SAO PAULO (Reuters) - Brazil’s Embraer expects to sell its Super Tucano light attack aircraft to more NATO nations after clinching an order from the United States that lifted the company into the upper echelons of global defense contractors, a top executive told Reuters.
“When you’re selling to the most demanding client on the planet ... that’s a showcase,” Luiz Carlos Aguiar, the head of Embraer’s Defense and Security unit, said in an interview. “It naturally opens the door to the NATO countries, which have many joint operations.”
Just weeks after winning its first U.S. government contract, Aguiar said Embraer is also eyeing at least three other projects for the U.S. armed forces, undeterred by the political firestorm surrounding an American rival’s legal challenge.
Buoyed by the U.S. endorsement, Embraer’s defense unit could make up a quarter of its revenue by 2020, Aguiar said, up from an estimated 14 percent last year and under 5 percent in 2006.
The unit promises steady growth with Brazil’s armed forces as the country bolsters protection of its vast borders and far-flung offshore oil reserves, reducing Embraer’s reliance on highly cyclical revenue from civil aviation.
But as Embraer’s defense ambitions grow in foreign countries, it also faces more politically charged competition.
The U.S. Air Force halted the $355 million Super Tucano order last week due to a lawsuit from losing bidder Hawker-Beechcraft HKBCH.UL, of Kansas, stirring nationalist rhetoric from local lawmakers and Republican presidential candidate Newt Gingrich.
Aguiar dismissed the political risks, confident that a swift decision in courts will free up Embraer to deliver the Air Force’s first Super Tucanos from a new Florida plant next year.
“Our team is totally ready. No one was deactivated,” said Aguiar. “You just press the button and we go to work.”
The order could grow to $950 million for 55 aircraft, which are designed for surveillance and counterinsurgency operations in rugged conditions like the Afghanistan border.
The U.S. contract is the first for the Super Tucano in the NATO alliance. An earlier generation of the plane, known as the Tucano, was used beginning in 1989 for pilot training in France and the United Kingdom.
Embraer’s focus on defense is a return to its roots for the planemaker, which was founded in 1969 as a government-run supplier for the Brazilian Air Force. After it was privatized in 1994, the company reinvented itself as a commercial planemaker and eventually became the world’s leading manufacturer of regional jets, competing with Canada’s Bombardier (BBDb.TO).
In many ways, Embraer has also become the face of an emerging, more modern Brazil, long a commodities-based economy dependent on the country’s vast natural resources and agricultural wealth, from iron ore and oil to sugar and coffee.
As Brazil’s global ambitions grow with its economic rise, Embraer is pushing into new defense segments. The company has announced a string of acquisitions and new partnerships in the year since it established a separate defense and security unit.
Embraer is developing unmanned aircraft to patrol Brazil’s borders deep in the Amazon. The Brazilian navy has turned to the company for planes to protect deep-sea oil reserves located more than an hour off its coastline by helicopter. And in November Embraer joined forces with state telecom Telebras to launch a defense and communications satellite.
The pace of new ventures will slow in 2012, as the focus turns to the execution of existing projects, Aguiar said.
Embraer has also finished lining up an array of suppliers for its KC-390 military cargo plane, he said, preparing the company to define specifications, determine pricing and begin sales by the first quarter of next year.
And with Embraer’s scope extending well beyond the aviation market, there is more room for innovative announcements.
As Brazil prepares to host the 2014 World Cup and 2016 Olympics, for example, Embraer is developing software to manage public security at those major events to coordinate communication between local, state and federal forces.
“Their systems still aren’t talking to each other. They’re fundamentally fragmented. So there’s a role for Embraer to play there, integrating all of them,” Aguiar said.
Editing by Todd Benson