4Parallels Issue 1 • February 2014

Issue 2 | November 2013

IN THIS ISSUESaratov Airlines

Spreading the E-Jets ConceptMeasuring Market Potential

ParallelsEmbraer News and Perspectives in Eastern Europe, Russia & Central Asia

Issue 1 • February 2014

4Parallels Issue 1 • February 2014

Welcome to this first issue of Parallels, a forum in which I look forward to sharing our perspectives on issues facing regional aviation in Eastern Europe, Russia and Central Asia. It’s also a way for me to highlight some of the activities of our customers who are flying E145s and E-Jets in this part of the world.

Although Embraer will celebrate its 45th anniversary this year, we are relatively new to Russia and its surrounding countries. In the few years we have been in those markets, we have been working to renew the regional aviation concept. And we have something to show for our efforts.

Air Astana has a fleet of eight E190s thanks to double-digit annual growth in domestic enplanements and we have other customers in Azerbaijan, and Ukraine. Our first Russian customer, Saratov Airlines, recently received two E195s that it will fly on both scheduled and charter services.

I see a tremendous opportunity to build new connectivity within the region with the help of the E190 and E195. Russia, in particular, has a long and rich domestic aviation heritage of which it can be proud. I and my team are eager to work with local airlines so they can evaluate Embraer aircraft and see how they can be used to grow their business, promote economic development and, of course, bring the wonder of flight to more people.

In the nearly ten years since the first aircraft entered revenue service, 88 airlines from 56 countries have added E-Jets to their fleets and 23 leasing companies have E-Jets in their asset portfolios.

Parallels is produced by Embraer Marketing (Paris.) We welcome your comments and submissions. Contact William Ast at William.Ast@embraer.fr

2013 was an exceptionally strong year for sales of Embraer commercial aircraft with new orders, options and letters of intent for over 900 current and next-generation E-Jets. Regional carriers in the USA went on a shopping spree last year in which Embraer captured some 80% of all orders, the equivalent of more than 700 E-Jets. We also delivered our 1,000th E-Jet last September, an E175 to American Eagle, just nine years after the first E-Jet started flying with LOT Polish Airlines.

Closer to home, we added new E-Jet customers in Lithuania, the Channel Islands, Sweden, Azerbaijan, Russia and India.

ДОБРО ПОЖАЛОВАТЬ

Mathieu DuquesnoyVice President,

Commercial AviationEurope, Middle East, Africa

Setting a Sales Record in 2013

2013 - By the NumbersOrders & Options - Current Generation E-Jets

SkyWest Airlines USA 200 E175

American Airlines USA 150 E175

Republic Airways Holdings USA 94 E175

United Airlines USA 70 E175

Aldus Aviation Ireland 35 E175/E190

Conviasa Venezuela 7 E190

Japan Airlines Japan 4 E170

Belavia Belarus 2 E175

Austral Argentina 2 E190

Aurigny Air Services Channel Islands 1 E195

Air Costa India 1 E190

BA CityFlyer United Kingdom 1 E190

Undisclosed NA 8 E190

Welcome

Embraer delivered its 1,000th E-Jet , an E175, to American Eagle, a subsidiary of American Airlines. (September 2013)

4Parallels Issue 1 • February 2014

Saratov Airlines has become the first Russian operator of E-Jets in that country after receiving two E195ARs (Advanced Range) leased from GECAS last December. Embraer’s E190 and E195 were certified by Russia’s Interstate Aviation Committee in December 2012. That accreditation allowed Embraer to market the two E-Jets to Russian carriers and tap into opportunities for western- manufactured aircraft between 110 and 120 seats.

The airline is a subsidiary of Saravia which has a fleet of 11 YAK-42s but

used the acquisition of the E195s to introduce the Saratov Airlines sub-brand and create a new, distinctive livery. The bright yellow E-Jets are intended to replace some of the Yakolevs as the carrier embarks on a fleet modernization program. Saratov’s E195s are configured with 114 seats in a two-zone configuration. A few rows of seats at the front of each aircraft have more generous pitch to attract premium-fare travelers.

Saratov Airlines deployed the first E-Jet between Tsentralny Airport and Moscow Domededevo in January.

Block time on the 687 kilometer route is 80 minutes and is one of the scheduled markets on which the E195s will fly. In addition to regular service between Saratov and Prague, which is slated to start this quarter, the airline intends to deploy the E195s on charter flights to Dubai and points in Europe, Asia and Africa through its tour partner, Magellan.

Saratov Airlines traces its routes to agricultural flying 83 years ago and is one of the oldest airlines in Russia’s Middle and Lower Volga region.

LOT Polish Airlines has always been a fleet trendsetter in its 85-year history. It was one of the first carriers to acquire the B787 and it was the very first airline to fly an Embraer E-Jet back in 2004. Its vision to modernize its fleet has been a showcase for what E-Jets can do in the region.

Today, 11 airlines in Eastern Europe, Russia and Central Asia operate 70 E-Jets in a network that spans the continent.

What has contributed to the success of the airplane family? As ageing equipment comes off lease or nears the end of its economic life, airlines have a unique opportunity to adopt a business strategy and aircraft capacity that reflects the realities of new competition and a different economic environment.

E-Jets were designed specifically for the 70 to 120-seat jet category. Their operating cost, family commonality, and range of seat capacity give airlines an efficient tool to access markets with the right frequency without the destructive effect of flying empty seats.

E-Jets make it easy for carriers to open new routes with very low risk and without sacrificing aircraft performance or downgrading the passenger experience in the cabin.

Spreading the E-Jets Philosophy

First Russian Airline Flies E195s

Who has E-Jets?Eastern Europe | Russ ia | Cent ra l As ia

LOT Polish Airlines10 E17014 E175

Air Astana 8 E190

Azerbaijan Airlines 2 E1704 E190

Ukraine International 5 E190

Estonian Air 4 E170

Bulgaria Air 4 E190

Belavia 2 E1752 E195

Montenegro Airlines 3 E195

Air Moldova 2 E190

Air Lituanica 1 E1701 E175

Saratov Airlines 2 E195

E1956

4Parallels Issue 1 • February 2014

Embraer’s market analysts continually monitor commercial aviation economic and performance indicators. When they crunched traffic and capacity numbers for the USA market more than a decade ago, they discovered a startling inefficiency among carriers in that country. Airlines around the world have always grappled with the age-old problem of

satisfying variable route demand with a fixed-capacity airplane. Despite the advent of yield management technology, the magnitude of unsold seats was truly alarming – the analysis showed some 65% of departures carried fewer than 120 passengers.That was ten years ago. Since then, E-Jets have become the back-bone of

the nation’s regional fleet after airlines acquired smaller capacity equipment to increase load factors and redeploy their larger aircraft more profitably. Some 700 E-Jets were ordered by U.S. airlines last year in their ongoing drive to maximize efficiency, reduce operating costs and maintain the optimal profitable balance between capacity and route frequency.

In a similar study prepared by Embraer’s market analysts last year, almost identical results were found for scheduled flights operating between Eastern Europe and Russia/Central Asia for 11 months of 2013. On those routes, 60% of all flights carried fewer than 120 passengers (see chart.)The data clearly dispute the wisdom of replacing large old jets with large new jets. Notwithstanding the necessity to schedule large aircraft on low-demand routes for operational reasons, habitually flying so many empty seats has a detrimental effect on yields, profitability and even competitive positioning. The arrival of new competition could be particularly worrisome to carriers flying on domestic Russian routes where 67% of the city pairs have monopoly service. Since intra-Russia RPKs were forecast to grow 13% last year and will continue to grow over the next six years, there will undoubtedly be an appetite for new airlines to tap into that demand.

Smaller-capacity, range-capable aircraft, like Embraer E-Jets, are able to provide nonstop links across the region, avoiding costly and inefficient connections at Moscow. Embraer’s analysts have identified 150 new routes that are ideal for E-Jet type capacity aircraft.Air Astana identified its excess seat capacity problem nearly two years ago. In 2012, 67% of all its regional departures carried fewer than 100 passengers. After reviewing the efficiency of its fleet, the revenue-generating potential of its aircraft, the competitive environment and its own commercial strategy, the airline acquired Embraer E190s to provide a better balance of frequency and capacity to build its network.The results are paying off. The philosophy of carefully-managed expansion with the right aircraft on the right routes earned Air Astana an operating profit of USD76 million in 2012, its tenth consecutive profitable year.

EMBRAER ANALYSIS

Unlocking the Potential

A Similar Profile

9.0%

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0-10

10-20

20-30

30-40

40-50

50-60

60-70

70-80

80-90

90-10

0

110-1

20

100-1

10

120-1

30

130-1

40

140-1

50

150-1

60

160-1

70

170-1

80

180-1

90

190-2

00

200-2

10

210-2

20

220-2

30

230-2

40

240-2

5025

0+0.0%

Source: Sabre ADI - Jan-Nov 2013

Profile of Passengers per FlightEastern Europe/Central Asia to/from Russia

60% of flights

depart with fewer than

120 passengers

Perc

enta

ge o

f All F

light

s

Passengers per Flight