2019 EMBRAER AIRCRAFT FINANCE OUTLOOK
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2019 EMBRAER AIRCRAFT FINANCE OUTLOOK

This presentation includes forwardlooking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our market. The words “believes”, “may”, “will”, “estimates”, “continues”,...

The aircraft financing market constitutes one of the most important pillars of the aviation industry. Commercial airplanes are large capital investments that may surpass double digit percentages of aviation total operating costs. The aircraft financing market is crucial for airlines, lessors and OEMs to efficiently manage such invesments and maximize their profitability. As the third largest commercial aircraft manufacturer and the number one in the segment up to 150 seats, we at Embraer Commercial Aviation felt we could contribute to our industry by sharing our perspectives of the aircraft...

FLEET AND MARKET OVERVIEW REGIONAL AND SMALL NARROW-BODY AIRCRAFT

Fleet and Market Overview / FLEET IN SERVICE BY REGION Number & Distribution by Region Aircraft up to 150 Seats 7% 2% 8% 41% 18% 24% North America Europe Asia Pacific Latin America & Caribbean Number & Distribution by Region All Aircraft Types 7% 4% 6% Africa Middle East 27% Asia Pacific leads overall fleet in service, but North America’s regional aircraft market is more developed than Asia Pacific. Regional airlines are the only source of air service for more than half of all U.S. airports and carry more than 40% of all U.S. passengers. Those airlines offer a high degree of network...

Fleet and Market Overview / Historically, large OEMs, with approximately 78% of the market, have focused their resources on developing larger single-aisle aircraft. Consequently, other OEMs seized the opportunity to grow their market share and compete in the segment with products that vary in structure and size. 23% 19% Bombardier Embraer Boeing Airbus ATR Fleet-in-Service All Aircraft Types Market shares in this segment are likely to change dramatically in the near future because of recent changes in the OEM landscape. Airbus took a majority stake in Bombardier’s CSeries program,...

AIRCRAFT FINANCE OUTLOOK

Aircraft Finance outlook / FINANCE OUTLOOK FOR THE UP TO 150-SEAT SEGMENT Aircraft USD Value, Distribution of Financing up to 150 Seats - 2018 Despite a 5% decrease in the number of deliveries expected in 2019, total demand for financing has remained stable compared to 2018. The mix of aircraft to be delivered this year saw an increase in the average appraised Current Market Values (CMV) which fully offset the year’s fewer deliveries. 40% Bank Capital Mkt Cash ECA ANPI Aircraft USD Value, Distribution of Financing up to 150 Seats – 2019F 12% Profit momentum in 2018 favored cash usage for...

Aircraft USD Value, Distribuition of Financing - up to 150 Seats 12% 1% Aircraft USD Value, Distribuition of Financing All Aircraft Types 31 Bank Capital Mkt Cash ECA ANPI OEM Up to 150-seat market is 33% of FIS but represents 5% of finance demand. Source: Cirium, Embraer, Boeing CAFMO Aircraft Finance outlook / REGIONAL VS. GLOBAL - 2019F The up to 150-seat aircraft segment represents about 33% of the global fleet-in-service yet only 5% of total financing needs. Capital markets provide lower funding costs and are usually tapped by companies with sound financial health, a suitable portfolio...

EMBRAER AIRCRAFT FINANCE OUTLOOK

Aircraft USD Value, Distribution of Financing 2018 Aircraft USD Value, Distribution of Financing 2019F Bank ( Capital Mkt ECA OEM ANPI CASH Deliveries concentrated on specific customers drive changes in financing profile. ECA lower than average share replaced by banks and capital markets. Source: Embraer Embraer Aircraft Finance Outlook / EMBRAER AIRCRAFT FINANCE OUTLOOK Embraer’s 2018 deliveries were largely financed by cash and ECA funding. In 2019 however, capital markets shall be the most relevant financing source for Embraer deliveries, breaking off from the regional aircraft segment...

Embraer Aircraft Finance Outlook / Number of aircraft 2018 deliveries E-JETS LEASE STRUCTURES 2018 & 2019 The current availability of different capital sources for regional aviation is competitive and puts traditional leasing options for operators under margin pressure. Some lessors have taken strategic positions in OEM orderbooks to secure skyline for their future transactions. 87% Owned Lease Placement Sale-Leaseback Number of aircraft 2019F deliveries With regards to Embraer’s deliveries, the recent concentration to US airlines and the transition to the E2s favors the buy option....

Embraer Aircraft Finance Outlook / EMBRAER PROGRAM FUNDING SOURCES Distribuition of Financing ERJ Deliveries 1996-2006 32% Sources of finance in the regional market have evolved, as the current portfolio of Embraer jets moved away from ECA-supported financing towards private funding, leaving BNDES as a backstop. 10% 5% Bank Capital Mkt CASH ECA Distribuition of Financing E-Jet Deliveries 2004-2019F 23% The reliance on ECA funding for deliveries of the ERJs posed significant challenges to new aircraft deliveries in the past. In general, the 50-seat market was considered a niche asset which...

Embraer Aircraft Finance Outlook / E-JETS FUNDING SOURCES HISTORY FUNDING FOR E-JETS DELIVERIES The development of different funding sources for Embraer E-Jets ensured that deliveries would not be impaired by external factors in the financial markets. Changes to the share of each type of financing are highly correlated with general aircraft financing landscape and to the profile of deliveries to specific customers and markets. E-Jets are broadly comparable with narrow bodies as shown by their funding history. A substantial portion of E-Jets operators also have narrow bodies in their fleets...