Deal Saves Embraer Production In China

Apr 14, 2011

By Joseph C. Anselmo

Embraer and Avic have reached a compromise to avert the shutdown of a Chinese production line that has been assembling Embraer jets since 2003.

The preliminary deal calls for output at the joint venture to shift from 50-seat ERJ-145 regional jets to Legacy 600/650 business jets, which are derived from the ERJ-135/145 family. The Brazilian aircraft company has discontinued production of those aircraft as regional jets, and the last of 41 assembled at the Harbin plant in northeastern China is scheduled for delivery this month.

Embraer had sought to shift production at the Chinese plant to its newer and larger Embraer 190 jets. But government-owned Avic balked, not wanting to provide a local foothold for a competitor to its new ARJ21 regional jet. Negotiations to end the stalemate had reached the highest levels of the Brazilian and Chinese governments, and the compromise was unveiled during Brazilian President Dilma Rousseff’s visit to Beijing this week.

The “framework agreement” did not disclose production rates for the Legacy business jets. Embraer said details of the project would be finalized “in the next few weeks.”

While the compromise will allow Embraer to retain a manufacturing presence in China, it falls short of the company’s desire to assemble its signature passenger jet, the 190, in the world’s second largest aviation market. The company cited “the rapid growth of the Chinese executive aviation market” and said it was “encouraged” with the potential that held for Legacy sales.

That may be optimistic, however. While the Chinese government has taken steps to loosen restrictions on private flight, the industry remains a miniscule part of the nation’s fast-growing aviation sector.

There are still fewer than 100 business jets registered in China, and the industry’s development there is hampered by high taxes; a shortage of pilots, mechanics and airports, and an air traffic control network that is straining to keep up with rapid growth.



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