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Monday, October 23, 2006

Embraer NBAA Notes

Embraer (ERJ) was one of the most prolific vendors at last week's National Business Aircraft Association conventionwhere it issued a flurry of announcements on orders, training, financing and other customer service news. Orders covered 60 Phenoms with a potential value of $223 million.

In a $70 million order, Valencia-based Wondair ordered 24 Phenom 100 jets. The Spanish on-demand operator also placed options for an additional 12 aircraft bringing the potential value to $105 million. Deliveries are scheduled to start during the second half of 2009.

In a second order, Avantair, a leading provider of fractional aircraft shares, ordered 20 Phenom 100 jets in an order valued at $57 million. The Phenom 100 is expected to enter service in mid 2008 with Avantair's deliveries scheduled for June 2009.

Sixteen more Phenoms went to Eagle Creek Aviation, a full-service aircraft sales provider, management and maintenance services company, in a $61 million order. The Indianapolis-based company will take its first aircraft at the end of 2008. Eagle Creek, which ordered 12 Phenom 100s and four Phenom 300s, was also named as one of the service and maintenance centers for the Phenom family, as part of Embraer's Authorized Service Center Network in the U.S.

With an investment of $40 million, Embraer will build four new service centers for the Phenom and Legacy 600 programs at Le Bourget as well as Fort Lauderdale-Hollywood International Airport in Florida, Williams Gateway Airport in Mesa, Ariz. and Bradley International Airport in Windsor Locks, Conn. Construction is scheduled to begin in 2007 and completed before the first Phenom goes into service. Each service center will be about 40,000 square feet and capable of providing full-service aircraft care including routine inspections, scheduled and unscheduled maintenance and repairs on airframe, engine avionics and other systems, 24/7 assistance, emergency services (AOGs Rescue/Mobile Teams) and expendable and repairable parts stock. They may offer painting and interior refurbishments.

AeroRepublica increased its Embraer ERJ 190 fleet when it signed with GE Commercial Aviation Services (GECAS) to lease one aircraft for delivery in the fourth quarter of 2007. The agreement increases the airlines' delivery commitments to eight Embraer 190 aircraft through 2007, three of which will be leased through GECAS and five purchased directly from Embraer. The airline also has options and purchase rights for 20 additional 190s through 2011.

The first flight of the Pratt & Whitney Canada PW617F turbofan engine, which powers the Phenom 100, flew its first flight last week. The four-hour flight achieved 20,000 feet and included a number of tests to assess capabilities. The engine is expected to be certificated in the fourth quarter of 2007.

Embraer joined with Bank of America to develop a joint referral program to promote sales and financing for the company's Phenom and Legacy aircraft. Under the program, the two companies will develop marketing strategies, materials and promotional events. It also enables Bank of America to provide expedited credit decisions for Embraer's executive jet customers with plans to add additional aircraft later.

The company also joined with the aviation branch of U.S. Bank Equipment Finance and U.S. Bank Multi Service Aviation to provide custom financing for Embraer's U.S. business jet customers. The deal includes a Multi Service Aviation Affinity Card to help monitor and manage total aviation expenses. The agreement covers the Embraer Phenom 100 and Phenom 300, the super mid-size Legacy 600 and the ultra-large executive jet Lineage 1000.

Embraer Overseas Limited is offering Guaranteed Notes due in 2017 in an offering exempt from registration under the U.S. Securities Act of 1933. The aggregate principal amount of the notes is expected to be US$300 million and proceeds will be used to repay existing debts amounting to $280 million as well as for general purposes.

Embraer and CAE formed a global training joint venture for the Phenom family of aircraft. The new venture, CAE's first program for the very light jet and light jet markets, provides entitlement training and post-entitlement training for pilots, maintenance technicians and dispatcher personnel. The two companies will develop all required courseware and provide a team of instructors to deliver all ground school and simulator instruction. As part of the program, CAE will design and manufacture full flight simulators and combine CAE Simfinity technology and devices into the Phenom training program. Pilots will get course content tailored to their specific needs, identified through tests, interviews and curriculum evaluation. The companies will also provide a mentor pilot program, offered separately and on request.

UPS Supply Chain Solutions, a division of UPS, was selected for dedicated service parts logistics and shipping services to support the Phenom aircraft fleets in North America and the Caribbean. The main distribution center for spares will be in Louisville at UPS's largest hub. Embraer will maintain a complete stock of repairable, expendable and structural parts for Phenoms as well as stock critical parts throughout the U.S.

Embraer is expanding the executive care program designed for Legacy customers to its Phenom very light jets. Designed specifically for the new aircraft, the program will be available in time for service entry in mid-2008 and mid-2009, respectively. The company will assist customers to manage airframe and engine maintenance and cover the execution of all aspects of maintenance tasks, service center reservation or even parts procurement. The program offers predictable monthly payments, based on projected flight hours and on the customer's operational profile.

Embraer has also announced an enhanced version of its Maintenance Tracking and Planning Service tailored for all executive jets as they become certified. It is already available for its Legacy and will become available for the Phenom and Lineage aircraft programs. The company selected Flightdocs, a leading aviation maintenance systems company, to provide the technology and round-the-clock support for this service.

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