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 | Home grown industry stunted
VIRGIN Blue's decision to spend $600 million
buying a compact aircraft in Brazil says a lot about that country's aviation
industry.
Picture: Keith Neate from Virgin Blue with an Embraer. |
It also says something about missed opportunities in Australia. While
Brazil's Embraer Aircraft Corporation shifted successfully from building
military aircraft to civilian planes, mismanagement here by successive
governments cost the nation the chance to build passenger planes distinctly
Australian Australia tried to convert from assembling the Mirage and FA-18 fighters to
building a small passenger turbo-prop aircraft called the Nomad.
The venture
ended in a series of crashes with at least $20 million of taxpayer money wasted,
despite being billed by the then government as the most important all-Australian
aircraft when it first flew in 1971.
Hopes for an export industry ended
after several fatal crashes and aerodynamic failures.
Near the end of the
project planes were being built in Melbourne and flown 350km north to a deserted
warehouse near Albury, where they were mothballed.
The Embraer Corporation
in Brazil had a similar birth, but its story is one of success. Once
government-owned but now listed on the New York stock exchange, Embraer is the
world's third largest builder of civilian jet aircraft.
While it is much
smaller than giants Airbus and Boeing, its order book is nearly full and it
expects next year to deliver about 200 airliners and corporate jets to its
customers. Its Phenom 100 very light business jet and Phenom 300 light jet
already have attracted 500 firm orders before either has entered production.
At the company's main Sao Jose dos Campos factory this week, hangars almost
overflowed with partly-finished aircraft fuselages. Many were painted in the
liveries of leading world airlines, including Air France, Air Canada, Alitalia
and the US-owned discounter JetBlue. Three were in Virgin Blue colours.
The
Australian carrier has 20 E-jets ordered, the first of which left Sao Jose dos
Campos on Tuesday for the six-day ferry trip to Australia. Two others, due
to be delivered later this year, are in various stages of completion, one with
its wings, engines and undercarriage attached, the other still merely a shell.
Virgin is introducing the Embraers to challenge Qantas and Rex Aviation on
their regional networks as well as Canberra-Sydney - which Virgin abandoned as
unprofitable for its much bigger and more costly to operate 180-seat Boeings.
Keith Neate, Virgin's chief financial officer, told BusinessDaily that
buying the E-Jet was a lay-down first choice for the airline.
The plane was
the clear winner on all points compared with other makes and models, Mr Neate
said, adding that there was no alternative in terms of client comfort, price and
operating costs. He said moving to two aircraft types, the Boeing 737 and the Embraer, had been
prompted by the need to keep growing while at the same time boosting returns.
"As we grew we saw we were filling the prime routes, but we found that
demand from the market was a combination of schedule and frequency," Mr Neate
said.
"We could not supply the frequency or the schedule people were looking
for with aircraft as big as our big 737-700s and 800 series Boeings."
Typical was Sydney-Canberra, on which Virgin plans to better satisfy public
service demands for frequency of schedules with the Embraer. Canberra's
decision-makers will have the first opportunity to inspect the jet in Australia.
How keen the airline is to impress Canberra's travellers can be judged by a
decision to stage a black-tie dinner in the national capital to unveil the plane
next Thursday.
In Brazil this week Embraer officials were keen to point out
that demand for the E-jets has created a $US15.6 billion order backlog.
Second quarter sales totalled $1.1 billion, chief executive Frederico Fluery
Curado said. But he admitted to BusinessDaily that net profit would take a
hit because of growing pains due to having to ramp production of the E-jet range
and tooling, and set production lines for the Phenom business jets.
"We are
actually growing significantly and there's a toll there in inefficiency," Mr
Curado said. "This year alone we hired 4500 people. To integrate those 4500
people on the production line takes three months of training -- no work, just
training. Then another 12 months as a trainee with a coach, like a supervisor."
However, Embraer is well accustomed to dealing with adversity. The company
almost went broke under government ownership, which forced the decision to
privatise in 1994.
The accounts returned to the black in 1997 and, while
international terrorism forced 1800 layoffs in 2001, the company remained
profitable.
Embraer made its name on world markets in the 1970s with its
Bandeirante 21-seat twin-turboprop aircraft that operated in parts of regional
Australia. It is returning in a much bigger way through the deal with Virgin. Orlando
Jose Neto, Embraer's managing director Asia Pacific, said the company was
placing a team in Australia, plus stock and the necessary logistics, to ensure
the airline is supported. Embraer is keen to ensure Virgin follows through
and firms up the purchase rights it holds for another 20 aircraft.
SOURCE | http://www.news.com.au/heraldsun/story/0,21985,22381304-664,00.html
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