Brazil's Embraer sees solid demand for new military cargo jet

6 April 2017

Brazilian planemaker Embraer SA sees $1.5 billion in annual exports as "a good target" for its KC-390 military cargo jet entering service next year, Jackson Schneider, head of the company's defense unit, said on Wednesday.

Brazil's Air Force has already ordered 28 of the aircraft for 7.2 billion reais ($2.3 billion), with two deliveries in 2018 and three in 2019, Schneider told reporters.

He added that "the sky is the limit" for production in the following years.Earlier, in remarks on Tuesday at the LAAD defense expo in Rio de Janeiro, Schneider had said Embraer aims to book its first foreign KC-390 contract this year.

His comments underscored Embraer's intent to take a bite out of the global military transport segment long dominated by the workhorse Hercules C-130, made by U.S. aerospace firm Lockheed Martin Corp.

Reinforcing the direct rivalry, KC-390 program director Paulo Gastao Silva said Embraer was engaged in "promising conversations" about developing a civilian version of the military aircraft. Earlier this year, Lockheed Martin rolled out the LM-100J, a commercial or civilian variant of the Hercules.

Embraer has previously forecast a market worth over $50 billion in the coming decades to replace more than 700 aging Hercules planes, some of them in service since the 1960s.

Tony Frere, vice president of business development for the Hercules and other transport aircraft at Lockheed, said Embraer's estimate of the market size was in the right ballpark, but he saw little room for a new entrant.

"The only replacement for a Hercules is another Hercules," Frere said in an interview at the expo, highlighting the C-130's incumbent advantages after more than 2,500 deliveries over nearly six decades.

The civilian version of the aircraft aims to build on that track record, especially on unfinished airstrips where its straight wing and four turboprops have earned it a rugged reputation, said Thomas Wetherall, director of business development for the LM-100J.

Lockheed aims to sell 75 to 125 LM-100Js, Wetherall said, and it got off to a strong start in Embraer's backyard. Brazil-based logistics firm Bravo Industries agreed last year to buy 10 to access hundreds of Brazilian airports unprepared to receive other big cargo planes.

Wetherall said growing demand for e-commerce deliveries in remote markets was boosting demand for rugged cargo planes like the LM-100J, expanding the client base beyond mining and oil services companies.