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1969 stands out as one of the great years in aviation history: it was the year when Neil Armstrong landed on the moon (and thereby revealing one of the greatest quotes in human history: "One small step for (a) man, on giant step for mankind)", Concorde, the second supersonic airliner (though the most popular one) hit the skies, the first wide-body "jumbo jet" (which would later be renamed "Queen of the Skies") got airborne. Shrouded in the dazzle of such monumental feats was the birth of a company whose name would be placed among the ranks of Boeing and Airbus - Embraer.Photo: Riik@mctr | Wikimedia CommonsEmbraer was an offshoot of Brazil's Aeronautical Technology Center
Brazil's Aeronautical Technological Center (CTA) was established in 1945 by the nation's Ministry of Aeronautics. It has been said that CTA had been modelled on the Massachusetts Institute of Technology to become "probably the most advanced research [institution] among industrializing countries" and generated one of the world's leading aeronautical engineering schools, the Aeronautical Technological Institute (ITA) [which would later produce most of Embraer's aeronautical engineers]. Established in 1969, Embraer was a product of the CTA.
Five years before Embraer was formed, Brazil had entered into a military dictatorship (that was to last more than two decades) that had mobilised efforts towards the development of science and technology. It was argued that the nation could not "afford" to rely on aircraft (or spare parts) that were manufactured outside its boundaries, nor could it allow foreign companies to take charge of the domestic manufacture of such strategic equipment.
According to the author, Andrea Goldstein, Embraer was "majority-owned by the government and inherited some mission-oriented activities from the CTA":
"Although the relationship between the company and the Ministry of Aeronautics remained very close, much bureaucratic red tape was avoided and a clear sense of corporate mission emerged. Not only did the Ministry manipulate the domestic market to Embraer's advantage, but it also concentrated in its hands most financial, fiscal, marketing, regulatory, and international responsibilities, which were transferred to Embraer".
Photo: Riik@mctr | Wikimedia CommonsEmbraer's First Manufacturing Success and Failure
Embraer met its first commercial success with Bandeirante, a 15-seat plane with a design based on an 8-seat prototype. Out of the 500 Bandeirantes that were sold in a decade, the first 80 were sold to Brazil's military, "as an indirect government support to the new enterprise".
Here are a few snippets of is history of its first successful planes:
1983: Embraer achieved its first major international success with the EMB 120 Brasilia, pressurized twin-turboprop.
1985: Embraer entered the jet era with the AMX, a military jet developed in partnership with Aermacchi of Italy.
2006: The EMB 120 Brasilia remained in production, with more than 350 aircraft operating worldwide.
Launched in 1985, the EMB-120 Brasília was derived from the Bandeirante. The EMB-120 necessitated investment in composite materials manufacturing, metal-to-metal bonding, and chemical milling. A relatively high cruise speed of 552 km/h (343 mph, 298 kn), relatively low operating costs, and high dispatchability, this 30-seater aircraft was a success as it was able to capture a third of the total market of an aircraft of its category.Photo: kitmasterbloke | Wikimedia Commons
However, a foray into developing a smaller derivative, the CBA-123, in cooperation with Argentina's Fábrica Militar de Aviones (FAMA) proved to be a disaster:
"While technically sophisticated, the plane was too expensive, not least because FAMA did not have the capacities required to cooperate with Embraer. Political motivations —to strengthen bilateral co-operation and build mutual trust with Argentina— primed over business considerations and, following the departure of Silva in 1986 to assume the presidency of Petrobras, Embraer could not resist them. Cash-flow management suffered: in an industry where long-term financing is indispensable to match extended development lead times, the company accumulated debt with a dangerously short time profile.
There was a saving grace, though. The manufacturer was able to install a CAD/CAM computer-aided design in the AMX project, making it the first Brazilian company to do so. Despite the technical prowess, by 1994, Embraer was posting losses of US$310 million against sales of US$177 million, a downturn that pushed the company down to 38th place among Brazil's top exporters.Photo: Marcel X42 | Wikimedia Commons
From privatization to the development of the ERJ
Brazil's military regime ended in 1985. Then sprang forth conversations about the decentralisation of the economy. The Federal Constitution was issued in 1988 and further legislation and six years later, and the company was privatized.
According to a research paper titled "The Evolution of Privatization in Brazil: The Case of Embraer", Embraer's privatization totaled US$ 192.2 million and the company was dedicated "to design, build and commercialize aircraft and their accessories components and equipment, as well as to perform technical activities related to the production and maintenance of aeronautical material."
Before privatization, a little over 95 % of Embraer's shares belonged to the Union, the Bank of Brazil held 4.7 percent of the shares, while the stake of other minor shareholders was 0.1 %. Around the end of 1994, a consortium of Bozano Simonsen, one of Brazil's greatest financial conglomerates; American investors assembled by Wasserstein Perella, a New York investment boutique; Previ and Sistel, the pension funds of the Banco do Brasil and Telebrás, had a controlling 45% stake for US$ 89 million in Embraer.
The following numbers give us a cue about the changes that came about with the privatization:
US$700 million: debt assumed by the Brazilian government during privatization
6.8%: equity stake retained by the government, including a golden share with veto powers
40%: cap imposed on foreign ownership of Embraer
6 months: moratorium on layoffs included in the privatization agreement
R$413.6 million: capital injected by new owners since 1996 to strengthen the equity base
1,700 employees: total workforce reductions in June 1995 (1,200 white-collar staff and 500 engineers/workers)
3,849 employees: payroll size at the end of 1996
10%: salary reduction applied to management in May 1996
The period between 1990 and 1996 also saw a reduction in the time it took to produce a Brasilia aircraft from 16 to 9 months. It was during this time that ERJ 145, an aircraft that was developed from Embraer EMB 120 Brasilia, first hit the skies.Photo: 4300streetcar | Wikimedia Commons
ERJ 145: Introduced at the Farnborough Air Show
The ERJ145 shared roughly 30% of parts (including the nose section and cabin) with the EMB 120 Brasília. It also drew on turbofan technology originally developed for the AMX military jet programme. The first flight of the ERJ 145, a pressurised twin turbofan aircraft with a 50 passenger capacity, took place in 1995. It was presented at the 1996 Farnborough fair and secured its first contract with Continental Express.
The ERJ-145's most direct rival was the Bombardier CRJ-200, an aircraft that had entered service earlier. But the ERJ 145 held key competitive advantages:
Approximately 15% lower operating costs compared with the CRJ-200
Lower acquisition price, aided by design and production efficiencies
Lower labour costs, further enhancing price competitiveness
Almost four years after the programme's launch, the 300th ERJ 145s were already delivered.
Building on this momentum, Embraer unveiled the ERJ-135 prototype in 1998. The smaller, 37-seat variant shared 96% parts commonality with the ERJ-145, significantly reducing development costs and increasing its appeal to operators already invested in the larger model.