UPDATE 1-Brazil's Embraer looks to shock Lockheed with price of cargo jet

Tue Apr 9, 2013 4:25pm EDT

* Competitive KC-390 price will make rivals "uncomfortable"

* Embraer says pricing below Lockheed's $90 mln-$120 mln range

* Firm orders for cargo plane to start in 1st qtr of 2014

By Brad Haynes

RIO DE JANEIRO, April 9 (Reuters) - Brazilian planemaker Embraer SA is looking to shock rivals with the price of its KC-390 military transport plane when it starts booking orders within the next 12 months, according to a senior executive.

Luiz Carlos Aguiar, the head of Embraer's defense unit, made clear at the LAAD defense show in Rio de Janeiro on Tuesday that the company was ready to undercut its main competitor, Lockheed Martin Corp ".

"In terms of price, we're going to make the competition uncomfortable. They're going to be astonished," he said in an interview before the event.

The confident tone highlights Embraer's growing ambitions for the KC-390, which aims to replace aging versions of the C-130 Hercules made by Lockheed Martin. The Brazilian aircraft received a vote of confidence last year when Boeing Co agreed to joint sales.

Aguiar declined to give precise details on the price of Embraer's new cargo jet at a press conference. He said the price tag would be "obviously less than" what Lockheed has been charging recently for the C-130 - a range he estimated between $90 million and $120 million.

Spokesmen for Lockheed Martin had no immediate comment on pricing for the Hercules. Lockheed has recently announced a lower-cost version of its latest Super Hercules and offers a kit to update older planes at a fraction of the cost.

Embraer also updated its assessment of the potential market in the military transport segment on Tuesday, estimating global demand for 728 new cargo planes worth more than $50 billion by 2025, up from the 700 new planes estimated in recent years.

Last month, the Brazilian air force wrapped up the KC-390's critical design review, finalizing details of its layout and performance. It also allowed the planemaker to move ahead with making prototypes and formalizing sales.

Embraer expects to book its first firm orders by the first quarter of next year, Aguiar said. The company already has letters of intent for 60 planes from Brazil, Colombia, Portugal, Argentina, Chile and the Czech Republic.

There are 77 countries that are potential customers for the KC-390, Aguiar said, adding that Embraer's traditional strength in Latin America, Africa and South Asia will continue to guide its commercial strategy on the cargo jet.

Development of the aircraft remains on track, he added, with the first flight by a prototype expected by the end of next year and deliveries starting in 2016.

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