1. AIRLINE MARKET OUTLOOK Frederico Fleury Curado Executive Vice-President, Airline Market EMBRAER ANALYSTS& INVESTORS MEETING So Jos dos Campos - November 17th., 2006

2. Contents Industry Review ERJ 145 family Retaining value for operators andinvestors E-Jets Breaking new grounds and achievingincreasing endorsement from airlines worldwide Embraers new 20-year market forecast 3. IndustryReview 4. Passenger traffic back and growing7000 80%RPKASKLoad Factor 78%6000 76%Billion (RPK & ASK)5000 % (Load Factor) 74%4000 72% 3000 70% 68%2000 66%1000 64% 0 62% 19951996 1996 199819992000 20012002 2003 2004 20052006F2007F 6.3% yoy7.7% yoy 6.4% yoy Source: ICAO - Contracting States - Scheduled Airlines 5. LCCs still in demands driver seat USA Domestic RPMIntra Europe RPK5% 11%14%18%17%17% 19%29% 11%31% 30% 40% 8%76% 71% 60%53%47%43% 200020052010E 2000 2005 2010E Netw ork LCCRegionalGrey zoneSource: Back Aviation and Embraer 6. But the cost gap in closing 16Network LCC 15 14 13 Cost ConvergenceCASM (/ASM) 12 11 109876 0000 0101 0202 0303 0404 0505 06 1Q3Q 1Q3Q 1Q3Q 1Q3Q 1Q3Q 1Q3Q 1Q Network carriers taking a disciplined approach towards capacity and cost reduction LCCs facing cost pressures and reconsidering growth plans Industry increasingly profitability x market share consciousSource: BACK (Form 41) 7. Strong effort to reduce costs, but ... 14 12.7812 10 CASM (/ASM) 8 Total Cost Total Cost (Exc Fuel) 6 Labor Fuel 4 3.163.09 20 0000 0101 0202 0303 0404 0505 1Q3Q 1Q3Q 1Q3Q 1Q3Q 1Q3Q 1Q3Q 2000 - fuel costs = 14%; labor costs = 34% 2005 - fuel costs = 23%; labor costs = 26%Source: ATA 8. Fuel prices are eating airlines lunch Jet Fuel Price by RegionJet Fuel Price Forecast (EIA) 2,252,25New York 2,10Rotterdam 2,08 2,002,00 Jet Fuel Price (US$ per Gallon)Singapore Jet Fuel (US$ per Gallon) 1,75 China1,75 1,651,65 1,62 1,501,501,251,251,001,000,750,75 0,500,50 2000 20012002 2003 2004 2005 20062006F 2007F 2008F 2009F 2010FSource: EIA - Energy Industry Administration (Sep/06) 9. Revenue environment is improving10510095Index (1994=100) 90858075 World Nominal Yield 70World Real Yield (adj. for US inflation) 65 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006F 2007F Source: ICAO (Contracting States Passenger, Scheduled Airlines), Global Insight and Embraer 10. Profitability a continual challenge North America-10 -6.7 -4.5 0 Europe 1.1 1.6 1.8 1.5World -5.6 -3.2 -1.7 1.9 2004 2005 2006F 2007F Middle East 0.2 0.2 0.1 0.12004 2005 2006F 2007F 2004 2005 2006F 2007FAsia Pacific 2004 2005 2006F 2007FLatin America3.4 2.1 1.7 1.2 Africa 0.1 -0.1 0.1 0.1 -0.3 -0.4 -0.8 -0.9 2004 2005 2006F 2007F2004 2005 2006F 2007F 2004 2005 2006F 2007FSource: IATA Economics Set/06 (ICAO 2004-2005 and IATA Forecast 2006-2007) Values in US$ Billion 11. A quick look at w/w fleet profile Scheduled Airlines, All Passenger Configuration and Active in Service16784 aircraft Age (years)4.500 > 304211 26-30 4.000 21-25 3.500 16-20Number of Aircraft (Units) 3.000 11-15 2.500 6-10 2035 2016 0-5 2.000 1778 1621 1.50013421051 1.000 935 798603500 394 0 TP 30-60 TP 61-90 J 30-60J 61-90 J 91-120J 121-150 J 151-180J 181-210J 211-300 J 301-400 J > 400 Source: Back Aviation (Dec/05) 12. Embraers unique competitive position30Y 50Y70Y 90Y 110Y 130Y CRJ900X SSJ ARJ21SSJ ?ARJ21 SSJ 13. ERJ 145 family Retaining Value for Operators and Investors 14. USA Hub & Spoke System 1. RJs are responsible for 22% of all USA domestic passengers 2. RJs: 3 connecting passengers for each local passenger Source: Back Aviation (T100 and OD1A: RJ: ERJ 145 Family, CRJ 100/200/440 and 328JET). 2006 FAA Report (DOT Form 41 & Form 298C) 15. China an unbalanced jet fleet30-120 seat jets represent only 12% of China jet fleet (30-210 seats), while it is 43% in US and 35% in Europe4,829 aircraft 826 2,612 100%80%% of Jet Fleet (J30-210)58%Seat Segment 65% 60%J121-210 89% J61-120 40%15%J30-60 24% 20% 43% 35%28%4% 8%12%11%0%USA China Europe Source: BACK FleetPC (Jun/06 ; active in service ; scheduled airlines) 16. China - ERJ 145 and 328Jet Routes 29 328Jet 6 ERJ145Backlog: 50 ERJ145 4 ERJ145 Backlog: 6 ERJ1455 ERJ145 328JetSource: CAAC (2005), Embraer 17. Mexico - ERJ 145 routes 2004:052004:05ERJ 145 ERJ 145 2006:182006:18ERJ 145 ERJ 145 18 markets39 markets18 markets39 markets Avg. Stage Length: 398 nm (738 km)Avg. Stage Length: 417 nm (773 km)Avg. Stage Length: 398 nm (738 km)Avg. Stage Length: 417 nm (773 km)Source: BACK OAG 18. RJ 50 Market Opportunities Russia 30-60Seat Segment244 aircraft33 years old (average)Yak-40An-24 Jet 30 seats Turboprop - 50 seats 122 aircraft 122 aircraft Average Age: 31 yrsAverage Age: 34 yrs Source: Back Aviation (Fleet PC Feb/06) 19. Parked Aircraft - World Jet Aircraft (Western Built)(as of Sep 05, 2006) Seat SegmentNumber% of 60030 - 60 61 - 90 91 - 120 Seg Manuf.of Parked% FleetAircraft ParkedBoeing149 53% 12%Douglas86 30% 28% 500Fokker 29 10% 11% 91-120BAe197% 15%Airbus00%0% Number of Aircraft 400Embraer 00%0%Total 283100% 15%BAe52 51% 25% 300Fokker 45 45% 30% 61-90Douglas 22%8%Bombardier22%1% 200Embraer 00%0%Total 101100% 12%Bombardier 82 71%8% 30-60 100Fairchild30 26% 32%Embraer 43%0%Total 116100%6%0 95 96 9798 99 00 01 02 0304 05 6 t/0191919 191920202020 2020seSource: BACK (Operator Category: Scheduled Airline, Non Scheduled, Leasing and Financial Institution) 20. ERJ 145 Product ImprovementsDesign WeightsHigh Altitude Operation Brake Hardware Optional structural weights increase:ERJ 145LR ERJ 145ER/LR/XR Models 13.500 ft Maintenance costs reduction ERJ 135ER (China) Original 1000FC Guaranteed Since Dec2005: MZFW = +400kg (880 lb)ERJ 145LR/XRNew Design ERJ 145ER 10.000 ft ER/LR Model: 1750 FC Available mid 2006: (North America, South America, XR Model: 1800 FC MZFW = +250kg (550lb) Mexico, China)ERJ 145LRERJ 145ER/MP Available mid 2006: 8.500 ft MTOW = +600kg (1,320lb) (South America, Mexico, EASA) MZFW = +500kg (1,100lb) MLW = +500kg (1,100lb) 21. RJ 50 Residual Value Evolution RV @ 12 Years10,009,008,007,00 US$ Million6,005,004,003,002,00 ERJ 1451,00 CRJ-2000,004 1 2 3 4 1 2 3 4 1 2 3 4 1 2Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q02 03 03 03 03 04 04 04 04 05 05 05 05 06 0620 20 20 20 20 20 20 20 20 20 20 20 20 20 20 ERJ 145s are sustaining Residual Values Source: MBA Avitas Airclaims, et al 22. RJ 50s market trends Market entered a mature phase in the US and Europe RJ50s will remain the backbone of US hub feeding system There is potential for increasing frequencies in the US and EU New market opportunities (long and thin) in the US and EU Potential in China, Mexico, Russia and other emerging markets Secondary market developing 23. ERJ 145 Family Orderbook FirmFirm Options Total Deliveries BacklogOrders ERJ 135 108 1109 108 - ERJ 140 74 - 7474- ERJ 145 732132 864 67755Total9141331,047 859 55 (as of September 30, 2006) 24. E-Jets Breaking New GroundsAchieving Increasing Endorsement fromAirlines 25. Filling the Seat Capacity Gap Remember? Seat Capacity 160 Narrowbody Aircraft120 Right-sizingEMBRAER 170/19080 Natural Growth 30-70 SeatT Props37 -50 Seat40ERJ 135/140/145 0 05001,000 1,500 2,000Stage Length (nm) 26. Beyond the current models Remember?There is a need for a new TOOL Regional AirlinesRASK / M Network Airlines Low CostCarriersE-Jets Capacity 27. E-Jets Family Efficiency to all Business Models RegionalNorthwest Network E175s Low CostVirgin BlueE170s + E190sSource: Embraer (Sep/06) 28. US Domestic: Pax & Seats per Departure Jet aircraft (70-150 Seats)35%Pax/Dep 2000 Seats/Dep 2000Pax/Dep 2005 Seats/Dep 2005 30%200025%Seats/dep 20% 2000Pax/dep 2005% of Flights 15%2005 10% 5% 0% 30 Aircraft Age (Years)31% of world fleet is more than 20 years old and will be replaced in the coming years.Source: Back Aviation (Dec/05) 30. E-Jets deployment US and Canada Sep/06: 126 E-Jets% of Routes (4Q05)Sep/06: 126 E-Jets Avg. Stage Length: 548 nm (1015 km)Avg. Stage Length: 548 nm (1015 km) New RouteRight-sizingNatural Growth 100%14% 75%41%50% 25% 45% 0% Source: BACK/OAG (1H06 routes ; Fleet Sep/06) 31. E-Jets deployment Europe % of Routes (4Q05)New Route Right-sizing Natural Growth100% 4% 75% 57% 50%25% 39%Sep/06: 31 E-Jets0%Sep/06: 31 E-Jets Source: BACK/OAG (1H06 routes ; Fleet Sep/06) Avg. Stage Length: 445 nm (824 km)Avg. Stage Length: 445 nm (824 km) 32. E-Jets deployment - Asia & Middle EastSep/06: 18 E-Jets Sep/06: 18 E-Jets Avg. Stage Length: 364 nm (675 km) Avg. Stage Length: 364 nm (675 km) 4 E1704 E170 10 E170Avg. Stage Length:Avg. Stage Length: Avg. Stage Length: 377 nm (698 km) 458 nm (848 km)303 nm (561 km)Source: BACK/OAG (1H06 routes ; Fleet as of June 30, 2006) 33. E-Jets operational flexibility as promised Longest RouteShortest Route3,274 km (1,768 nm ; 2,033 sm) @ 5:10 hs 137 km (74 nm ; 85 sm) @ 0:37 hs Air Canada E190Saudi Arabian E170Calgary ArarJoufNew York Avg. StageAvg. ElapsedLongest Shortest Equipment Length (km) Time (hours) Flight (km) Flight (km)E170 930 1:502,510137E175 962 1:552,219150E1901,0172:013,274301 E-Jets945 1:523,274137Source: BACK/OAG (2Q06) 34. US Scope Clauses Jun/2000 Labor Seats 4050 6070 8090100Contract Amendable Year 30 units Not Allowed Unlimited45-55 seats (Grandfathered rights 36 Avro RJ85 up to 69 seats) 2003 UnlimitedNot Allowed 2003Unlimited Up to 67 units Not Allowed 2002 Unlimited Up to 75 unitsNot Allowed2000 Up to 65 unitsNot Allowed(Grandfathered rights 18 AirWis BAe 146)2000Up to 35 units 50 seats and 35 units 69 seatsNot Allowed 2003 35. US Scope Clauses Jun/2006 Labor Seats 405060 708090 100Contract Amendable Year UnlimitedUp to 90 units Not Allowed 2012 Unlimited Not Allowed 2009Unlimited (Up to 110% AA narrowUp to 50 units Not Allowedbody)2008 Up to 200 units Unlimited (30 units 71-76 seats + 3 units for eachNot Allowed mainline aircraft increase)2010Unlimited up to 70 seatsNot Allowed2010 Unlimited up to 78 seats Up to 93 units (86 seats)Not Allowed2010 36. E-Jets Joint Certification means FlexibilitySame Type Design for ANAC, FAA and EASAFAAEASAANAC FAA EASA EMBRAER 170 February, 2004February, 2004 EMBRAER 175 December, 2004 August, 2006 January, 2005 Remarketing flexibilityEMBRAER 190August, 2005September, 2005 June, 2006 Higher residual values EMBRAER 195 June, 2006 4th Quarter, 2006*July, 2006 Reduced cycle for aircraft configuration definition 37. E-Jets: Continuous Product DevelopmentFollow-on Certification items already achieved: Dual HUD HUD for Low Visibility Takeoff (E170) CAT III A (E170) IFE ThalesE170/190IFE LiveTV PC Power Outlets Cabin Surveillance System (CSS) Vertical Navigation (VNAV) Lightning Sensor System (LSS) Autobrake Ditching (extended overwater ops) Quick Access Recorder (QAR) 38. E-Jets : On-going New Developments Follow-on Certification E190 ETOPSCAT IIIa Autoland E170 LCY Steep ApproachReady for customer operational Kit provides a fly-by-wire function E170 Certifiedapproval: to allow the use of multi-function E175 4Q 2006 spoilers as lift/drag devices. ETOPS 75 minutes: Aug/06 E190 3Q 2007 650 nm rangeETOPS 120 minutes: by Aug/07 E195 4Q 2008 Certification: Dec/06 39. E-Jets Operational Statistics E170/175 E190/195 Operators10 Operators 5 Aircraft in Service 139 Aircraft in Service40 Flight Hours433,822 Flight Hours 52,506 Flight Cycles 296,927 Flight Cycles32,512E170/190 Family Operators* 13 Aircraft in Service179 Flight Hours 486,328 Flight Cycles329,439 Source: Airlines (as of Oct 22nd, 2006) (*) Air Canada operates E175 and E190 and Tame operates E170 and E190 40. E-Jets Family Orderbook FirmFirm Orders Options Total DeliveriesBacklog EMBRAER 170152 133285120 32 EMBRAER 175 52 - 522230 EMBRAER 190298 24854641 257 EMBRAER 195 4140 81 140Total 543 421964 184 359(as of September 30, 2006) 41. E-Jets market trends Traffic growth on 50-seater routes Capacity increase at regional routes peak hours Mainline service in regional routes Market fragmentation more point to point flying Right sizing of non-optimized narrowbody lift Replacement of older, less efficient aircraft Less risky market developments with no compromise to mainline service 42. MarketForecast 2007 - 2026 43. Projected Traffic and Economic Growth Growth by Region (2007-2026) USA, Canada & Caribbean RPK Latin America GDP Europe CISAfrica Middle East Asia PacificChinaWorld 0% 1% 2%3%4%5% 6% 7% 8%Average Annual Growth (%)Projected world GDP growth around 3% in the next twenty yearswill sustain nearly 5% annual increase in air transport demand.Source: Global Insight and Embraer (Oct/06) 44. Embraer Market Forecast (2007-2026)Worldwide Jet DeliveriesSegment2007 - 2016 2017 - 20262007 - 202630 - 60300 1,100 1,400 61 - 90 1,1001,500 2,60091 - 120 1,6501,850 3,500TOTAL 3,0504,450 7,500 45. Embraer Market Forecast Comparison WorldJetsSegment 2007-2016 2006-2015 30-60 300 50061-901.100 1.30091-120 1.650 1.55030-120 3.050 3.350121-150 1.350 1.418 151-180 3.250 3.191 181-210800 796 121-210 5.400 5.405 46. Embraer Market Forecast (2007-2026)Projected Deliveries (30-120 seats): 7,500 Jets CISUSA, Canada 505& Caribbean Europe7% 3,850 1,29051%17%China Middle 630East 9%Africa 230 Latin 130 3%America2%Asia480 Pacific 6%3855% 47. Thank you 70 airlines. 43 countries. 1 manufacturer. EMBRAER