Airline Market Airline Market Outlook

24th - 25th February 2005 President Wilson Hotel, Geneva

Trends and Outlook

Some Key Elements Shaping the New Industry

(30 to 120 seat segment)

Orlando Jos Ferreira Neto Joo Alfredoof Market Intelligence Director Paiva
Sr. Manager Market Strategy

Contents Q Key Global Market Trends Q Regional Jets Sustained Operation

Q From Concept to Reality the E-Jets Family Q EMBRAER Market Forecast

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Forward Looking Statement

This presentation includes forward-looking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our market. The words believes, may, will, estimates, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT.

Key Global Market Trends

LCC Expansion
Around 70% of all domestic passengers in North America and Europe have access to low cost carriers services. LCCs hold air fare pricing power. Passengers are more stringent on air travel value proposition.
US Domestic (% RPK) Intra-Europe
14% 1% 27% 16% 7% 15% 17%

Shift in Market Share

US: LCCs and Regionals expanding.

100%

3% 12%

5% 19%

9%

80%

60%

Intra-Europe: LCCs expanding and Regionals concentrating on secondary/ /business markets development.

40%

85%

76% 64%

85%

77%

68%

20%
Source: Airlines , Embraer

0%

1995

2000

2004

1995

2000

2004

Network

Low Cost

Regional

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Key Global Market Trends

% Change in Passenger Revenues per Mile (Yield) vs 2000

10% 5% 0% -5% -10% -15% -20% -25% -30%

Ja n/ 01 Ap r/0 1 Ju l/0 1 Oc t/0 1 Ja n/0 2 Ap r/0 2 Ju l/0 2 Oc t/0 2 Ja n/0 3 Ap r/0 3 Ju l/0 3 Oc t/0 3 Ja n/ 04 Ap r/0 4 Ju l/0 4 Oc t/0 4
Source: ATA - Air Transport Association

U.S. Pax Yields Down Sharply from 2000

No evidences or expectation of a sizable recuperation.

Traffic Recovering
Intra-Europe (RPK Billion)
300 250 200 150 100 50 0

US Domestic (RPM Billion)

600 500 400 300 200 100 0

2000

2001

2002

2003

2004

2005F

2000

2001

2002

2003

2004

2005F

Network

Low Cost

Regional

Network

Low Cost

Regional

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Key Global Market Trends

Fleet Right-Sizing
60% of all US domestic flights depart with load factor more appropriate to 70-110 seat aircraft. 95% of all narrow-body flights are within 1,700nm range. 85% of all city pairs around the world are served with less than two frequencies a day.
25 20 15
%

60%
of flights

10 5 0
4 50 8 60 13 70 15 80 20 90 13 100 8 110 7 120 5 130 2 140 2 >150

Source: US DOT/Embraer

Passengers per Departure

Replacement Crisis Ageing Fleets (61 to 120 seats)

35% of total fleet is more than 20 years in service
451 492

810
Aircraft older than 20 Years
35% of total fleet in service

and shall start to be replaced in the coming years.

320

361

Old technology equipments, most of them no longer in production. Inefficient and expensive aircraft to operate.
0-5 6-10

233

212

237

Source: DOT/Embraer - Fleet in service - Jan 2005 THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT.

11-15 16-20 21-25 Aircraft Age (Years)

26-30

30

Not Another Cycle, but a Fundamental Change

Q New Passenger Profile Different Value Proposition Q Ultra Competitive Environment Q Fierce Competition among 3 models (LCC x Network x Regionals) Its all about cost and efficiency Q Strong Focus on Cost Reduction, Reduced Investments Cash is King Q Maximum Utilization of Assets (fleet optimization and flexibility)
B737 B737

Q Fast Scope Clauses Relaxation / / Closing the 70-110 Seat Gap (Bottom-Up and Top-Down)
25 50 75

B737

MD80

B737

B757 B737 A320 175+ B757 B757 B757 B757

B737

70 to 110 70 to 110 Seats Seats

A319

A320

Source: US DOT/Embraer THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT.

10 125 0 Seat Capacity

A319

150

A320

MD80 B737 A320

A319 B737

MD80

B737

B757

Regional Jets Sustained Operation

Regional Jets - A Dynamic Tool When markets are strong

RJs expand the air transport system by enhancing catchment areas, adding more spokes to carrier hubs, opening new routes and increasing frequency.

and when markets are weak

RJs help to defend an airlines overall market presence / network integrity by maintaining route-frequency, replacing unprofitable mainline jet services and rightsizing aircraft capaciy to demand.
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Regional Jets Network - USA

Jan 1995: 76 Routes Jan 2005: 2452 Routes

Source: Back/OAG (Feb/05 - ERJ-145/140/135, CRJ-100/200/440, 328Jet routes)

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ERJ - American
New Route Jet Complement Jet Replacement TP Complement TP Replacement
100%
33%

75%
12%

50%
26%

25%

5% 24%

0%
Source: BACK/OAG(Jan/05)
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ERJ - Continental
New Route Jet Complement Jet Replacement TP Replacement
100%
35%

75%
19%

50%
26%

25%
20%

0%
Source: BACK/OAG(Jan/05)
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ERJ 145 Family Main Missions

TP Replacement TP Complement Jet Replacement Jet Complement New Route

100% 33% 75% 12% 50% 26% 26% 25% 5% 24% 0% 20% 7% 23% 29% 25% 19% 9% 15% 5% 14% 23% 4% 23% 15% 35% 36% 37% 35%

Source: BACK/OAG(Jan/05)
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ERJ 145 Family

The Evolution of Regionals

An Intrinsic Part of the Solution

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ERJ 145 Family Orderbook

(as of December 31st., 2004)

Firm 123 94 684 901

Options 2 20 314 336

Total 125 114 998 1,237

Deliveries 106 74 618 798

Firm Backlog 17 20 66 103

ERJ 135 ERJ 140 ERJ 145 Total

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From Concept to Reality

E- stablishing
the 170/190 Family

The Rule of 70 to 110 (www.ruleof70to110.com)

THE FIRST ISSUE: THE NEED FOR AIRLINES TO RIGHT-SIZE THEIR FLEETS The Rule gives the airlines the tools to right-size their fleets thereby optimally matching capacity to demand. THE SECOND ISSUE: AIRLINES USING AIRCRAFT WITH TOO MUCH CAPACITY The Rule, by allowing the airline to efficiently right-size, creates increased frequency to capture market share and provides customers with more choice. The airlines can therefore focus their 120-plus seat aircraft on high-demand routes. THE THIRD ISSUE: USE OF TODAYS REGIONAL JETS IS NOT OPTIMIZED The Rule provides the right aircraft for the right market and allows the airlines to reposition their existing fleets to ensure that aircraft are neither overused or underused. THE FOURTH ISSUE: AGEING FLEETS The Rule, by introducing the right equipment for the right market, gives airlines the opportunity to develop the most optimum aircraft replacement strategy.
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The E- Jets Family

Certification Mid 2006

Certification Mid 2005

Certified Certified
CTA / FAA / EASA
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CTA / EASA TC Mid 2005

EMBRAER 170 EIS Statistics

Operating Summary Operators Aircraft in Service Flight hours Flight Cycles 5 53 61,740 43,570
(as of February 16th, 2005)

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EMBRAER 170 Network

New Route Right-sizing RightNatural Growth

100%

5%

75%

50%

50%

25%

45%

0%
Source: BACK/OAG(Jan/05)
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EMBRAER 170 - Republic

The 170s unique design allows us to offer United a true mainline product but at regional jet operating economics.
Bryan Bedford, Chairman, President and CEO of Republic Airways Holdings (Sep/2004)

70 seats:

48 @ 31 pitch

16 @ 34

6 @ 36

FA Seat Aft Lavatory Aft Galley

Wardrobe FA Seat Forward Lavatory Forward Galley

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EMBRAER 170 Network

New Route Right-sizing RightNatural Growth

100%

7%

75%
48%

50%

25%

45%

0%
Source: BACK/OAG(Jan/05)
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EMBRAER 170 Network

New Route Right-sizing RightNatural Growth
100%
2%

75%

39%

50%
59%

25%

0%
Source: BACK/OAG(Jan/05)
THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT.

EMBRAER 170 Network

New Route Right-sizing RightNatural Growth

100%

8%

75%
68%

50%

25%
24%

0%
Source: BACK/OAG(Jan/05)
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EMBRAER 170 Main Missions

Natural Growth Right-sizing RightNew Route

100%

2% 39%

7%

8%

5%

6%

75%

48% 68%

50%

48%

50% 59% 45% 24% 0% 45% 46%

25%

Source: BACK/OAG(Jan/05)
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LCC Next Step - Moving Downwards in Capacity

1,098 markets
upper boundary for a B737 / A320

500 PDEW

24%
315 PDEW

lower boundary for a B737 / A320

48% 28%
upper boundary for a 50 seater RJ

530 markets are perfectly suited for 70-110 seaters

150 PDEW

lower boundary for a 50 seater RJ

Source : US DOT OD1A
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105 PDEW

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EMBRAER 190 JetBlue

"JetBlue will bring its superior product and award-winning customer service to many mid-sized markets desperately in need of low fares and high quality service. With a combined Airbus and Embraer fleet, we will be well-positioned to offer a better product to markets of all sizes across the U.S., without compromising the low fares, cabin comfort and great service that are the hallmarks of the JetBlue experience." David Neeleman, CEO of JetBlue Airways (Jun/2003)
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EMBRAER 175 / 190 Air Canada

Together with the EMBRAER 190, the EMBRAER 175 will give Air Canada a competitive edge in offering high frequency, low-cost services on new and existing routes in Canada and the United States. Robert Milton, Air Canada President and CEO (Nov/2004)

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EMBRAER 170/190 Family Orderbook EMBRAER 170 / 190 Family Orderbook

Firm
(as of December 31st., 2004)

Options 177 230 20 427

Total 335 15 385 35 770

Deliveries 46 46

Firm Backlog 112 15 155 15 297

EMBRAER 170 EMBRAER 175 EMBRAER 190 EMBRAER 195 Total

158 15 155 15 343

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Embraer Market Forecast

Embraer Market Forecast (2005-2024)

Worldwide Jet Deliveries by Capacity Segment

Segment 30 - 60 61 90 91 120 TOTAL

2005 - 2014 650 1,300 1,250 3,200

2015 2024 1,300 1,550 1,750 4,600

2005 - 2024 1,950 2,850 3,000 7,800

30 to 120-seat segment value = US$ 170 billion

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Embraer Market Forecast (2005-2024)

30 - 120 Seats: 7,800 Jets

USA, Canada & Caribbean 4,165 4,165

Europe Europe 1,319 1,319

CIS CIS 495 495

17%

6%

53%
Latin America 538

China 635

Middle East Middle & Africa 177

8%
Asia Pacific 471

3%

7%

6%

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The

E-Jets Family

Thank you !
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