Reuters: Deals: Embraer sees rebid for U.S. contract within weeks

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Embraer sees rebid for U.S. contract within weeks Mar 28th 2012, 19:39 An Air Canada Embraer 190 jet prepares to land at Calgary International Airport in Alberta January 7, 2010. Credit: Reuters/Todd Korol By Brad Haynes SANTIAGO | Wed Mar 28, 2012 3:39pm EDT SANTIAGO (Reuters) - Brazilian aircraft maker Embraer (EMBR3.SA) expects to bid again within weeks on the U.S. Air Force contract to supply up to $1 billion in light attack planes for the Afghan government, the chief executive of the company's defense unit said on Wednesday. Luiz Carlos Aguiar said he would be "surprised" if there were any changes in conditions for the contract, which Embraer won in an initial bidding process before the Air Force unexpectedly pulled the contract in February. "We see no reason to mess with the requirements now," he said in an interview at Chile's FIDAE regional air and defense show. "If there were a change to the conditions, we would have to rethink if we're going to bid or not. Our plane was made for that mission exactly." Embraer's Super Tucano light attack fighter landed the contract in December for an initial delivery of 20 planes before the Air Force suspended the contract due to an unspecified mistake that U.S. officials have called embarrassing and disappointing. The Air Force, which cited problems with documents used to make the decision, extended its investigation on Friday. Meanwhile, Aguiar said the Super Tucano's reputation for being inexpensive to fly and maintain even in rugged conditions has led to growing demand for the turboprop attack plane. Embraer announced $180 million in Super Tucano orders from three African nations earlier on Wednesday, and Aguiar said he expects more deals this year from both new and old clients in Latin America, Africa and Southeast Asia. Integration in the U.S. mission in Afghanistan would also open the possibility of orders from allied NATO forces, Aguiar told Reuters in January. ANOTHER NEAR MISS? The Super Tucano would be Embraer's first plane delivered to the U.S. armed forces -- a "showcase" that Aguiar hopes will cement the company's credibility as a global defense contractor, helping smooth out swings in commercial aviation cycles. So far, the contract has been the second frustrating miss in a decade after the Air Force canceled an earlier contract with Lockheed Martin Corp (LMT.N) for a reconnaissance plane based on Embraer's ERJ-145 regional jet. Still, potential revenue from the Super Tucano is dwarfed by Embraer's next big project, the KC-390 cargo and tanker plane that could see its first flights in 2014. Aguiar said revenue from the KC-390 program will more than double this year from 2011 to make up nearly 40 percent of the defense unit's top line, as a contract with Brazil's air force provides cash flow to cover research and development. Development revenue for the cargo plane already represents $2 billion of future revenue in the defense unit's backlog, pushing the total backlog to an historic high of $3.4 billion. That backlog could jump next year when Embraer prices the KC-390, allowing it to book firm orders. The company currently has letters of intent for 60 planes from partner countries involved in the program's supply chain. Aguiar said he expects to finalize an agreement by June with Colombia as a partner country ordering 12 planes. Embraer sees a potential market for up to 700 new cargo planes worth over $50 billion by 2025 as countries replace aging versions of the C-130 Hercules, made by Lockheed-Martin. Aguiar also expects the first phase of Brazil's border control spending to boost its defense backlog this year, when it aims to sign as prime contractor for a program eventually worth some $4 billion over 15 years. Between 60 percent and 65 percent of spending on the borders contract could go to Embraer and partner companies supplying unmanned surveillance planes, radars and communications networks, Aguiar said, while the rest would go to outside contractors. Aguiar said the backlog could receive an additional boost this year if the company secures a $400 million government contract to launch Brazil's first defense and communications satellite through a joint venture with state telecom Telebras. (Editing by Todd Benson, Bernard Orr) Link this Share this Digg this Email Reprints

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