| SAO PAULO
SAO PAULO Dec 20 Brazilian planemaker Embraer
SA called on Tuesday for the aviation industry to set
limits on state funding of aircraft development, a day after
Brazil said it would challenge Canada over government support
for rival Bombardier Inc.
Embraer Chief Executive Paulo Cesar Silva said the aviation
industry's standards for export financing by state banks had
worked well to promote fair competition between Embraer,
Bombardier and larger peers Boeing and Airbus.
"If the industry can establish a framework for aircraft
development financing similar to what we have for export
financing, then we'll have a level playing field," Silva told
The timing may be tough for an industry accord, however,
after Brazil said on Monday it would dispute investments made by
the province of Quebec in Bombardier's CSeries, which helped to
develop a direct competitor for Embraer's E-195.
Silva said the capital injection had helped Bombardier sell
the CSeries at cut-rate prices to Delta Air Lines Inc in
April and there were signs of similarly aggressive pricing in
other ongoing U.S. sales campaigns.
Bombardier did not immediately respond to a request for
The latest standoff at the World Trade Organization (WTO)
recalls nearly a decade of sparring between Brazil and Canada
over state financing for Embraer and Bombardier's exports.
Silva's comments on the rules that settled those disputes shows
the Brazilians may be looking ahead to industry-wide talks.
Silva said it is especially important to set limits as new
entrants from Russia, Japan and China are challenging Embraer's
and Bombardier's duopoly in the regional jet market, in some
cases with generous government backing.
"This is a market that can barely fit two players. Five is
impossible," Silva said.
Making matters worse, Silva said demand in the aviation
industry is passing through a softer cycle, making 2017 a
Structural changes to the executive aviation market, with
the rise of fractional ownership companies such as NetJets in
the United States, have also given buyers more leverage in an
already weak market for new private jets, Silva said.
Embraer shares fell 2 percent on Silva's downbeat outlook to
their lowest in two months.
One bright spot for Embraer is the defense division, which
is expected to start delivering the new KC-390 military cargo
jet to the Brazilian Air Force in 2018. Jackson Schneider, head
of Embraer's defense division, told journalists he expected to
book another order for the KC-390 in 2017.
(Reporting by Brad Haynes; Editing by Chizu Nomiyama)