Embraer negotiates 1st line of the KC-390 aircraft outside Brazil – 03/04/2024 – Market

Embraer is negotiating with Saudi Arabia the creation of the first production line for the star of its military portfolio, the KC-390 multi-mission transport aircraft, outside Brazil.

“Our proposal is to maximize Embraer’s presence, with an engineering office, production lines”, stated Caetano Spuldaro Neto, vice-president of Embraer Defense for the Middle East and Asia-Pacific, during a business conference at Grupo Lide, owned by the former governor João Doria, from São Paulo, in Riyadh.

Since signing a memorandum of understanding last year with the Saudi Sami fund to compete for the replacement of the fleet of C-130 Hercules freighters operating in the Persian Gulf kingdom, the company has been discussing options for the local manufacture of its plane due to the characteristics of Arab demand.

Riyadh has embarked on a project to modernize its economy and society, called Vision 2030, which aims to free the country from dependence on oil, which currently accounts for 40% of its revenues, according to Osmar Chofhi, president of the Arab-Brazilian Chamber of Commerce.

To support the idea, however, the country relies on its petrodollars. The aerospace sector is one of the main pillars of Vision 2030 as it provides not only off-the-shelf purchases, but technological partnerships.

That’s where the KC-390 campaign in Saudi Arabia comes in. The kingdom is interested not only in buying the plane, but in manufacturing it and training local labor in the process — the plan is to have 50% of local content. Market analysts say that Embraer would be able to scale production of this type, given the money available to the Saudis: the country had the sixth largest defense budget in the world in 2023, equivalent to R$340 billion.

The Middle East is, proportionally in relation to GDP, the region in the world where the most is spent on defense. The rivalry between the Saudis and their allies with Iran, the war between Israel and Hamas and other conflicts inspire this reality.

“We include in our project a plan for a final assembly and production line for the KC-390. It is a value proposition aligned with Vision 2030”, said Spuldaro. He said the talks involve Embraer’s civil aircraft, such as the E2 commercial jet, and electric flying cars from its Eve subsidiary.

The Saudis’ nominal demand in the field of military transport is the gradual replacement of their fleet of 52 Hercules, a legendary North American aircraft that has been flying in different versions since the 1950s. Of these, 33 are older H models, without the ability to refuel in flight. .

The KC-390 has been targeting the global Hercules market. In addition to the 19 planes sold to its first customer, the FAB (Brazilian Air Force), Embraer has recently engaged in a series of deals: five European countries have ordered or selected 18 planes, South Korea will buy 3.

The Saudi business is of another magnitude, with a fleet potentially superior to the Brazilian one. Spuldaro said the idea is to transform Saudi Arabia into a distribution center for the entire Middle East.

From there, reaching other rich countries in the region, such as the United Arab Emirates, is just a short hop — noting that, in this market, time is measured in years and is subject to various adverse events.

Saudi Arabia itself has a long history of faltering defense deals, subject to geopolitical issues, as the acquisition of 54 new fighters now under debate shows: Riyadh wanted to expand its fleet of the European Typhoon, but accepted the entry of the French Rafale in the dispute for press for better conditions.

The European manufacturers of the Typhoon, Germany and the United Kingdom in the lead, had decreed a partial embargo on Riyadh due to the kingdom’s human rights violations, but the arrival of the French in the dispute made them abandon their modesty.

There is an additional factor for Embraer, which is the political weight of the relationship between Saudi Arabia and the USA, manufacturers of the C-130. In the Brazilian defense market, few forget Riyadh’s choice for the American Abrams tank in the 1980s.

The armored vehicle had been technically defeated by the Brazilian tank Osório, from Engesa, then one of the largest defense companies in the world, but the selection ended up being political — and the São Paulo manufacturer ended up going bankrupt due to investment in the product, among other problems.

The KC-390 continues in other campaigns, such as in Singapore and Sweden, where negotiations are advanced for a combined purchase: the sale of the freighter to Stockholm and the expansion of the fleet of Swedish Gripen fighters, manufactured together with Embraer, from 36 to 50 units.

The journalist traveled at the invitation of Lide