Brazil's Embraer bets big on luxury business jets

By Todd Benson

GAVIAO PEIXOTO, Brazil (Reuters) - At a factory flanked by orange groves and sugar cane fields, workers are putting the finishing touches on a new plane that will make Brazil's Embraer a major player in the executive jet market.

The plane, the Phenom 100, is small but roomy, with a cabin outfitted by BMW Designworks that can seat up to eight people. At $3 million, it is a tad pricier than other jets in its class but has twice the lifespan.

It doesn't take to the skies until later this year and a slightly larger version, the nine-seat Phenom 300, won't go into operation until a year later. Still, orders for both keep pouring in.

Embraer's foray into the executive jet market, at a time of burgeoning demand around the world, looks like the latest in a series of smart moves by the company, which once made military trainers and is now a symbol of a surging Brazil.

Embraer has received more than 700 orders for the two new planes, lifting the backlog for its executive jet line-up to more than $4.5 billion. Demand for the new models is growing so fast that it expects business jets to account for 25 percent of its revenue by 2010, up from 15 percent currently.

Like rivals such as Gulfstream and Cessna, Embraer is benefiting from surging demand for business jets. From the oil-rich Middle East to fast-growing countries like Russia and Brazil, wealthy individuals and corporations are lining up to buy Embraer's private planes. At one air show alone last November in Dubai, Embraer rang up $623 million in orders for 51 business jets.

"I don't think the competition ever acknowledges that it's nervous about anybody else, but I'm sure they are," said Nigel Moll, editor of Aviation International News, a trade magazine that tracks the business jet industry.

Still, Embraer faces hurdles putting its planes in the air. For one, its executive jet backlog has ballooned so much that new customers face waits of up to five years for a Phenom 100 and six years for a Phenom 300. Fortunately for Embraer, buyers are likely to face similar delays with other manufacturers.