Political Risk Latin America Blog @PolRiskLatam

Exclusive: Embraer CEO sees risk from oil, euro zone

Posted in News and Articles, Political Risk by politicalrisklatam on June 21, 2011

by Cesar Bianconi for Reuters, June 20th, 2011.

Strong oil prices and the euro zone crisis threaten to cut short the recovery of an increasingly competitive aircraft manufacturing industry, the head of Brazil’s jet builder Embraer (ERJ.N)(EMBR3.SA) told Reuters on the eve of the Paris Air Show.

Frederico Curado also said in an interview late on Sunday that one of Embraer’s main clients, JetBlue Airways Corp (JBLU.O), could significantly cut its orders.

His comments could reinforce concerns that the impact of high oil prices on the aviation industry is beginning to spread to suppliers and aircraft manufacturers.

“The industry was recovering nicely and then the issue of the Arab countries and the oil price hike hit,” Curado said, adding that the Greek debt situation also weighed on the industry outlook.

With airline profits expected to fall from $16 billion in 2010 to around $4 billion this year, their appetite for new aircraft could fall, Curado said.

“The viability (of airlines) is again at risk.”

Embraer, one of Brazil’s flagship exporters, itself could see a substantial fall in orders. JetBlue, the U.S. low-cost airline, is “unlikely” to exercise its options for 100 jets, Curado said. (continue reading… )

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