August 13, 2012
Credit: Credit: Embraer
Leithen Francis Sao Jose dos Campos, Brazil
Embraer is a brand synonymous with commercial and business aviation, but can it also become one of the world's largest defense firms? The Brazilian aerospace company is repositioning itself to achieve that goal, and the catalyst for the move is a series of multibillion-dollar defense contracts that are coming up for grabs in Brazil.
There is Sisfron, a $6 billion integrated border-monitoring system that the Brazilian army plans to field to protect the nation's land frontiers. Brazil has borders with 10 different countries totaling nearly 17,000 km (10,560 mi.). There is also SisGAAz, otherwise known as “Blue Amazon,” a $2 billion project spearheaded by the navy to protect Brazil's exclusive economic zone. Brazil derives much of its economic wealth from its oil and gas platforms off the coast. The government also wants to protect its fisheries and ensure that it has the monitoring capability to stop any incursions. Another important program involves a geostationary satellite. It will have a payload for providing military communications.
In addition, there are defense and security contracts arising from the FIFA World Cup and Summer Olympics, which will be held in Brazil in 2014 and 2016, respectively.
The contracts require companies to have expertise in ground-based radar, sensors, air surveillance, satellite communications, Earth-observation and radio communications.
Embraer has made its defense and security business a separate entity and branded it Embraer Defesa e Seguranca (ED&S). Luiz Carlos Aguiar, who was previously Embraer's chief financial officer, is now ED&S's CEO.
“We are trying to emulate in Brazil what European and American defense companies have done in the past,” says Aguiar, referring to companies such as Boeing, which has defense and commercial/business aviation activities that are managed separately, each with its own CEO.
Even though Embraer already makes the Super Tucano light attack and the EMB-145 airborne early warning (AEW) aircraft, commercial and business aviation still accounts for 80% of Embraer's group revenue. However, a 20% revenue share in this year's first half is an achievement for ED&S, because last year Embraer's defense work amounted to only 15%. Aguiar anticipates ED&S will account for 25% by 2020. Last year the unit had revenue of $859 million; this year, it is forecast to be “a little over $1 billion,” he says. In 2006, Embraer's defense business had revenue of only $400 million, he adds.