Airline Market Outlook Embraer’s Positioning in the 30 to 120 Seat Segment

6th Annual Analyst & Investor Meeting

Frederico Fleury Curado

November 18th, 2005 São Jose dos Campos SP, Brazil

Executive Vice-President, Airline Market

Contents


Key Global Market Trends
Competitive Environment
Regional Jets Sustained Operation
Embraer Market Forecast

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.

Key Global Market Trends • Traffic Recovery Intra-Europe (RPK Billion)

300

U.S. Domestic (RPM Billion) 600

250

500

200

400

150

300

100

200

50

100

0

0

2000

2001

Network

2002

2003

Low Cost

2004

2005F

Regional

2000

2001

Network

2002

Low Cost

2003

2004

Regional

Source: Airlines, Embraer

• Disconnection from Forecast Ground Rules • Historically > 0.90% of GDP, Passenger Revenue is below 0.70%. • RPM is becoming a more complex function of GDP and Yield.

Source: US Bureau of Economics Analysis and DOT Form 41

2005F

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 100%

• Shift in Market Share

3%

5%

9%

(% RPK) 8%

12%

12%

5%

Intra-Europe 17%

16%

80%

11%

27%

19% 35%

37%

• US: LCCs and Regionals expanding.

60%

• Intra-Europe: LCCs expanding and

40%

Regionals concentrating on secondary/ /business markets development.

15%

19%

85%

87% 76%

72%

64%

65%

51%

50%

20% Source: Airlines, Embraer

0%

1995

2000

Network

2005E 2010E

Low Cost

1995

2000

2005E 2010E

Regional

Key Global Market Trends • Domestic U.S. Pax Yields Down Sharply from 2000 • No evidences or expectation of a sizable recuperation. • Passenger unit revenue trends weak

• Crude Oil and Jet Fuel Prices

historical levels to around US$50-60 long term. Jet fuel prices expected to be around US¢150-170.

50 40 30 20 10 2002 2003 2004 2005

• Projected oil prices: an upward shift from

200 180 160 140 120 100 80 60 40 20 0

Source: EIA

1995 1996 1997 1998 1999 2000 2001

refinery capacity) led to higher prices.

60

1990 1991 1992 1993 1994

import rates, increased China demand and

Crude Oil (US$/Barrel)

• Several factors (cold weather, wars, higher

70

Jet Fuel (US¢/Gallon)

domestically but strong internationally

Key Global Market Trends •

25

Fleet Right-Sizing

20

• 95% of all North American narrow-body flights are within 1,700nm range. • 85% of city pairs exclusively served by narrow body jets have less than two daily frequencies.

of flights

15 %

• 60% of all US domestic flights depart with load factor more appropriate to 70-110 seat aircraft.

60%

10 5 0

4

8

13

15

20

13

8

7

5

2

2

50

60

70

80

90

100

110

120

130

140

>150

Passengers per Departure

Source: US DOT/Embraer

• Replacement Crisis – Ageing Fleets (61 to 120 seats)

810

• 35% of total fleet is more than 20 years in service and

Aircraft older than 20 Years

492 451

35% of total fleet in service

shall start to be replaced in the coming years.

361 320

• Old technology equipments, most of them no longer in

233

212

237

production. • Inefficient and expensive aircraft to operate. 0-5

6-10

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

26-30

30

Source: BACK/Fleet PC (Jan/05)

Not Another Cycle, but a Fundamental Change
New Passenger Profile  Different Set of Values
Ultra Competitive Environment
Strong Focus on Cost Reduction, Reduced Investments  Cash is King
Maximum Utilization of Assets (fleet optimization and flexibility)

50

100

150

B777 B777

MD11

B767 B767

B747

B777 A330

A340

A330

B747

B777

B767 B767

B767

B767

B757 B757

DC-10

B757

A300 B757

B757 B757

A321 B737

175+

B757 A330

B737 B767

B757

B737 B737

MD82 A320

B737

MD88 MD90

B737 DC-9

A319

125

Seat Capacity

A320

B737

B737

A319

B737

A319 B737

75

A320

B737

B737

MD80 MD83

CRJ700 CRJ700

CRJ700 E-170 CRJ700 E-170

DC-9

CRJ440

25

CRJ700

CRJ200 ERJ145 CRJ200 ERJ145

ERJ135

(Bottom-Up and Top-Down)

110 Seats

AVRO

CRJ200 ERJ145

ERJ135


Fast Scope Clauses Relaxation / / Closing the 70-110 Seat Gap

70 to

ERJ145

ERJ135

 It´s about value proposition

ERJ145

ERJ135

 It´s about cost and efficiency

ERJ140


Clash of 3 models (LCC x Network x Regional)

Competitive Environment

30-60 Seat Jet Competitors

ERJ ERJ 135 135

CRJ200 CRJ200 // 440 440

ERJ ERJ 140 140

328JET 328JET

ERJ ERJ 145 145 and and 145XR 145XR

Market Share (30-60 seat segment) 100 93 90 83 Accumulated Market Share (%)

80 70 68 60 56 50

55

45

52 48

45

40

52

48

52

48

55

54.4

47

45

45.6

2003

2004

53

32

30 17 20 10

7

0 1995 Source: Embraer

1996

1997

1998

1999

2000

2001

2002

'Sep/2005

61-90 Seat Segment Competitors

RRJ RRJ

EMBRAER EMBRAER 170 170 CRJ700 CRJ700

CRJ900 CRJ900

EMBRAER EMBRAER 175 175 ARJ21 ARJ21

Market Share (61-90 seat segment) 100 100

Accumulated Market Share (%)

100

73

77

80

72

70

67 64 57.9

60

40 30 27

23

28

33

36

36.2

20

0

0 1995 Source: Embraer

1996

1997

1998

1999

2000

2001

2002

2003

2004

2.5 3.4 'Sep/2005

91-120 Seat Segment Competitors B717 B717

B737-600 B737-600

EMBRAER EMBRAER 190 190 A318 A318 ARJ21 ARJ21

RRJ RRJ

EMBRAER EMBRAER 195 195

Market Share (91-120 seat segment) 100

100

100

100

90

Accumulated Market Share (%)

80 70 60

56

56 45

50

49 42

40 38

29

33 16

20 10

45

42

44 30

58.5

11

11

1999

2000

24

26 20

13

21.3 20.2

0 1995 Source: Embraer

1996

1997

1998

2001

2002

2003

2004

'Sep/2005

Embraer Commercial Jets Unique Position 30Y

50Y

70Y

Potential New Entrants

Scope

90Y

110Y

130Y

Regional Jets Sustained Operation (30-60 seat segment)

ERJ 145 Family

37 Seats

44 Seats

50 Seats

50 Seats (2,000 nm range)

ERJ 145 Family Network - USA New Routes Jet Complement Jet Replacement RJ Complement RJ Replacement TP Complement TP Replacement 100% 28%

75% 18%

50% 22%

25%

18%

Average Stage Length = 460 miles Source: BACK/OAG (Jan/05)

3% 5% 6%

0% 1371 routes

ERJ 145 Family Network

< 1 hour 1 – 2 hours 2 – 3 hours > 3 hours

Number of Routes

Source: BACK/OAG (Jan/05)

Jan/2000

Jan/2005

< 1 hour

41 (14%)

179 (15%)

1 - 2 hours

157 (55%)

639 (51%)

2 - 3 hours

87 (31%)

380 (30%)

> 3 hours

0

48 (4%)

US Regional System Network % routes in each major US RJs operator network without direct competition 50% 44% 40%

35%

30%

27% 21%

20%

15%

15%

UA

US

10% 0%

AA

CO

DL

NW

• High percentage of RJ service is on monopoly routes • 75% of all RJs monopoly routes are operated with less than 2 daily frequencies Source: BACK/OAG (Jan/05 ; combined city effect not considered)

US Domestic Market (Year 2004) 2,500 50-seat RJ Market Opportunities: 1949 connecting markets

Number of Markets

2,000

1,500

1,000

Connecting Flight (Greater than 90% of total PPDEWs in Connecting Flight) Direct & Connecting Flight

Direct Flight (Less than 10% of total PPDEWs in Connecting Flight)

500

0 25 - 75

75 - 150

150 - 315

315 - 500

Passenger Per Day Each Way (PPDEW) Source: US DOT OD1A (Back Aviation)

>500

ERJ 145 Family Network - Europe New Routes Jet Complement Jet Replacement TP Complement TP Replacement 100% 31%

75% 17%

50% 18%

25%

13%

21% Source: BACK/OAG(Jan/05)

Average Stage Length = 430 miles

0%

424 routes

New Routes Development - London City • •

ERJ 135: Steep Approach Capable (London City Airport) Still Air Range: 600 nm

ERJ 135

- Typical European airline OEW - Full PAX Passengers at 90.7 kg (200 lb) - Cruise at LRC - Airport Temp. at 20.5ºC / ISA+5.5ºC (85% Summer) - 85% Summer Winds - JAR OPS Reserves 100 nm alternate

New Routes Development - China

China Eastern 5 ERJ 145

Chengdu

China Southern

Sichuan Airlines 5 ERJ 145

Source: BACK/OAG(1Q05)

Guangzhou

6 ERJ 145

ERJ 145 - AeroLitoral - Mexico New Routes Jet Replacement

CJS CJS

TIJ TIJ

TP Complement HMO HMO

CUU CUU

TP Replacement

CEN CEN LMM LMM

MTY MTY

CUL CUL

100% 17% 75%

GDL GDL

17%

BJX BJX MEX MEX

50% 41%

• The ERJ 145, on average, attracts 10 more pax per flight on every route it replaces the Saab.

25% 25%

• Since the incorporation of the ERJ 145s, AeroMexico’s market share, on disputed routes, has increased by 9 p.p. 0% Source: BACK/OAG(Jan/05)

ERJ 145 Family Worldwide Fleet SR and CR Schedule Reliability & Completion Rate 12 Months Moving Average

REF. Aug/2005

CR=99.7% (completion) SR=98.8% (15 min. delay)

ERJ 145 Family Orderbook

(as of September 30th., 2005)

Firm Orders

Options

Total

Deliveries

Firm Backlog

ERJ 135

123

2

125

108

15

ERJ 140

94

20

114

74

20

ERJ 145

677

206

883

661

16

Total

894

228

1,122

843

51

The 30-60 Seat Jet Segment Summary

• Market has reached maturity (established customer base) • The lowest trip cost: increased frequencies (market presence) and reduced risks to new markets development (long and thin routes with monopoly services – better pricing power)

• Secondary market starting to develop • Less than 10 ERJs temporarily parked • Will remain the markets)

backbone of US Regional fleet (small density

The E-Jets Family Program Status

Economics

Ergonomics

Engineering

Efficiency

EMBRAER 170 Certified by CTA/FAA/EASA CTA

FAA

EASA

EMBRAER 170/175 Canadian Certification •Canadian Certification Granted on July 15th, 2005.

Florida, July 2005, -35 °C McKinley Climatic Lab, Eglin Air Force Base

Additional Cold Soak tests performed for the Canadian authorities PR 22/Jul/05

EMBRAER 190 – Certified by CTA and FAA CTA TC on August 30th, 2005.

PR 01/Sep/05

FAA TC on September 2nd, 2005.

EMBRAER 195 – Development & Certification Schedule 2000 Q1

Q2

Q3

2001 Q4

Q1

Q2

Q3

2002 Q4

Q1

Q2

Q3

2003 Q4 Q1

Q2

Q3

2004 Q4

Q1

Q2

Q3

2006

2005 Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

Q4

Initial Definitions Phase

Joint Definition Phase Detail Design and Manufacturing

First Flight Certification Tests

Type Certification 1st Delivery


1ST Flight – Dec’07th 2004 PR 10/May/05

E-Jets Operators ITALY

France

SWITZERLAND

UK

FINLAND

GERMANY

POLAND

●Alitalia

●Régional

●Swiss

●Flybe

●Finnair

●Cirrus

●LOT

CANADA ●Air Canada USA ●US Airways ●Republic

China

Delta United

●Hong Kong Express

●JetBlue

India ●Paramount

PANAMA ●Copa

ECUADOR ●Tame

Saudi Arabia ● Current Operators

● Near Future operators

●Saudi Arabian Airlines

(as of Oct 24th, 2005)

Embraer 170 Network at % of Routes (3Q05)

New Route Rightsizing Natural Growth 100%

75%

8%

41%

50%

25%

Source: BACK/OAG (3Q05 routes)

Average Stage Length = 635 sm (552 nm)

0%

51%

Embraer 170 Network at % of Routes (3Q05)

New Route Rightsizing Natural Growth 100%

3%

75%

43%

50%

25%

Source: BACK/OAG (3Q05 routes)

Average Stage Length = 640 sm (556 nm)

0%

54%

Embraer 170 Network at % of Routes (3Q05)

New Route Rightsizing Natural Growth 100% 12%

75%

29%

50%

25%

Source: BACK/OAG (3Q05 routes)

Average Stage Length = 429 sm (373 nm)

0%

59%

Embraer 175 Network % of Routes (4Q05)

New Route Rightsizing Natural Growth 100%

75%

50%

50%

25%

Average Stage Length = 410 sm (357 nm) Source: BACK/OAG (4Q05 routes)

0%

50%

Embraer 170 Network % of Routes (3Q05)

New Route Rightsizing Natural Growth 100%

75%

2%

37%

50% 61%

25%

Source: BACK/OAG (3Q05 routes)

Average Stage Length = 609 sm (529 nm)

0%

EMBRAER 190 Initial Network

New Route

100%

From

Panama City

San Pedro Sulas

To

San Salvador

San Jose

Equipment

73G

E90

73G

E90

Jun/05

0

0

0

0

Jan/06

0

30

0

0

Jun/06

0

30

0

31

22%

75%

50%

Rightsizing From

Guatemala City

Panama City

Panama City

Panama City

Panama City

Panama City

To

Managua

Managua

San Andres

Barranquilla

Cartagena

Guayaquil

Equipment

73G

E90

73G

E90

73G

E90

73G

E90

73G

E90

73G

E90

Jun/05

60

0

30

0

30

0

22

0

22

0

45

0

Jan/06

62

0

30

0

0

31

0

31

0

31

13

31

Jun/06

30

30

30

30

0

31

0

31

0

31

6

46

78%

25%

0% Source: BACK OAG (Oct 05)

Y COP

200

400

EMBRAER 190 Initial Network

New Routes Rightsizing

Source: jetBlue website, BACK OAG (Oct/05) and ATI News

New Success Stories To Be Written Shortly

Firm order of 12 E170 plus 8 options

Firm order of 4 E170

Firm order of 2 E170 and 1 E190

Firm order of 15 E170

plus 4 options

New Success Stories To Be Written Shortly

Firm order of 6 firm E190

Firm order of 14 EMBRAER 195

Firm order of 2 E170 and 3 E175

EMBRAER 170/175 EIS Statistics • Operating Summary Operators

8

Aircraft in Service

87

Flight hours

167,700

Flight Cycles

115,200 (as of Oct 14th, 2005)

IS 19/Oct/05

EMBRAER 170/190 Family Order Book

Firm Orders

Options

Total

Deliveries

Firm Backlog

EMBRAER 170

191

133

324

81

110

EMBRAER 175

22

-

22

9

13

EMBRAER 190

185

219

404

2

183

EMBRAER 195

29

31

60

-

29

Total

427

383

810

92

335

(as of September 30th., 2005)

Embraer Market Forecast

Embraer Market Forecast (2006-2025)

Worldwide Jet Deliveries by Capacity Segment

Segment

2006 - 2015

2016 – 2025

2006 - 2025

30 - 60

500

1,050

1,550

61 – 90

1,300

1,650

2,950

91 – 120

1,550

1,900

3,450

TOTAL

3,350

4,600

7,950

30 to 120-seat segment value = US$ 180 billion

Embraer Market Forecast (2006-2025) 30 - 120 Seats: 7,950 Jets

USA, Canada & Caribbean 4,230

Europe 1,450

18%

Russia & CIS 525

53%

7%

China 590

7% Latin America 465

6%

Africa & Middle East 280

4%

Asia Pacific 410

5%