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Embraer Ready for China Business Aviation Growth
Saturday 08, April 2017

Embraer Executive Jets (EEJ) comes to ABACE having established itself over the past 10 years among the elite of the business jet manufacturing sector. Overall the Brazilian company delivered 225 aircraft worldwide last year, of which 117 were executive jets and 108 were commercial/regional jets.

Guan Dongyuan, president of Embraer China, told AIN, “The total of 225 aircraft for these two markets represents the highest volume of deliveries in the last six years…In China, Embraer delivered one Legacy 500 and two Phenom 300s. Embraer sees the Chinese market as full of potential and predicts that the Chinese executive aviation market will [continue growing] at a stable pace in the coming years.”

Guan said that the Legacy 500 was the first to a Chinese customer (in Tianjin), and added that in September 2016 Embraer “signed a firm order with Colorful Yunnan General Aviation for two light Phenom 300s and delivered them to the customer by the end of the year.”

Asked what the main factors are affecting the Chinese market at present, Guan said the market had huge potential for Embraer “considering the economic volume, the great consumption of power, the HNWI (high net worth individual) numbers etc.

However, there are two major challenges all the OEMs have to face and conquer: the infrastructure lags behind compared with mature markets, leading to tight flight slots and high costs; and the shortage of experienced professional aviation talent, including pilots, crew, engineers, managerial talent. This restrains the fast growth of the executive aviation market in China.”

Embraer has been producing small regional aircraft in China for some years, but the executive jets have always been produced in Brazil (centered on São José dos Campos, between Rio and São Paulo) and, more recently, also in Melbourne, Florida. The latter, said Guan, manufactures only the Phenom 100 and 300, and the Legacy 450 and 500.

Based on the current import duty and VAT position in China, it will be more economical and efficient to manufacture in Brazil or the U.S. However, we attach great importance to the Chinese market and Chinese customers. [So] in the future Embraer will continue to seek the best solution to serve its customers and supply them with the products and services they really need.”

He noted that the fact Embraer has set up a Beijing office reflects its attitude to the Chinese market, with its Singapore office handling the rest of the markets in Asia.

But why is China so important to the Brazilian company? Guan listed the main reasons: It has five cities that rank as regional hubs for global billionaires, compared to only four cities in the Americas. “The appearance of more high net worth individuals—333 super rich individuals whose personal assets total over 10 billion yuan [U.S.$1.45 billion]—brings more consumption power and dynamics to the executive aviation market.”

He continued, “Besides, compared with the fleet size of the American market, the development of executive aviation in China lags far behind. By 2016, there were only 482 executive jets in the Greater China area, while the number has surpassed 10,000 in the USA. The fleet size does not match the economic volume of China, which reflects the great potential of the market.”

Another factor Guan touched upon was finance, and its importance to market growth. He reflected, “Embraer has very good cooperation with domestic and international banks, lessors and other financial providers that can help our customers with different credit ratings to obtain financial support in the China and overseas financial markets,” with financing being conducted in USD or Chinese RMB. He added that such institutions “recognize Embraer’s products and services.”

Aircraft Size

A question on everyone’s lips at ABACE is what the trends are with aircraft sizes—are the bigger jets doing best, how are the smaller ones doing, and not forgetting the midsize markets. Guan told AIN, “The first executive jet entered the Chinese market in the 1990s. At first, Chinese customers preferred ultra-large jets, but after more than 10 years’ development, Chinese consumers have a more profound understanding of executive jets and have started to treat them as time and efficiency machines.

So those midsize and light executive jets with excellent performance and economic operation are [now] well accepted.

In 2015, Embraer delivered the first entry-level Phenom 100 in the Chinese market to a customer. In 2016, Embraer delivered one midsize Legacy 500 and two light Phenom 300s in the Chinese market. These deals reflect that the Chinese consumers are getting more mature when purchasing executive jets,” said Guan.

Asked how he believes Embraer is doing compared to the other business jet manufacturers, he said, “‘Market and customer driven’ should be treated as the DNA of Embraer. Compared with other executive jet manufacturers, Embraer’s advantages lie in the products that combine with good performance and economic operation.

Besides, the complete customer service and support system ensures that we can supply them with the best service quality. In August 2016 Embraer was ranked again as first place for product support both on AIN and ProPilot [magazines], which demonstrates customers’ recognition of our products and service. This is also the base of Embraer’s development in previous years.”

Government Stimulus

With all this potential, what does Guan believe is the government’s role? “The government encourages the development of general aviation and has issued several favorable policies for the development of the industry. According to ‘Guidelines on the Development of the General Aviation Industry,’ issued by the State Council, by 2020 there will be in total over 500 general aviation airports,” he said.

The situation of infrastructure construction will be greatly improved,” he suggested. “Furthermore, on March 3, the CAAC issued a document which says the approval procedures of general aviation aircraft import will be canceled. This will further stimulate the development of executive aviation.”

The State Council has also adopted policies such that by 2020 a further 50 commercial airports will have been built as well, so the total number of these “will surpass 260,” said Guan. “As for general aviation, the total number will reach 500 by 2020.”

AsBAAABACE

How important is the Asian Business Aviation Association (along with NBAA) and the ABACE annual event in helping the market to prosper?

As a professional association that promotes executive aviation culture and business, AsBAA has been playing an important role,” said Guan. “In the future, Embraer hopes that AsBAA will continue to be a bridge that links operators, OEMs, government authorities, aviation service providers, finance and insurance providers as well as business aviation users.

More importantly, it can better promote the right concept of executive aviation as a ‘time and efficiency machine’ to more of the Chinese public.”

On ABACE he supports keeping Shanghai as the location for the event; “Embraer does believe that Shanghai is the best location to hold ABACE in China, considering the economic factors, geographic factors, infrastructure construction, influence, etc.” He did not comment on whether it might be held outside China, for a wider Asian audience, but did say, “The successful organization of ABACE from 2012 to 2016 has proven [that Shanghai is a good location for the event]. ABACE is becoming one of the most influential executive aviation exhibitions in the world.

Embraer in China

Turning back to Embraer itself, Guan told AIN that the company had almost 17 years of development in the executive jet business, since it entered the market in 2000 with the Legacy 600, “which was based on the mature technical platform of the ERJ145.”

Now, “Embraer has become one of the leading executive jet manufacturers and the only manufacturer that produces a full line of jets, from entry level to ultra-large [the Lineage]. It has delivered more than 1,000 executive jets in the global market.

In China, Embraer delivered the first Embraer jet in the Chinese market, an ERJ145 to Sichuan Airlines. To date, Embraer has logged 190 firm orders for commercial jets in China, and 143 jets have been delivered. The economic operation and stable performance of the ERJ145 and E-Jet family have won very positive feedback from customers and passengers, and now they have taken up more than an 80 percent market share in the 70-130 seat category of the Chinese market. [This] helps more customers to get to know the quality of Embraer products and the complete customer service and support system, which helps the promotion and sales of Embraer’s executive jets in the market.”

 

 

 

by Ian Sheppard

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