Brazil Finds Niche in Plane Market

THE crew may not speak Portuguese, the piped-in music may not be a rhumba, but the next commuter plane you fly may well be Brazilian. Embraer, Brazil's state-controlled aircraft manufacturer, sells about 140 planes a year to United States and European commuter airlines and is stepping up its efforts in this niche of the transportation market.

As more countries deregulate air travel, demand grows for small planes to bring passengers into large airports from feeder cities. Joaquim Maria Botelho, an Embraer spokesman, talks of 7 percent-a-year growth in the commuter plane market in the European Community after it deregulates airlines in 1993. The estimated total world market for small passenger planes until the year 2000 is 1,500.

Embraer is aiming at winning half these sales, competing with Boeing Company's De Havilland division and Sweden's SAAB-Scania AB, which also manufactures automobiles.

Over the years, Embraer has sold planes to such US regional airlines as Air Midwest, Atlantic Southeast Airlines, Texas Air, Comair, and Northwest. The Brazilian company is predicting sales this year of $840 million, up from almost $700 million in 1989. Profits range around 7 percent of sales, but may grow if current government plans to privatize the company are carried out.

Embraer's competitive advantage includes its design capability and the relatively cheap labor of its 12,000 employees. The company imports about 75 percent of its components. Many parts come from US companies, such as two divisions of United Technologies Corporation - Hamilton Standard (propellers) and Pratt & Whitney (engines) - and Allied Signal Aerospace Company's Garrett division (jet engines).

The 90-minute drive to the plant from congested, polluted Sao Paulo, passes by favelas - slums filled with shacks and hordes of sometimes malnourished children.

Then suddenly, there is a security check and highly skilled workers building planes in the clean, organized working space of eight Embraer hangars.

Brazil's interest in airplanes dates back to the beginning of this century when Alberto Santos Dumont, a national hero, ranked alongside the Wright brothers in aviation pioneering. Then, in the 1940s, the military decided to invest in engineering research and training to reduce the country's dependence on foreign technology. Out of this philosophy came Embraer's first product, the Bandeirante, created 18 years ago for the Brazilian air force.

The Brazilian engineers surprised themselves with the Bandeirante, snapped up in the 1970s by Uruguayan and French buyers. Embraer sold its first Bandeirante in the US in 1978. Sales grew, and more sophisticated models followed.

Marcel Reynaud, a pilot who has come to pick up the 30-seat twin turboprop for France's Air Exel, describes the Bras'ilia as the best on the market. ``It goes fast, 300 knots, and its engines are very sure,'' he says.

The company's latest creation, unveiled last month, is a twin-engine turboprop seating 19 called the Vector. Manufactured here in conjunction with Argentina's Fabrica Argentina de Materiales Aerospaciales (FAMA), its selling points are low engine noise, efficient fuel consumption, and speed. It costs $4.6 million.

``By the year 2005, including the executive version of the [Vector], we have a sales potential of 600 units over the next 15 years,'' says Embraer director-superintendent Oz'ilio Silva.

The Brazilians are also eyeing the US military. Embraer plans to be among bidders next year to furnish 900 training planes to the US Air Force and Navy for $2.7 billion. To receive the order, Embraer will have to line up with a US aircraft company, which would produce the planes under license in the US. Mr. Botelho said Embraer's close relationship with McDonnell Douglas Corporation makes the company a likely partnership candidate.

Embraer already supplies the French and British Air Forces with Tucano training planes. Government training programs choose the single-engine turboprop Tucano because it speeds up the learning process for pilots by simulating jet conditions. The basic model costs $1.9 million.

For the future, Embraer promises its first commercial jet plane, seating 45, in 1992. And it hopes to sell the fighter-bomber AMX, produced in conjunction with Italy's Aerimacchi and Aeritalia. Now being supplied to the Brazilian and Italian air forces, the AMX has drawn interest from many other countries.