By Gabriel Araujo
(Reuters) -Brazilian aircraft maker Embraer signed a contract on Monday to formalize the sale of nine C-390 Millennium military aircraft to the Netherlands and Austria, further expanding its defense order book.
The two European countries had previously selected aircraft to replace their aging fleets Lockheed Martin (NYSE:)’s Hercules C-130s, but a final deal involving both countries placing a joint order was still pending.
The final order announced at the Farnborough Airshow includes five aircraft to the Netherlands and four to Austria, with deliveries expected to begin in 2027 and be completed in 2030, the Brazilian company said.
“It is one of the most important days in the history of Embraer Defense & Security because it represents our largest contract for C-390 exports,” Bosco da Costa Junior, Embraer’s defense chief, told Reuters.
Expanding its presence abroad with more sales of C-390s has been a key goal of Embraer’s defense division, including selling the military transport aircraft to NATO members such as the Netherlands.
In addition to the two European countries and Embraer’s home country of Brazil, countries such as Portugal, Hungary, the Czech Republic and South Korea have also used the aircraft for their fleets.
Analysts at Citi praised the announcement, saying it was a positive outcome for Embraer as global military spending rises. The aircraft manufacturer’s shares traded in Sao Paulo fell more than 4.5% on Monday, but are still up more than 75% this year.
“Citi reiterates its buy rating on Embraer and is looking forward to other news from this week’s Farnborough Airshow,” the analysts led by Stephen Trent said in a note to clients.
Embraer did not disclose the price tag of the deal.
Austria and the Netherlands, said Costa Junior, “had already chosen the C-390 as a platform that met all their requirements, but now that becomes a purchasing obligation, adding deliveries and the aircraft to our production line.”
Embraer is currently working to increase the output of the tactical aircraft. The production line was planned for 18 aircraft per year, but four aircraft will be delivered this year and another six next year, Costa Junior said.
“We predict that (annual) production will reach twelve aircraft by 2030,” he said. “The challenge right now is keeping up with the supply chain. A few months ago we had a ‘C-390 Day’ with our key suppliers to ensure this ramp-up will happen.”
Embraer’s defense backlog was $2.1 billion at the end of the second quarter, when it delivered one C-390 aircraft.
“This sale makes our backlog very NATO concentrated, but we also had a sale to South Korea last year. Asia, the Middle East and of course Europe are regions where the C-390 stands out,” Costa Junior said. “We are very optimistic about future purchases by other countries.”
India, Saudi Arabia and the United States are seen as strategic markets for Embraer’s defense unit, with Sweden also a potential customer.
