Embraer Shifts Small Jet Business to China

Embraer, the largest aircraft manufacturing company in South American and tied for third largest in the world next to Bombardier, has recently begun shifting its business to the Chinese market. The shift in its jet-sales strategy is aimed at increasing its market share in small jets, where it currently holds a competitive advantage over Bombardier. The strategy targets China’s startup regional airlines that are more inclined to operate smaller aircraft and less frequently traveled routes. Chinese airlines gravitate towards operating full-size aircraft, such as those manufactured by Boeing and Airbus, and fly on heavily-traveled routes.

The Chinese government has been pushing for airlines to serve secondary cities and Embraer has answered the call by offering up regional aircraft to suit this purpose. Whereas domestic routes with low passenger volumes do not justify the cost for larger airlines, it is the perfect business model for smaller regional airlines that fly routes of 300 people or less per day. China Southern Airlines Co., the nation’s largest airline, is Embraer’s 2nd largest operator with 26 aircraft. In fact, 75 of Embraer’s 126 regional jets operate in China, making it the optimal location to expand small jet business.

Embraer, a Brazilian aerospace conglomerate, competes with Canadian rival Bombardier, third to only aerospace giants Boeing and Airbus. The company develops and manufactures a range of commercial, military, executive, and agricultural aircraft and also provides aeronautical services. Founded in 1969, the company is now publicly-traded on the NYSE as well as the BM&F (Brazilian stock exchange), generating an estimated $5.7 billion in annual revenue with $329.1 million in net income as of 2013.

Embraer currently employs over 19,000 people among all itself and all its subsidiaries, which are Neiva, OGMA, Atech, and Bradar. Their success lies in their targeting of the unsaturated regional jet market as opposed to the hugely saturated commercial jet market dominated by Boeing and Airbus. Look to Embraer in the near future as it attempts to create a monopoly on regional jets.

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