Introduction
Embraer Jets Company is located in Brazil which is one of the fastest-growing economies in the world. The country is endowed with numerous natural resources and has a well established foreign policy regarding importation and exportation (Central Intelligence Agency, 2012). Due to the rapid growth of the Brazilian economy, the airline industry is expected to continue growing. The main factors affecting the growth rate in the airline industry are globalization, developments in the tourism industry, communications advancement, sports, the need to exploit natural resources, trade liberalization and adequate national policies (Cateora and Graham, 2011).
Market size
Estimated industry sales for the planning year
The airline industry is expected to continue growing at an increasing rate. Embraer Jets Company forecast that the aviation industry will have more demand in Asia and Latin America. The airline expects that the major forces affecting this growth are the strong economic development in an emerging market, economic growth of middle cities, increased urbanization, high fuel prices and increased competition (Embraer, 2012b). The airline industry forecasts a 5% yearly growth in the Revenues Passenger Kilometre (RPK) over the next 20 years.
This will require approximately 32,800 new aircraft to be manufactured. The fastest-growing economies will be the Middle East, Latin America, and Africa. It is also expected that the population will become wealthier, and the number of people using the airline industry will increase. It is also expected that: Middle East, China and Latin America will experience a growth rate of 7%, the commonwealth countries will experience a growth of 5.6%, African countries will grow by 5.3%, while developed economies such as America will grow by 3.2% due to their market maturity (Embraer, 2012a).
Estimated sales for the planning year
The Embraer Company foresee that the demand for 20-120 seat jets will be 6795 for the next 20 years. This will represent a market value of US$ 315 billion. For the turboprop, it is expected that 670 new aircraft will be demanded over the next 20 years. Out of these, 54% will be used to replace the old aircraft, while 46% will support the increasing market. For the narrow and wide-body aircraft, a total of 5220 new aircraft will be demanded for the next 20 years, 41 % will replace the old airplanes while 59% will sustain the growing market (Embraer, 2012a).
Government participation in the marketplace
The Brazil government is at the forefront of promoting the development of the airline industry in the country. The government has also established a favorable business environment for foreign investors. These investors are allowed to repatriate their registered capital and earnings tax-free. This makes it easy for foreign investors to invest their capital in the country. To promote the exportation of aircraft and other goods, the government has reduced all import duties and removed most of the importation barriers.
This makes it easy for the airline industry to import parts and also export aircraft. The government is also improving the education sector, the channels of distributions, sports, transport and warehousing (Nes, 2011). All these are expected to promote the development of the airline industry. The main agencies that are involved in the importation and exportation include import agency, clearing, and forwarding agency, marketing agency and the national civil aviation agency of Brazil. These agencies assist companies in the importation and exportation of aircraft.
Regulations affecting the industry
The main regulation by the government that may promote or hinder the development of the airline industry include import and export restrictions, tax regulations, aircraft regulation drafted by the national civil aviation agency and other government regulation on domestic and international trade.
References
Cateora, P., & Graham, J. (2011). International marketing. (15 ed.). New York: Irwin McGraw Hill.
Central Intelligence Agency. (2012). The CIA World Factbook.
Embraer. (2012a). Market outlook 2012-2031.
Embraer. (2012b). Embraer company website.
Nes, E. (2011). Bonded warehouse in Brazil. The Brazil Business.