 750 orders for the two Phenom models.
Deliveries of executive jets are up 30 percent since 2004.