2005 - Chinese Market Presentation May 2005

Embraer & China’s Regional Aviation Market

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.

Contents

• Embraer’s Market Forecast

• Regional Aviation in China

• Embraer’s Commitment to China


Operations in Brazil, United States, Europe, Singapore and China

Global Business

BrazilGavião Peixoto

BotucatuSão José dos Campos

USANashville

Palm Beach GardensFort Lauderdale

Jacksonville*France

Le Bourget

ChinaBeijingHarbin

SingaporeSingapore

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.FA 14/Nov/02

The only manufacturer that offers complete 30-120 seats coverage

Seats108

98

70

50

44

37

78

Complete Product Portfolio


ERJ 145 Family Orderbook

82

47

20

15

FirmBacklog

8161,131233898Total

634892211681ERJ 145

741142094ERJ 140

1081252123ERJ 135

DeliveriesTotalOptionsFirm

(as of 1st quarter, 2005)


E170/190 Family Orderbook

1515-15EMBRAER 175

301

15

155

116

FirmBacklog

56744387357Total

-352015EMBRAER 195

-385230155EMBRAER 190

56309137172EMBRAER 170

DeliveriesTotalOptionsFirm

(as of 1st quarter, 2005)


4,600

1,750

1,550

1,300

2015-2024

7,800

3,000

2,850

1,950

2005-2024

3,200Total

1,25091-120 seats

1,30061-90 seats

65030-60 seats

2005-2014Segment

World Total Deliveries (30-120 seats): 7,800 Jets

Market Forecast 2005-2024

World Deliveries by Segment - Jets


Aisa Pacific

4716%

Aisa Pacific

4716%

China

6358%

China

6358%

North America

4,16553%

North America

4,16553%

30 - 120 seats: 7,800 Jets

Europe, Middle East &

Africa

1,99126%

Europe, Middle East &

Africa

1,99126%

Latin American& Caribbean

5387%

Latin American& Caribbean

5387%

Market Forecast 2005-2024


• rightsizing aircraft capacity with demand

• maintaining high route-frequency

RJs help to defend an airline’s competitive market position by:

When markets are weak

• preserving network integrity and overall market presence

• replacing unprofitable mainline jet service

Regional Jets - A Dynamic Tool


…and when markets are strong

RJs expand catchment areas by adding more spokes to hubsin addition to:

• supplementing mainline jet capacity

• increasing route frequency

• opening new “long & thin” routeswith small, low-risk capacity

Regional Jets - A Dynamic Tool

China’s Regional Aviation Market


38.2% annual growth

Strong Traffic Growth

2002

SARS

2003 2004 2005

1.3% annual growth 21.9%15.6% annual growth

10% traffic growth forecasted in the coming 10 years - world highestSource: State Statistics Bureau


Narrow Body

Wide Body

Regional

RJ

TP

572

121

65

7

588.5%

Currently regional represents 8.5% of the fleet, compared with 35% worldwide

Aircraft in service: 758 (Feb. 2005)

Small regional aircraft fleet


Airport pax traffic 2004

20 airports represent 80% of total traffic

50 out of 133 airports are with traffic less than 200 daily

Airports are under utilized

Source: CAAC Statistics


PDEW vs. FrequencyDaily Passenger Traffic

Daily Frequency

61% 16%

480 59 33 21 15 14 8 5 3129

Total 786 domestic routes

Market Opportunities- Right Sizing


• Improved Service

• Profitable Load Factor

Low LFLow Frequency

Low Freq.Medium High LF

RJ provides the right solution for the thin Traffic Routes A

dd F

requ

ency

Rightsizing

Thin Traffic Routes Y2002 Domestic Routes with PDEW < 120Frequency /day

LF


Yield Distribution

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

- 500 1,000 1,500 2,000 2,500

150 Seaters50 SeatersPower (50 Seaters)Power (150 Seaters)

Right sized aircraft for the right routes have better yield

Over sized aircraft have to slash fare to

fill empty seats

KM

Yield (RMB/KM) Y2002 Chinese airline data – Domestic routes

Market Opportunities- Shuttle service model


Chengdu

Chongqing

The Operation:

Q High Frequency – 6 pairs per day

Q High Yield – RMB1.16/KM

Q Express check-in procedure

Q Shuttle bus link to downtown

Q One price includes all (airport tax, shuttle bus)

Q High load factor – more than 80%

Q High aircraft utilisation: 9 block hours/day

The Route:

Q Short trunk route

Q Compete with highway link

Q 300 KM (45 minutes BH for ERJ145)

Sichuan Airlines

A successful shuttle service with ERJ 145

Sichuan Shuttle Service


Well-shaped dual hub network

Sichuan Shuttle Service

Market Opportunities- New Market Development


TOC = 57,502

TOC = 26,781

Sector Length: 1000 KMRMB

RJ’s trip cost advantage makes it best equipment for opening new markets

Typical Chinese assumptions

Trip Cost Comparison

53%


MACAU

RJ is a powerful tool for developing new routes and enhancing hub

China Southern’s ERJ145 Network

Market Opportunities- HK and Macau market


Mainland HK New Agreement

400 additional frequencies will only be available for 2nd tier destinations

Trunk routes (14)

2nd tier routes (30)


Daily Frequency

8.1 8.2

2.41.1 0.9 1.3

0.21.0 0.6 0.1 0.2 0.2 0.4 0.5 0.3 0.2 0.2 0.2 0.1

21.2

0

5

10

15

20

Taip

ei

Sha

ngha

i

Kao

hsi

un

g

Xia

men

Bei

jing

Gui

lin

Fu

zho

u

Ku

nm

ing

Ban

gko

k

Han

gzh

ou

Hai

kou

Nin

gbo

Nan

jing

Man

ila

Sin

gapo

re

Ch

on

gq

ing

XiA

n

Ch

eng

du

Seo

ul

K.L

um

pu

r

Macau Daily Frequency

RJ will help to improve frequency and opening new direct flights

53% of Macau traffic is transfer pax. Low frequency and lack of direct flights resulted

in bad connectivity.

Daily Flights

Market Challenges


Jet Fuel Price


Shortage of Pilots

0

500

1000

1500

2000

2500

3000

3500

4000

Y2004 Y2005 Y2006 Y2007 Y2008

accumulative pilot demand

accumulative pilot supply

Short of 630 pilots in Y2006

Huge mainline aircraft orders are draining airline’s resources, most notably causing pilot shortage


Smaller airports are more expensiveAirport Charges for a 50 seat RJ

378 372 365 339

88 88 88 88

1,300 1,463 1,463 1,625

200200 200

200800

800 800800

-

500

1,000

1,500

2,000

2,500

3,000

3,500

1 2.1 2.2 3 Airport Category

RMB

Ground Handling

Security Check Fee

Passenger Service Fee

Terminal Navigation

Landing Fee

big airports small airports

2,7662,922 2,916

3,052

(MTOW)

(MTOW)

(Seats & Apt. Cat.)

(Max Payload)

(Max Payload)

Airport charge for a 50-seat RJ

Embraer’s Commitment to China Market


Beijing

Nanjing

Guangzhou

Wuhan

Harbin

Embraer’s Presence in China

Zhuhai

MacauHongkong

Beijing Rep. Office

Spare Center

Chengdu


Industrial Cooperation

• Shareholding structure: Embraer51%, Hafei 49%

• Capital investment: 40 million USD

• Transfer of technology and management expertise

• Same standard of Embraermanufacturing process, product quality and customer services


Beijing Spare Parts Center

• Bonded Warehouse in cooperation with CASC

• Set up in Feb.2002

• Worldwide integrated computer spare parts management system and advanced custom declaring system

• Quick spare parts support and shortened deliveytime


ERJ145 Simulator in Zhuhai

• ERJ145 Full Flight Simulator

• Will be installed in China Southern Zhuhai Flight Training Center in June 2005

• Will greatly reduce the airline training cost


Documents

2005 - Chinese Market Presentation May 2005