As filed with the Securities and Exchange Commission on April 29, 201018, 2011

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 20092010

Commission file number 333-132289001-15102

EMBRAER-EMPRESA BRASILEIRA DE AERONÁUTICAEMBRAER S.A.

(Exact name of Registrant as specified in its charter)

EMBRAER – Brazilian Aviation Company Inc.

(Translation of Registrant’s name into English)

Federative Republic of Brazil

(Jurisdiction of Incorporation)

Avenida Brigadeiro Faria Lima, 2170

12227-901 São José dos Campos, São Paulo, Brazil

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Title of each class:

US$500,000,000 6.375% Guaranteed Notes due 2017 of Embraer Overseas Ltd.

Guaranteed by Embraer- Empresa Brasileira de AeronáuticaEmbraer S.A.

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2009:2010:

740,465,044 common shares, without par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x    Accelerated Filer  ¨    Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  x¨    International Financial Reporting Standards as issued by the International Accounting Standards Board  ¨x    Other  ¨

Indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ¨    Item 18  x¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

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ii

INTRODUCTION

In this annual report, “Embraer,” “we,” “us” or “our” refer to Embraer-Empresa Brasileira de AeronáuticaEmbraer S.A., formerly known as Rio Han Empreendimentos e ParticipaçõesEmbraer-Empresa Brasileira de Aeronáutica S.A. (as successor in interest to the previously listed company having the same name –i.e., Embraer-Empresa Brasileira de Aeronáutica S.A., or former Embraer as– a predecessor company, as a result of the merger of former Embraer with and into Embraer pursuant to the corporate reorganization described below), and its consolidated subsidiaries (unless the context otherwise requires). All references herein to the “real,” “reais” or “R$” are to the Brazilianreal, the official currency of Brazil. All references to “US$,” “dollars” or “U.S. dollars” are to United States dollars.

On March 31, 2006, our shareholders approved a reorganization of our corporate structure. The purpose of the reorganization was to, among other things, create a basis for the sustainability, growth and continuity of our businesses and activities by simplifying our capital structure and thereby improving our access to capital markets and increasing financing resources for the development of new products and expansion programs. For further information on our corporate reorganization, see “Item 4A. Information on the Company—History and Development of the Company—2006 Corporate Reorganization.”

Presentation of Financial and Other Data

Financial Data

Our audited financial statements at December 31, 20082010 and 2009 and January 1, 2009 and for each of the years ended December 31, 2007, 20082010 and 2009 are included in this annual report.

Our financial statements as of and for the years ended December 31, 2005 and 2006 have not been included in this annual report.

Our consolidated financial statements have been prepared in accordance with accounting principles generally acceptedInternational Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our financial statements for the year ended December 31, 2010 are our first annual financial statements that comply with IFRS as issued by the IASB. As permitted by the applicable rules, when making the transition from U.S. GAAP to IFRS, we did not include in this annual report our financial statements as of and for the United Statesyears ended December 31, 2008, 2007 and 2006, as they were prepared in accordance with U.S. GAAP and not IFRS.

After analyzing our operations and businesses with regard to the applicability of America,International Accounting Standards, or U.S. GAAP. Because we export more than 90%IAS, 21 – “Effects of our production and operateChanges in an industry that usesForeign Exchange Rates”, particularly in relation to the U.S. dollar as its currency of reference, our management believes that the U.S. dollar isfactors involved in determining our functional currency, management concluded that our functional currency is the U.S. dollar. This conclusion was based on an analysis of the following factors, as set forth in IAS 21: (1) the currency that mainly influences the sale prices of our goods and services, (2) the most appropriatecurrency of the countries whose competitive forces mainly determine the sale prices of our goods and services, (3) the currency that mainly influences prices of raw materials and other costs involved in providing our goods and services, (4) the currency in which to presentthe funds for financial operations are principally obtained; and (5) the currency in which revenue from operations is usually received. Items included in the financial statements of each of our subsidiaries are measured using the currency of the primary economic environment in which such subsidiary operates. Our audited consolidated financial statements. As a result, amounts for all periodsstatements included elsewhere in this annual report are presented have been remeasured intoin U.S. dollars, in accordance with the methodology set forth in Statement of Financial Accounting Standards guidance on foreign currency translations.which is our presentation currency. Our financial statements and financial data presented herein and prepared in accordance with U.S. GAAPIFRS do not reflect the effects of inflation.

Pursuant to the accounting standard guidance on foreign currency translations as it applies to us, non-monetary assets and liabilities, including inventories, property, plant and equipment, accumulated depreciation and shareholders’ equity, are remeasured at historical rates of exchange, while monetary assets and liabilities denominated in currencies other than U.S. dollars are remeasured at period-end rates. Export sales invoiced in currencies other than the U.S. dollar are remeasured at the respective exchange rate on the date of sale. Cost of sales and services, depreciation and other expenses relating to assets remeasured at historical exchange rates are calculated based on the U.S. dollar values of such assets and other non-U.S. dollar statement of income accounts are remeasured at the rate prevailing on the date of the charge or credit to income. Translation gains and losses are recorded under foreign exchange (gain) loss, net in our statement of income.

In our 2007, 20082010 and 2009 financial statements, gains or losses resulting from the remeasurement of the financial statementsmonetary items and from foreign currency transactions have been reported in the consolidated statement of income as single line items.

In our Form 20-F/A filed with the U.S. Securities and Exchange Commission, or SEC, on November 26, 2007, we restated our financial statements for the years ended December 31, 2004, 2005 and 2006.

For certain purposes, such as providing reports to our Brazilian shareholders, filing financial statements with theComissão de Valores Mobiliários (Brazilian securities commission), or CVM, and determining dividend payments and other distributions and tax liabilities in Brazil, we have prepared, and will continue to be required to

prepare, financial statements in accordance with Law No. 6,404 of December 15, 1976, as amended, or Brazilian Corporate Law. Effective 2008, significant changes were introduced to the accounting aspects of the Brazilian Corporate Law by Law 11,638 of December 28, 2007. In addition, in 2008 certain changes to the accounting principles, were introduced in 2008 andas well as other changes to the accounting practices adopted in Brazil, or Brazilian GAAP, were

introduced by theComitê de Pronunciamentos Contábeis (Brazilian Accounting Standards Setting Board) will, and have become effective in 2010. These changes to the accounting aspects of the Brazilian Corporate Law and Brazilian GAAP impacted our parent company financial statements as of and for the years ended December 31, 2010 and 2009 and the basis of our distribution of minimum mandatory dividends. Other than that, such changes had no effect to our consolidated financial statements prepared in accordance with U.S. GAAPIFRS that are included elsewhere in this annual report. Our parent company financial statements as of and for the years ended December 31, 2007, 20082010 and 2009 prepared in accordance with the Brazilian Corporate Law, and which are not included in this annual report, are not adjusted to account for the effects of inflation.

As a result of the reconciliation of amounts to the functional currency and other adjustments related to the differences in accounting principles between U.S. GAAP and Brazilian GAAP, the amounts of net income and shareholders’ equity as reported in our audited consolidated financial statements presented herein differ from those includedprepared in our statutory accounting records.accordance with IFRS.

As a result of the listing of our common shares on theNovo Mercado segment of the BM&FBOVESPA S.A.-Bolsa de Valores, Mercadorias e Futuros de São Paulo, or São Paulo Stock Exchange, since January 2009 we are required to either translate into English our quarterly financial statements, including cash flow statements, prepared in accordance with the Brazilian Corporate Law, or prepare such quarterly financial statements in accordance with, or reconciled to, U.S. GAAP or International Financial Reporting Standards, or IFRS.statements.

Other Data and Backlog

In this annual report:

We calculate the value of our backlog by considering all firm orders that have not yet been delivered. A firm order is a firm commitment from a customer, represented by a signed contract and customarily accompanied by

a down payment, for which we have reserved a place on one of our production lines. Every time we refer to our backlog in this annual report, we only make reference to firm orders and not to options. When we refer in this annual report to the number or value of commercial aircraft, we exclude two EMB 145s delivered to Satena Airline, a state-owned Colombian airline, in 2004. These aircraft have been included in our defense and security data. In July 2005, we started to include the number of aircraft sold by theour defense and security segment to state-owned airlines, such as TAME and Satena, in our commercial aircraft backlog.

Special Note Regarding Forward-Looking Statements

This annual report includes forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or Exchange Act, principally in Items 3 through 5 and Item 11 of this annual report. We have based these forward-looking statements largely on our current expectations and projections about future events, industry and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:

The words “believe,” “may,” “will,” “forecast,” “estimate,” “plan,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. As a result of various factors such as those risks described in “Item 3D. Risk Factors,” undue reliance should not be placed on these forward-looking statements.

PART I

Not applicable.

Not applicable.

The following table presents our selected financial and other data at and for each of the periods indicated. Selected financial data as of December 31, 2010 and 2009 and January 1, 2009 and for each of the years ended December 31, 2007, 20082010 and 2009 have been derived from our audited U.S. GAAPconsolidated IFRS financial statements andwhich are included elsewhere in this annual report. TheWe determined January 1, 2009 to be the transition date for our IFRS audited consolidated financial statement and presented our balance sheet as at that date. You should read this selected financial data presented for all other periods have been derived fromin conjunction with our audited U.S. GAAPconsolidated financial statements notand related notes thereto included herein.elsewhere in this annual report.

		At and for the year ended December 31,
		2009		2008		2007		2006		2005
		(in US$)
Earnings per Share
ADS – diluted(3)		1.36		2.16		2.64		2.10		2.54
Dividends per Share
Common share(1)(2)(3)		0.18164		0.32837		0.17361		0.21242		0.26080
Preferred share(1)(2)(3)		—		—		—		—		0.28688
ADS(1)(2)(3)		0.72656		1.31348		0.69443		0.84968		1.14752

		Year ended December 31,
		2010				2009
		(in US$)
Earnings per Share – Diluted
Net income attributable to owners of Embraer			330.2				465.2
Weighted average number of shares (in thousands) – diluted			723,665				723,665
Dilution – issuance of stock options (in thousands)			354				—
Weighted average number of shares (in thousands)			724,019				723,665
Diluted earnings per share – U.S. dollars			0.4562				0.6428

consequence, short-term repurchase transactions and bank certificates of deposits with high liquidity are now classified as cash equivalents, thereby causing us to reclassify those transactions as of December 31, 2007 and 2008 in order to provide for a same-basis comparison with transactions existing on December 31, 2009. See Note 3(d) to our audited consolidated financial statements.

(5)	Excludes non-recourse and recourse debt. Includes current portion of long-term debt.

(6)	Excludes non-recourse and recourse debt.

		Year ended December 31,
		2010				2009
		(in US$ millions)
Other Consolidated Financial Data
Net cash provided by operating activities			873.8				3.6
Net cash (used in) investing activities			(288.3	)			(378.0	)
Net cash (used in) financing activities			(802.2	)			(23.9	)
Depreciation and amortization			219.2				229.3

Exchange Rates

Prior to March 4, 2005, there were two principal legal foreign exchange markets in Brazil:

Most trade and financial foreign exchange transactions were carried out on the commercial rate exchange market. These included the purchase or sale of shares or payment of dividends or interest with respect to shares. Foreign currencies could only be purchased in the commercial exchange market through a Brazilian bank authorized to buy and sell currency in these markets. In both markets, rates were freely negotiated.

Resolution No. 3,265 by theConselho Monetário Nacional (National Monetary Council), or CMN, dated March 4, 2005, consolidated the foreign exchange markets into one single foreign exchange market, effective as of March 14, 2005. All foreign exchange transactions are now carried out through institutions authorized to operate in

the consolidated market and are subject to registration with the electronic registration system of the Central Bank of Brazil, or Central Bank. Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

Since 1999, the Central Bank has allowed thereal/U.S. dollar exchange rate to float freely, and during that period, thereal/U.S. dollar exchange rate has fluctuated considerably. At April 23, 2010, the selling exchange rate for U.S. dollars was R$1.7624 per US$1.00. In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian federal government will continue to let thereal float freely or will intervene in the exchange rate market through a currency band system or otherwise. Thereal may depreciate or appreciate against the U.S. dollar substantially in the future. See “Item 3D. —Risk Factors—Risks Relating to Brazil.”

The following table sets forth the selling exchange rate, expressed inreais per U.S. dollar, for the periods indicated.

		Exchange Rate of Reais to US$1.00
		Low				High				Average(2)				Period-end
Month/period ended
November 30, 2010			1.6801				1.7336				1.7133				1.7161
December 31, 2010			1.6662				1.7240				1.6934				1.6662
January 31, 2011			1.6510				1.6912				1.6749				1.6734
February 28, 2011			1.6612				1.6776				1.6680				1.6612
March 31, 2011			1.6287				1.6757				1.6591				1.6287
April 2011 (through April 8, 2011)			1.5762				1.6194				1.6030				1.5762

Source: Central Bank.

We will pay any cash dividends and make any other cash distributions with respect to the common shares inreais. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by the holders of American Depositary Shares, or ADSs, upon the conversion into U.S. dollars by the depositary of our ADS program of such distributions for payment to holders of ADSs. Fluctuations in the exchange rate between thereal and the U.S. dollar may also affect the U.S. dollar equivalent of thereal price of our common shares on the São Paulo Stock Exchange.

Not applicable.

Not applicable.

Risks Relating to Embraer

A downturn in commercial aviation may reduce our sales and revenue, and, consequently, our profitability, in any given year.

We expect that a substantial portion of our sales in the near future will be derived from sales of commercial aircraft, particularly the EMBRAER 170/190 jet family. Historically, the market for commercial aircraft has been cyclical due to a variety of factors that are both external and internal to the air travel industry, including general economic conditions.

The commercial airline industry has been negatively impacted by a number of factors since 2001. First, the U.S. and world economies experienced an economic downturn that beganfactors. For example, in 2001 and was characterized by rapid declines in securities markets, a decline in productivity and an increase in unemployment. Second, the terrorist attacks of September 11, 2001 caused an immediate decline in airline travel and a high level of financial uncertainty among the worldwide commercial airline industry.

In addition, airline travel decreased significantly in 2003 as a result of both the commencement of military action by the United States and other countries in Iraq and the concerns over outbreaks of severe acute respiratory syndrome (SARS) in Asia and Canada. In response to these events, beginning in the fourth quarter of 2001, many airlines, including our largest customers at the time, reduced their flight schedules for the long-term and announced significant lay offs, and a number of airlines filed for bankruptcy protection. As a result, we agreed to modify, between 2001 and 2004, certain delivery schedules to adjust to the changes in our customers’ businesses and reduced scheduled commercial aircraft, executive jet and government transportation aircraft deliveries. In 2004, we reduced scheduled deliveries from 160 to 145 aircraft following US Airways’ second Chapter 11 filing in September 2004. In 2003 andMoreover, in 2004 we also re-evaluated our risk exposure related to aircraft valuations and customer credit risk, which resulted in charges to income of US$40.6 million and US$16.0 million, respectively.million.

Although the U.S. and world economies showed some signs of recovery starting in 2004, many airlines continued to face increased competition, escalating insurance costs, increased security costs, credit downgrades, liquidity concerns and bankruptcy, and later sharply higher fuel costs. For example, on January 5, 2010, Mesa Air Group, Inc., or Mesa, one of our important customers, filed for Chapter 11 protection from creditors. From 2000 to

2003, we have delivered 36 ERJ 145 aircraft to Mesa. As a result of our aircraft sales to Mesa and based on our risk assessment of this airline’s Chapter 11 filing, on December 31, 2009 we recorded a US$103.0 million charge against income, of which US$74.4 million are represented by collateral in the form of cash deposited in escrow, in recognition of estimated losses that we classify as probable with respect to financial guarantees extended by us in connection with sales of our aircraft to Mesa.

In the second half of 2007, the economies of the U.S. and many other countries began to experience downturns which were characterized by, among other factors, instability in securities’ value and capital markets, instability of currencies, a widespread reduction in demand, sharp reductions in the availability of credit and inflationary pressure.

By the second half of 2008, the additional effects of the severe economic downturns in our markets included significant reductions in air travel and contractions in corporate and personal spending which, as a result, have negatively impacted our product lines. Additional impacts of such downturns on the air transport industry have included a decrease in orders of executive jets and a decrease in the volume of financing available to our customers for aircraft purchases, particularly in the commercial and executive aviation segments (see “Item 4B. Information on the Company—Business Overview—Aircraft Financing Arrangements”). A continued downturn in general economic conditions could result in further reductions in air travel and decreased orders from our customers for our aircraft. Our customers could also defer or cancel their purchases of our aircraft. We cannot, at this time, predict the magnitude or duration of the impact that the above events will have on the air transport industry as a whole and on our business in particular.

In February 2009, we had to lay off approximately 20% of our labor force as part of our efforts to reposition Embraer in view of the current global economic crisis.downturn. The cost of these layoffs was approximately US$60.461.3 million. In addition, we also experienced some cancellations of 60 aircraft orders by several of our customers including the HNA Group, a Chinese airline, which reduced its firm orders for the ERJ 145 regional aircraft from 50 to 25, of which 18 had been delivered by March 31, 2010 (for more information on aircraft cancellations, see “Item 3D. —Our aircraft sales are subject to cancellation provisions that may reduce our cash flows”).

On January 5, 2010, Mesa Air Group, Inc., or Mesa, one of our important customers to which we had delivered 36 ERJ 145 aircraft from 2000 to 2003, filed for Chapter 11 protection from creditors. As a result of our aircraft sales to Mesa and based on our risk assessment of this airline’s Chapter 11 filing, on December 31, 2009 we recorded a US$103.0 million charge against income.

We cannot guarantee that material cancellations will not occur in the future or that our other businesses will not be affected. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our revenue and backlog.

We depend on key customers and key suppliers, the loss of any of which could harm our business.

Commercial aircraft. As of MarchDecember 31, 2010, all of our firm orders in backlog for the ERJ 145 regional jet family were attributable to a Chinese company, the HNA Group. The aircraft will be assembled by our joint venture Harbin Embraer Aircraft Industry Company Ltd., or HEAI, our joint venture formed with Harbin Aircraft Industry (Group) Co., Ltd.

and Hafei Aviation Industry Co., Ltd., subsidiaries of China Aviation Industry Corp., or AVIC. In addition, as of MarchDecember 31, 2010, approximately 52.4%38.0% of our firm orders in backlog for the EMBRAER 170/190 jet aircraftfamily were for the HNA Group from China, and JetBlue Airways from the U.S. Furthermore, as of March 31, 2010, approximately 68.4% of our firm orders in backlog for the EMBRAER 195 jet aircraft were forand Azul, thea new Brazilian airline founded by David Neeleman.in 2008. We believe that we will continue to depend on a number of key customers, and the loss of any one of which could reduce our sales and reduce our market share. Fewer sales could reduce our profitability.

Increasingly, due to the current global economic crisis,slowdown, the commercial airline industry is seeking to reduce costs and increase efficiency, and experiencing a consolidation process through mergers and acquisitions and alliances through code-sharing arrangements. Although it is expected that such consolidations and alliances may result in the creation of more stable and competitive airlines, they may also have the effect of reducing the number of existing and potential customers and, possibly, the number of purchases of our aircraft.

Defense aircraft. TheForça Aérea Brasileira, or Brazilian Air Force, is our largest customer of defense aircraft products. SalesRevenue arising from sales to the Brazilian federal government accounted for approximately 28%33.4% of our defense salesand security revenue for the year ended December 31, 2009.2010. A decrease in defense spending by the Brazilian federal government due to defense spending cuts, general budgetary constraints or other factors that are out of our control could decrease our defense sales.and security revenue. We cannot assure you that the Brazilian federal government will continue to purchase aircraft or services from us in the future at the same rate or at all.

Key suppliers. Our risk-sharing partners develop and manufacture significant portions of our aircraft, including the engines, hydraulic components, avionics, interior and parts of the fuselage and tail. Once risk-sharing partners have been selected and program development and aircraft production have begun, it is difficult to substitute these partners. In some cases, the aircraft are designed specifically to accommodate a particular component, such as the engines, which cannot be substituted by another manufacturer without significant delays and expenses. This dependence makes us susceptible to the risks of performance, product quality and financial condition of these risk-sharing partners.

We cannot assure you that we will not experience significant delays in obtaining key equipment in our manufacturing process in the future. A large number of the equipment employed by the aircraft industry is subject to export control regulations and, as such, deliveries are dependent on suppliers having secured the applicable export licenses. In 2007, deliveries of equipment for one of our defense products were temporarily suspended due to export control requirements. Although we work closely with, and monitor the production process of our risk-sharing partners and suppliers, the failure of our risk-sharing partners and other major suppliers to meet our performance specifications, quality standards or delivery schedules or to comply with regulatory requirements (including export control requirements) could affect our ability to deliver new aircraft to customers in a timely manner.

Our aircraft sales are subject to cancellation provisions that may reduce our cash flows.

A portion of our aircraft firm orders is subject to significant contingencies, both before and after delivery. Prior to delivery, some of our purchase contracts may be terminated, or all or a portion of a particular firm order may be canceled, for different reasons, including:

Our customers may also reschedule deliveries, particularly during an economic downturn. DuringAlthough we had no cancellations in 2008, during 2009 we experienced some 60 cancellations of aircraft orders by several of our customers, including the HNA Group, a Chinese airline, which reduced its firm orders for the ERJ 145 regional aircraft from 50 to 25, of which 18 had been delivered by March 31, 2010.customers. In addition, for a variety of reasons, in 20092010, we experienced another 3512 cancellations in our commercial aircraft orders, which may have an impact on our results of operations starting in 2011 assuming our backlog remains at current levels until then. This compares to no cancellations in 2008 and 30 cancellations in 2007.orders. Although these cancellations occurred in our commercial aviation business, we cannot guarantee that in the future we will not experience material cancellations in our other aircraft segments. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our sales and revenue, and, consequently, our profitability, for that year. A substantial number of cancellations or extensions of delivery schedules could reduce our sales and revenue for a given year, which in turn would reduce our cash flow and backlog.

Certain of our aircraft sales may be subject to financial and residual value guarantees and trade-in options that may require us to make significant cash disbursements in the future.

We have in the past guaranteed, and may in the future guarantee, the financial performance of a portion of the financing for, andand/or the residual value of, some of our aircraft that have already been delivered. Financial guarantees are provided to financing parties to support a portion of the payment obligations of purchasers of our aircraft under their financing arrangements to mitigate default-related losses. These guarantees are collateralized by the financed aircraft.

Residual value guarantees typically ensureguarantee to the aircraft purchaser that, inat the 15^th year after delivery,maturity of the financing of the purchased aircraft, the relevant aircraft will have a residual market value of the original sale price. Most of our residual value guarantees are subject to a limitation (a

“cap” “cap”) and, therefore, on average, our residual value guarantee exposure is limited to 18%17% of the original sale price. In the event of an exercise by a purchaser of its residual value guarantee, we will bear the difference, if any, between the guaranteed residual value and the market value of the aircraft at the time of exercise.

Assuming all customers who are supported by off-balance sheet financial guarantees defaulted on their aircraft financing arrangements, and also assuming we were required to pay the full aggregate amount of outstanding financial and residual value guarantees and were unable to remarket any of the aircraft to offset our obligations, our maximum exposure under these guarantees (less provisions and liabilities) would have been US$1,600.21,340.0 million as of December 31, 2009.2010. As a result, we would be obligated to make substantial payments that may not be recoverable through proceeds from aircraft sales or leases, particularly if in the future we are not able to remarket any of the aircraft to offset our obligations or financing defaults occur with respect to a significant portion of our aircraft. The value of the underlying aircraft is more likely to decrease and third parties are more likely to default during economic downturns. For further discussion of these off-balance sheet arrangements,responsibilities and commitments, see Note 3540 to our audited consolidated financial statements.

In addition, in connection with the signing of purchase agreements for new aircraft, we may provide trade-in options to our customers.customers upon their execution of an aircraft purchase agreement. These options provide a customer with the right to trade intrade-in existing Embraer aircraft upon the purchase and acceptance of a new aircraft. In 2008,2010, we were required to accept fouraccepted 29 aircraft for trade-in, and by April 2009 weof which 25 were required to accept eight additional commercial aircraft that were subject toCitation Ultras, acquired as result of the exercise of trade-in options.options under an agreement executed with NetJets Inc. Currently, we are subject to trade-in options relating to five18 aircraft, including two options entered into in 2010 as a15 of which result from new sales and the remaining three from trade-ins tied to contractual obligations with customers and to their taking delivery of certain new sales.aircraft. In addition, other aircraft may become subject to trade-in due to new sales agreements. The trade-in price is determined in the manner discussed under “Item 5A. Operating Results—Critical Accounting Estimates—Guarantees and Trade-In Rights” for commercial and executive aircraft. We may be required to accept trade-ins at prices that are above the market price of the aircraft, which would result in financial loss for us when we remarket the aircraft.

We continuously re-evaluate our risk for the financial guarantees and trade-in obligations based on a number of factors, including the estimated future market value of our aircraft based on third-party appraisals, including information developed from similar aircraft remarketing in the secondary market, and the credit rating for the customers. In this regard, based on our risk assessment of Mesa’s Chapter 11 filing, on December 31,in 2009 we recorded a US$103.0 million charge against income, of whichreserved US$74.4 million are represented byof collateral in the form of cash deposited in escrow, in recognition of estimated losses that at the time we classifyhad classified as probable with respect to financial guarantees extended by us in connection with sales of our aircraft to Mesa.

Any future decrease in the market value of the aircraft covered by trade-in rights or financial guarantees would decrease our ability to recoup the amounts payable to satisfy our obligations and cause us to incur additional charges to income. If we are required to pay amounts related to such guarantees, we may not have sufficient cash or other financial resources available to do so and may need to seek financing to fund these payments. We cannot assure you that the then-prevailing market conditions would allow us to resell or lease the underlying aircraft at its anticipated fair value or in a timely manner. Consequently, honoring our financial guarantee or trade-in obligations could require us to make significant cash disbursements in a given year, which, in turn, would reduce our cash flow in that year.

Any decrease in Brazilian federal government-sponsored customer financing, or increase in government-sponsored financing that benefits our competitors, may decrease the cost-competitiveness of our aircraft.

Historically, when purchasing our aircraft, our customers have benefited from export financing incentives provided by Brazilian government-sponsored export programs. The most important of these government programs iswas a system of interest rate adjustments called thePrograma de Financiamento às Exportações (the Export Financing Program), or ProEx program.ProEx.

As a result of past disputes between the Canadian and Brazilian governments at the World Trade Organization, or WTO, regarding the granting of export subsidies relating to sales of aircraft, the Brazilian federal government ultimately amended the ProEx, program so that any ProEx payments would not decrease the effective interest rate below the interest rate permitted by the WTO, and the Canadian government has also made changes to theirits financing arrangements for sales of aircraft by Bombardier, Inc., or Bombardier, a Canadian aircraft manufacturer.

Although the ProEx program is currently in compliance with WTO rules, other export financing programs available to our customers may be subject to challenge in the future. If, in the future, ProEx program or another similar Brazilian export financing program is not available, in the future, or if itsthe terms of the ProEx are substantially reduced,changed such that our customers’ export financing costs could bebecome higher andthan those offered by other export credit agencies, or ECAs, that support our cost-competitivenesscompetitors exports, our competitiveness in the regional jet market could decrease.

Any future government subsidies supporting any of our major competitors may cause the cost-competitiveness of our aircraft to suffer and our sales to decline.

In July 2007, Brazil and the Organization for Economic Co-operation and Development, or OECD, countries entered into an agreement known as the Aircraft Sector Understanding to establish a “level-playing field” for official export financing support of aircraft.for aircraft exports. Export Credit Agencies, or ECAs, from signatory countries are required to offer the same financial terms and conditions when financing sales of competing aircraft. The effect of the agreement is to encourage aircraft purchasers to focus on the price and quality of aircraft products offered by aircraft manufacturers rather than on the financial packages offered by their respective governments. As a result of the above agreement, financing support by the Brazilian federal government to the potential purchasers of our aircraft will contain similar terms and conditions offered to such purchasers by The Boeing Company, or Boeing, Airbus S.A.S., or Airbus, and Bombardier or any other competitor from a signatory country to such purchasers.the Aircraft Sector Understanding of the OECD. By the end of 2007, theBanco Nacional de Desenvolvimento Econômico e Social (Brazilian Social and Economic Development Bank), or BNDES, started to offer financing to our customers under terms and conditions required by the agreement.OECD’s Aircraft Sector Understanding. To the extent we do not continue to maintain the pricing advantage and quality of our aircraft, our future sales may be negatively affected. In addition, aircraft manufacturers from countries which are not signatories to the agreement may be able to offer financing packages which will negatively affect the cost competitiveness of our products.

Any future government subsidies supporting any of our major competitors may cause the cost-competitiveness of our aircraft to suffer and our sales to decline.

Budgetary constraints of the Brazilian federal government could reduce funds available to our customers under government-sponsored financing programs.

From 19962004 through 2009,2010, approximately 28%18.1% of the total value of our export deliveries was subject to financing support by the BNDES and the Export Guarantee Fund (Fundo de Garantia à Exportação)., or FGE, a special fund linked to the Ministry of Finance and managed by the BNDES to foster exports. As a government agency, the BNDES relies on funds allocated by the Brazilian national budget. We cannot ensure that the Brazilian federal government will continue to provide sufficient funding in the national budget for the financing of our aircraft or that other sources of funding will be available to our customers. The loss or significant reduction of funds available to customers, without an adequate substitute, could lead to fewer deliveries and result in lower profitability for us.

We may face a number of challenges resulting from the development of new products and the possible pursuit of strategic growth opportunities.

As we continue to develop new products, we may need to reallocate existing resources and coordinate with new suppliers and risk-sharing partners. From time to time, there is significant competition within the aviation industry for skilled personnel in general and engineers in particular. To the extent such competition reoccurs, we

may be unable to recruit the necessary number of highly skilled engineers and other personnel we require. Failure to coordinate our resources in a timely manner or to attract and retain skilled personnel could slow down our development efforts and cause delays in production and deliveries of our aircraft, which would delay recognition of revenue.

We may pursue strategic growth opportunities, including joint ventures, acquisitions or other transactions, to expand our business or enhance our products and technology. We may face a number of challenges, including difficulties in identifying appropriate candidates, assimilating their operations and personnel and maintaining internal standards and controls, as well as the diversion of our management’s focus from our ongoing business. We cannot assure you that we will be able to meet these challenges or that our business will not face disruptions.

We may have to refund cash contributions in connection with the production or development of the EMBRAER 170/190 jet family the Phenom 100/300 jet family and the Legacy 450/500 jet family if certain milestones for each of these aircraft are not reached.

We have arrangements with our risk-sharing partners, pursuant to which they have contributed to us, in cash, a total of US$534.0582.4 million through 2009.December 31, 2010. Cash contributions do not have to be returnedrefunded by us to the risk-sharing partners if we fulfill certain milestones agreed with our risk-sharing partners. An amount of US$466.3565.6 million

of these cash contributions had become nonrefundable through 2009.2010. If we cancel the production of the Phenoms 100/300 family or any aircraft in the EMBRAER 170/190 family, or if we cancel the development of the Legacy 450/500 family, because we are unable to obtain certification or for other nonmarket related reasons, we may be obligated to refund US$67.716.8 million of the total cash contributions already received. The Legacy 500 executive jet is expected to enter into service between 2012 and 2013 and the Legacy 450 is expected to enter service one year after the Legacy 500.

If we require additional financing and we are unable to obtain it,meet certain milestones agreed with our risk-sharing partners, we willmay be required to refund cash contributions for which we have not be able to continue to develop and market our Legacy 450/500 aircraft family.established provisions.

We face significant international competition, which may adversely affect our market share.

The worldwide commercial aircraft manufacturing industry is highly competitive. We are one of the leading manufacturers of commercial aircraft in the world, along with Boeing, Airbus and Bombardier, all of which are large international companies. Certain of these competitors may have greater financial, marketing and other resources than we have. Although we have attained a significant share of the market for our commercial aircraft products, we cannot assure you that we will be able to maintain this market share. Our ability to maintain this market share and remain competitive in the commercial aircraft manufacturing market over the long term requires continued technological and performance enhancement to our products. Our primary competitor in the regional and mid-capacity jet markets is Bombardier Inc., a Canadian company, which has significant technological capabilities and financial and marketing resources and, in some instances, benefits from government-sponsored exportproduct development subsidies. These companies also may have significant technological capabilities and greater financial and marketing resources. Additionally, Chinese, Russian and Japanese companies are developing mid-capacity jets and already have firm orders in backlog.

As a relatively new entrant to the business jet market, weWe also face significant competition from companies with longer operating histories and established reputations in this industry. Also, some of our competitors in the business jet market may reach the market with their product before we do, allowing them to establish a customer base and making our efforts to gain greater market share more difficult. We cannot assure you that we will continue to increase our market share in the business jet market segment as we have been able to do in the past, or that we will not experience a reduction in our current market share in this segment.

We may have to make significant payments as a result of unfavorable outcomes of pending challenges to various taxes and payroll charges.

We have challenged the constitutionality of certain Brazilian taxes and payroll charges, as well as modifications and increases in the rates and basis of calculation of such taxes and charges. Interest on the total amount of these unpaid taxes and payroll charges accrues monthly based on the Selic rate, the principal lending rate of the Central Bank, and we make an accrual as part of the interest income (expenses),financial expenses, net item in our statements of income.

As of December 31, 2009,2010, there was a US$414.7433.0 million provision recorded as a liability (taxes and payroll charges) on our balance sheet in connection with litigation contingencies that we classify as representing probable losses to us. We are awaiting a final decision in these proceedings. We cannot assure you that we will prevail in these proceedings or that we will not have to pay significant amounts, including interest, to the Brazilian federal government in the future as payment for these liabilities. For an additional discussion of these liabilities, see Note 17 to our audited consolidated financial statements.

Risks Relating to the Commercial Airline Industry

Scope clause restrictions in airline pilot contracts may limit demand for regional and mid-capacity jets in the U.S. market.

A key limiting factor in demand for regional and mid-capacity jets is the existence of scope clauses contained in airline pilot contracts. These scope clauses are union-negotiated restrictions on the number and/or size of regional and mid-capacity jets that a particular carrier may operate. Current scope clause restrictions, which are more prevalent in the United States, include restrictions on the number of seats, weight of aircraft and number of 50-7060-90 seat commercial aircraft in an airline’s fleet.fleet operated by regional carriers. As a result, our opportunities for near-term growth in the U.S. regional jet market in the 30-60 and 60-90 seat categories may be limited. The continuation or further tightening of

scope clauses could also lead some of our customers who have purchased options to acquire our regional and mid-capacity jets not to exercise those options. We cannot assure you that current restrictions will be lessened, or will not be expanded, including by amending these scope clauses to cover larger-sized commercial aircraft. Furthermore, although scope clauses are less prevalent outside the United States, we cannot assure you that scope clauses will not become more prevalent or restrictive, or that some other form of restriction will not take effect, in Europe or in other markets.

We are subject to stringent certification requirements and regulation, which may prevent or delay our obtaining certification in a timely manner.

Our civil aviation products are subject to regulation in Brazil and in each jurisdiction where our customers are located. The aviation authoritiesauthority in Brazil andknown as theAgência Nacional de Aviação Civil - ANAC (National Civil Aviation Agency), or Brazilian Aviation Authority, as well as in other countries in which our customers are located, including theAgência Nacional de Aviação Civil, or Brazilian aviation authority,most notably the U.S. Federal Aviation Authority,aviation authority, or the FAA, and the European Aviation Safety Agency, or the EASA, must certify our aircraftcivil aviation products before we can deliver them.them to our customers in those regions. We cannot assure you that we will be able to obtain certification of our aircraft on a timely basis or at all. If we fail to obtain a required certification from an aviation authority for any of our aircraft, that aviation authority can prohibit the use of that aircraft within its jurisdiction until certification has been obtained. In addition, complying with the requirements of the certification authorities can be both expensive and time-consuming.

Changes in government regulations and certification procedures could also delay our start of production as well as entry into the market withof a new product. Weproduct into a new market. Despite our continuous efforts to strictly observe and comply with all certifications and other regulatory requirements, we cannot predict how future laws or changes in the interpretation, administration or enforcement of laws will affect us. We may be required to spend significantly more money to comply with these laws or to respond to these changes.

Any catastrophic events involving our aircraft could adversely affect our reputation and future sales of our aircraft, as well as the market price of the common shares and the ADSs.

We believe that our reputation and the safety record of our aircraft are important selling points for our products. We design our aircraft with backup systems for major functions and appropriate safety margins for structural components. However, the safe operation of our aircraft depends to a significant degree on a number of factors largely outside our control, including our customers’ proper maintenance and repair of our aircraft and pilot skill. The occurrence of one or more catastrophic events involving one of our aircraft could adversely affect our reputation and future sales, as well as the market price of our common shares and the ADSs.

Risks Relating to Brazil

Brazilian political and economic conditions have a direct impact on our business and the trading price of our common shares and ADSs.

The Brazilian federal government has frequently intervened in the Brazilian economy and occasionally has made drastic changes in policy and regulations. The Brazilian federal government’s actions to control inflation and affect other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition, results of operations and the trading price of the common shares and the ADSs may be adversely affected by changes in policy or regulations at the federal, state or municipal level involving or affecting factors such as:

Uncertainty over whether the Brazilian federal government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and securities issued abroad by Brazilian companies.

Historically, the political scenario in Brazil has influenced the performance of the Brazilian economy. In particular, political crises have affected the confidence of investors and the public in general, which adversely affected the economic development in Brazil. In addition, 2010 iswas an election year in Brazil and a new president, along with state governors and congressmen, will bemembers of congress, were elected. Although the transition of power in the last decade has been less disruptive to the overall Brazilian economic scenario than in prior periods, we cannot ensure that a new administration would not implement new government policies that would not be disruptive to Brazil’s relative economic stability that has prevailed in recent years.

These and other future developments in the Brazilian economy and governmental policies may adversely affect us and our business and results of operations and may adversely affect the trading price of our common shares and ADSs.

Inflation and government efforts to combat inflation may contribute significantly to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and, consequently, may adversely affect the market value of the common shares and ADSs.

Brazil experienced extremely high rates of inflation in the past. More recently, Brazil’s annual rate of inflation was 3.8% in 2006, 7.7% in 2007, and 9.8% in 2008 and, although Brazil experienced deflation of 1.7% in 2009, the 2010 annual inflation rate was 11.3%, as measured by theÍndice Geral de Preços ao Mercado (General Market Price Index), or IGP-M Although Brazil experienced deflation of 1.7% in 2009, as measured by the IGP-M, inflationIGP-M. Inflation rates in Brazil were on the rise in early 2010.2011. Inflation, and certain government actions taken to combat inflation, have in the past had significant negative effects on the Brazilian economy. Actions taken to combat inflation, coupled with public speculation about possible future governmental actions, have contributed to economic uncertainty in Brazil and heightened volatility in the Brazilian securities markets.

Future Brazilian federal government actions, including interest rate decreases, intervention in the foreign exchange market and actions to adjust or fix the value of thereal may trigger increases in inflation. If Brazil experiences high inflation again in the future, our operating expenses and borrowing costs may increase, our operating and net margins may decrease and, if investor confidence decreases, the price of our common shares and ADSs may fall.

Exchange rate instability may adversely affect our financial condition and results of operations and the market price of the common shares and ADSs.

Although most of our net salesrevenue and debt areis U.S. dollar-denominated, the relationship of thereal to the value of the U.S. dollar, and the rate of depreciation of thereal relative to the prevailing rate of inflation, may adversely affect us.

As a result of inflationary pressures, among other factors, the Brazilian currency has devalued periodically during the last four decades. Throughout this period, the Brazilian federal government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. Although over long periods depreciation of the Brazilian currency generally has correlated with the rate of inflation in Brazil, devaluation over shorter periods has resulted in significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies.

For example, in 2002, thereal to U.S. dollar exchange rate increased 52.3% due in part to political uncertainty surrounding the Brazilian presidential elections and the global economic slowdown. Although the R$ to US$ exchange rate decreased 18.2%, 8.1%, 11.8%, 8.7%, and 17.2% in 2003, 2004, 2005, 2006, and 2007,

respectively, in 2008 it increased 31.9% mainly as a result of the global economic crisis. In 2009, thereal to U.S. dollar exchange rate decreased 25.5% mainly as the effects of the global economic crisis on the Brazilian economy appeared to be less severe than in other parts of the world. In 2010, such rate decreased another 4.3%, a trend that persisted in the first months of 2011. No assurance can be given that thereal will not appreciate or depreciate significantly against the U.S. dollar in the future.

Historically, depreciations in thereal relative to the U.S. dollar have also created additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary government policies to curb aggregate demand. On the other hand, appreciation of thereal against the U.S. dollar may lead to a deterioration of the current account and the balance of payments, as well as dampen export-driven growth. Depreciations generally curtail access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciations of thereal relative to the U.S. dollar would also reduce the U.S. dollar value of distributions and dividends on our ADSs and may also reduce the market value of our common shares and ADSs.

Appreciation of thereal against the U.S. dollar may also have an adverse impact on the competitiveness of our products as approximately 13%15% of our production inputs, including labor costs,cost of sales and services are incurred and denominated inreais. Therefore, appreciations of thereal against the U.S. dollar or other currencies increases the costs of our products when measured in U.S dollars, and may result in a decrease in our margins.

In addition, because taxes on income are largely determined and paid inreaisbased on our Brazilian tax books, the income tax expense (benefit) line item of our income statement, which has the U.S. dollar as our functional currency, is significantly impacted by appreciations of thereal relative to the U.S. dollar to the extent we must record deferred taxes resulting from exchange rate fluctuations on the reported basis of our nonmonetary assets (principally property, plant and equipment and intangible assets).

Economic developments and investor perceptions of risk in other countries, including both in developed or emerging market economies, may adversely affect the trading price of Brazilian securities, including our common shares and ADSs.

The market value of securities of Brazilian issuers is affected in varying degrees by economic and market conditions in other countries, including in developed countries, such as the United States, and in emerging market

countries. Although economic conditions in such countries may differ significantly from economic conditions in Brazil, the reaction of investors to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. For example, the 2008 global economic crisis has had an impact on many economies and capital markets around the world. Such crisis was evidenced by instability in the value of securities and capital markets, stock and credit market volatility, instability of most currencies, unavailability of credit, higher interest rates, a widespread reduction in demand, a general economic slowdown and other factors that could adversely affect our financial condition and diminish investors’ interest in securities of Brazilian issuers, including ours. Future crises in other countries could adversely affect the trading price of our common shares and ADSs, diminish investor interest in securities of Brazilian issuers, including our common shares and ADSs, and make it more difficult for us to access the capital markets and finance our operations on acceptable terms or at all.

Risks Relating to our Common Shares and ADSs

If holders of ADSs exchange the ADSs for common shares, they risk losing the ability to remit foreign currency abroad and Brazilian tax advantages.

The Brazilian custodian for the common shares has obtained an electronic certificate of registration from the Central Bank permitting it to remit foreign currency abroad for payments of dividends and other distributions relating to the common shares or upon the disposition of the common shares. If holders of ADSs decide to exchange their ADSs for the underlying common shares, they will be entitled to continue to rely on the custodian’s electronic certificate of registration for five business days from the date of exchange. Thereafter, such holders of ADSs may not be able to obtain and remit foreign currency abroad upon the disposition of, or distributions relating to, the common shares unless they obtain their own electronic certificate of registration or register their investment in the common shares pursuant to Resolution No. 2,689, which entitles certain foreign investors to buy and sell securities on the São Paulo Stock Exchange. Holders who do not qualify under Resolution No. 2,689 will generally be subject to less favorable tax treatment on gains with respect to the common shares. If holders of ADSs attempt to obtain their own electronic certificate of registration, they may incur expenses or suffer delays in the application process, which could delay their ability to receive dividends or distributions relating to the common shares or delay the return of their capital in a timely manner. In addition, we cannot assure you that the custodian’s electronic certificate of registration or any certificate of foreign capital registration obtained by a holder of ADSs will not be affected by future legislative or other regulatory changes, or that additional restrictions applicable to such holder, to the disposition of the underlying common shares or to the repatriation of the proceeds from such disposition will not be imposed in the future.

The Brazilian federal government has veto power over change of control, change of name, trademark or corporate purpose and over the creation or alteration of our defense and security programs, and its interests could conflict with the interests of the holders of our common shares or ADSs.

The Brazilian federal government holds one share of a special class of our common stock called a “golden share,” which carries veto power over change of control, change of our name, trademark or corporate purpose and over the creation or alteration of our defense and security programs (whether or not the Brazilian federal government participates in such programs). TheMoreover, the Brazilian federal government may have an interest in vetoing transactions that may be in the interests of the holders of our common shares or ADSs. For example, in 2010, we changed our corporate name to Embraer S.A. and altered our bylaws to allow us to enter the defense and security market segments, which actions required the approval of the Brazilian federal government. We cannot assure you that we will be able to obtain approvals from the Brazilian federal government in the future to effect important corporate changes, such as those carried out in 2010, or other important corporate changes that may be required in the future.

Our bylaws contain provisions that could discourage our acquisition or prevent or delay transactions that you may favor.

Our bylaws contain provisions that have the effect of avoiding the concentration of our common shares in the hands of a small group of investors so as to promote the dispersed ownership of such shares. These provisions require any shareholder or group of shareholders that acquires or becomes the holder of (1) 35% or more of the total shares issued by us or (2) other rights over shares issued by us that represent more than 35% of our capital, to make a public tender offer to purchase all of our shares on the terms specified in our bylaws, or to sell all of such

shareholders’ shares that exceed the 35% limit, in either case, as required by the Brazilian federal government. If the request is approved, such shareholder or group of shareholders must commence the public tender offer within 60 days of the date of approval. If the request is refused, such shareholder or group of shareholders must sell such number of common shares within 30 days so that the holding of such shareholder or group of shareholders is less than 35% of our capital stock. These provisions may have anti-takeover effects and may discourage, delay or prevent a merger or acquisition, including transactions in which our shareholders might otherwise receive a premium for their common shares and ADSs. These provisions can only be altered or overridden with the approval of our Board of Directors and our shareholders in a shareholders’ meeting convened for this purpose, and, with the consent of the Brazilian federal government, as holder of the golden share.

The absence of a single, controlling shareholder or group of controlling shareholders may render us susceptible to shareholder disputes or other unanticipated developments.

The absence of a single, controlling shareholder or group of controlling shareholders may create difficulties for our shareholders to approve certain transactions, because the minimum quorum required by law for the approval of certain matters may not be reached. We and our shareholders may not be afforded the same protections provided by the Brazilian Corporate Law against abusive measures taken by other shareholders and, as a result, may not be compensated for any losses incurred. Any sudden and unexpected changes in our management team, changes in our corporate policies or strategic direction, takeover attempts or any disputes among shareholders regarding their respective rights may adversely affect our business and results of operations.

Our bylaws contain provisions that limit the voting rights of certain shareholders including non-Brazilian shareholders.

Our bylaws contain provisions that limit the right of a shareholder or group of shareholders, including brokers acting on behalf of one or more holders of ADSs, to exercise voting rights in respect of more than 5% of the outstanding shares of our capital stock at any general meeting of shareholders. See “Item 10B. Additional Information—Memorandum and Articles of Association—Description of Capital Stock—Voting Rights of Shares—Limitations on the Voting Rights of Certain Holders of Common Shares.”

Our bylaws also contain provisions that limit the right of non-Brazilian shareholders to exercise voting rights in respect of more than two-thirds of the voting rights that may be exercised by Brazilian shareholders present at any general meeting of shareholders. This limitation will effectively prevent our takeover by non-Brazilian shareholders and limit the ability of non-Brazilian shareholders to effect control over us. See “ Item 10B. Additional Information—Memorandum and Articles of Association—Description of Capital Stock—Voting Rights of Shares—Limitations on the Voting Rights of Non-Brazilian Shareholders.”

Holders of ADSs may not be able to exercise their voting rights.

Holder of ADSs may only exercise their voting rights with respect to the underlying common shares in accordance with the provisions of the deposit agreement governing our ADS. Under the deposit agreement, ADS holders must vote the common shares underlying their ADSs by giving voting instructions to the depositary. Upon receipt of the voting instructions from the ADS holder, the depositary will vote the underlying common shares in accordance with these instructions. Otherwise, ADS holders will not be able to exercise their right to vote unless they surrender the ADS for cancellation in exchange for the common shares. Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 30 days in advance of the meeting, the second call must be published at least 15 days in advance of the meeting, and the third call, if necessary, must be published at least eight days in advance of the meeting. When a shareholders’ meeting is convened, holders of ADSs may not receive sufficient advance notice to surrender the ADS in exchange for the underlying common shares to allow them to vote with respect to any specific matter. In addition, the depositary has no obligation to notify ADS holders of an upcoming vote or distribute voting cards and related materials to ADS holders, unless we specifically instruct the depositary to do so. If we ask the depositary to seek voting instructions from ADS holders, the depositary will notify ADS holders of the upcoming vote and will arrange to deliver a proxy cardcards to such holders. We cannot ensure that ADS holders will receive the proxy cardcards in time to allow them to instruct the depositary to vote the shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for an untimely solicitation of voting instructions. As a result, holders of ADSs may not be able to fully exercise their voting rights.

The relative volatilityilliquidity and illiquidityvolatility of the Brazilian securities markets may substantially limit the ability of holders of our common shares or the ADSs to sell the common shares underlying ADSs at the price and time they desire.

Investing in securities, such as the common shares or the ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investing in securities of issuers from more developed countries.

The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States and other jurisdictions, and are not as highly regulated or supervised as some of these other markets. The relatively small market capitalization and illiquidity of the Brazilian equity markets may substantially limit the ability of holders of our common shares or ADSs to sell the common shares or the ADSs at the price and time desired.

There is also significantly greater concentration in the Brazilian securities markets than in major securities markets in the United States. See “Item 9C. The Offer and Listing—Markets—Trading on the São Paulo Stock Exchange.”

The sale of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of the common shares and the ADSs; holders of our common shares and/or ADSs may not be able to sell their securities at or above the price they paid for them.

Sales of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of our common shares and ADSs. As a consequence of sales by existing shareholders, the market price of the common shares and, by extension, the ADSs may decrease significantly. As a result, the holders of the ADSs and/or common shares may not be able to sell their securities at or above the price they paid for them.

Holders of our ADSs might be unable to exercise preemptive rights with respect to the common shares.

Holders of our ADSs may not be able to exercise the preemptive rights relating to the common shares underlying their ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares or other securities relating to these preemptive rights and we cannot assure holders of our ADSs that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, holders of our ADSs may receive only the net proceeds from the sale of their preemptive rights by the depositary or, if the preemptive rights cannot be sold, the rights will be allowed to lapse.

Judgments of Brazilian courts with respect to our common shares will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the common shares, we will not be required to discharge our obligations in a currency other thanreais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other thanreais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the common shares or the ADSs.

Overview

Embraer-Empresa Brasileira de AeronáuticaEmbraer S.A. is a joint stock company duly incorporated under the laws of Brazil with an indefinite term of duration. Originally formed in 1969 by the Brazilian federal government, we were privatized in 1994. In connection with our privatization, we were transformed into a publicly-held corporation and we operate under the Brazilian Corporate Law. As a result of the merger of former Embraer with and into Embraer approved on March 31, 2006,

we succeeded to all rights and obligations of former Embraer. See “Item 4A. —Corporate—2006 Corporate Reorganization” for more information on the merger. Our principal executive offices are located at Avenida Brigadeiro Faria Lima, 2170, 12227-901 São José dos Campos, São Paulo State, Brazil. Our telephone number is 55-12-3927-4404. Our agent for service of process in the United States is National Registered Agents, Inc., with offices at 875 Avenue of the Americas, Suite 501, New York, New York, 10001.

We have grown from a government-controlled company established to develop and produce aircraft for the Brazilian Air Force into a publicly-held company that produces aircraft for commercial and executive aviation executive jet and for defense and security purposes.

As part of our evolution, we have obtained, developed and enhanced our engineering and technological capabilities through our own development of products for the Brazilian Air Force and through joint product development with foreign companies on specific projects. We have applied these capabilities that we gained from our defense business to develop our commercial aviation business.

Our first regional aircraft was the Bandeirante, a 19-passenger twin-engine non-pressurized turboprop aircraft initially designed to service the transport needs of the Brazilian Air Force. This aircraft was certified in 1973. The Bandeirante was followed by the development of the EMB 120 Brasília, which was certified in 1985 and is a high performance, pressurized turboprop commercial aircraft seating up to 30 passengers that was designed to serve the longer routes and higher passenger traffic of the growing regional aircraft market. Drawing upon the design of the EMB 120 Brasília and the jet technology acquired in our development of the AM-X, a jet strike bomber for the Brazilian Air Force, we developed the ERJ 145 regional jet family, our first jet product for commercial use. This family is comprised of three aircraft, which seat up to 37, 44 and 50 passengers. The first member of the ERJ 145 family, the ERJ 145, was certified in 1996. We have expanded our jet product line with the development of the EMBRAER 170/190 jet family, which has the capacity to seat between 70 and 118 passengers and was designed to serve the aircraft market’s trend towards larger, higher volume and longer range jets. The first member of this family, the EMBRAER 170, was certified in February 2004 and its derivatives, the EMBRAER 175, and the EMBRAER 190 were certified in December 2004 and August 2005, respectively. The certification of the EMBRAER 195 was granted in June 2006. We are also marketing and selling the Legacy 450, Legacy 500 and Legacy 600, a line of executive jets in the mid-light, mid-size and super midsize categories, and the Phenom 100, Phenom 300 and Lineage 1000, which are products in the entry-level, light and ultra-large categories, respectively. In addition, in 2009 we presented the new Legacy 650, a large executive jet that will be positioned in our executive jet portfolio between the Legacy 600 and the Lineage 1000. ForIn the defense and security market, we also offer a line of intelligence, surveillance and reconnaissance aircraft based on the ERJ 145 regional jet platform.

2006 Corporate Reorganization

On March 31, 2006, our shareholders approved a reorganization of our corporate structure. The purpose of the reorganization was to, among other things, create a basis for the sustainability, growth and continuity of our businesses and activities by simplifying our capital structure and thereby improving our access to capital markets and increasing financing resources for the development of new products and expansion programs. As a result of the reorganization and merger, former Embraer ceased to exist and:

2010 Change of Embraer’s Legal Name and Change of Scope of the Defense Business Unit

On November 19, 2010, our shareholders approved a change to our corporate name from Embraer – Empresa Brasileira de Aeronáutica S.A. to Embraer S.A., as well as the addition of capabilities and the broadening of the scope of our defense business unit to allow such business unit to manufacture and trade equipment, materials, systems, software, accessories and components for the defense, security and energy industries, as well as to perform technical activities and services related to these areas. As a result, our bylaws were amended to reflect the addition of these activities to our corporate purposes.

Strategic AllianceAlliances and Growth Opportunities

We intend to review strategic growth opportunities, which may include joint ventures and acquisitions, and other strategic transactions, as well as enhance our existing relationship with significant world players in the aerospace and defense and security industries, including any members of the groups or companies below.

Strategic Alliance with the Alliances

European Aerospace and Defense Group

On November 5, 1999, a group consisting of (1) Aerospatiale Matra, currently known as European Aeronautic, Defense and Space Company N.V., or EADS, (2) Dassault Aviation, (3) Thomson-CSF, currently referred to by its trade name Thales^TM, and (4) Société Nationale d’Étude et de Construction de Moteurs d’Aviation, or Safran, which we refer to collectively as the European Aerospace and Defense Group, purchased 20% of our outstanding common stock from our existing common shareholders at that time. Most of the common stock purchased by the European Aerospace and Defense Group was owned by our former controlling shareholders.

Because the members of the European Aerospace and Defense Group were, at the time, considered by our former controlling shareholders to be strategic partners of Embraer, they were granted the right, as a group, to appoint two members to our Board of Directors. However, as a result of the termination of the shareholders’ agreement among our former controlling shareholders as part of our 2006 corporate reorganization, the European Aerospace and Defense Group no longer has the right to appoint members to our Board of Directors, other than pursuant to the general right provided for in the Brazilian Corporate Law. In addition, under Brazilian law the European Aerospace and Defense Group is no longer recognized as a group for voting purposes nor considered to be a strategic shareholder of Embraer. As of March 31, 2010,2011, each of Dassault Aviation and Safran, individually, held shares representing 0.9% and 1.1% of our total capital stock, respectively. Thales^TM sold all of its shares in October 2006 and EADS sold all of its shares in a secondary offering in February 2007.

Our alliance with the European Aerospace and Defense Group allowed us to develop several business opportunities. For example, our alliance with the European Aerospace and Defense Group led us, together with EADS, to acquire a 65% interest in OGMA-Indústria Aeronáutica de Portugal S.A., or OGMA, and also resulted in the integration by us of the Thales^TM mission systems and electronic equipment in some of our EMB 145 AEW&C aircraft, as well as in commercial transactions for the purchase by us of certain equipment and services from the members of the European Aerospace and Defense Group in the ordinary course of our business.

We intend to review strategic growth opportunities, which may include joint ventures and acquisitions, and other strategic transactions, as well as enhance our existing relationshipAVIC

In April 2011, we entered into a framework agreement with significant world playersAVIC for the implementation of a Legacy 600/650 production line in the aerospace industry, including anyChina, taking advantage of the membersinfrastructure, financial resources and workforce of Harbin Embraer Aircraft Industry Company Ltd., or HEAI, our joint venture company with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., both subsidiaries of AVIC. This industrial cooperation program will focus on the production of the European AerospaceLegacy 600/650 family in China and Defense Group.aims to serve the growing demand of the Chinese executive aviation market.

AEL Sistemas

In April 2011, we and AEL Sistemas, a subsidiary of the Israeli company Elbit Systems Ltd., announced the signature of a strategic agreement with the purpose of evaluating joint exploration prospects for unmanned aerial

systems (UAS), including the potential creation of a company to explore this segment with a majority participation of our defense and security business unit.

Joint Ventures and Acquisitions

In July 2008, we acquired for US$20.0 million a 40% interest owned by Liebherr Aerospace SAS, or Liebherr, in ELEB–Equipamentos Ltda., or ELEB, a 60%/40% joint venture that we formed with Liebherr in 1999. ELEB is an aerospace system and component manufacturer and its main products include landing gear systems, hydraulics and electro-mechanical sub-assemblies, such as actuators, valves, accumulators and pylons.HEAI

In December 2002, we formed HEAI, a joint venture company with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., both subsidiaries of AVIC, to provide for the assembly,manufacture, sale and after-sale support of the ERJ 145 regional jet family in China.family. We own 51% of the equity of HEAI. We have granted HEAI a license for the above-mentionedexclusive rights to produce, sell and provide support for the ERJ 145 regional jet family in the Chinese markets, and we contributed US$12.4 million in cash, tooling and inventory to the joint venture. Our joint venture company, namedpartners have contributed the land use rights in Harbin, China and contributed US$10.8 million in cash and facilities to the joint venture. The roll-out of the first ERJ 145 manufactured by the joint venture occurred in December 2003, and the joint venture entered into its first sales contract for six aircraft with China Southern Airlines in February 2004. As of December 31, 2010, Harbin Embraer Aircraft Industry Company Ltd. had secured contracts with five Chinese airlines for a total of 46 ERJ 145 aircraft, 44 of which had been delivered by December 31, 2010. In October 2007, the 1,000^th jet of the ERJ 145 family was delivered by Harbin Embraer Aircraft Industry Co. Ltd.

AIRHOLDINGS

In March 2005, a consortium formed by us and EADS acquired 65% of OGMA’s shares through a newly created holding company, named AIRHOLDING, SGPS, S.A. At that time we held 99% of the equity in the referred holding company and EADS held the remaining 1%. Further, in March 2006, EADS exercised its option to increase its interest, and currently holds 30% of the equity in the referred holding company. OGMA is a major representative of the aviation industry in Europe, offering services that include the maintenance repair and overhaul of civil and military aircraft, engines and parts, assembly of structural components and engineering support.

CAE

In October 2006, we entered into an agreement with the Canadian company CAE Inc., or CAE, to form a global training joint venture, which will provide comprehensive pilot and ground crew training to customers of the Phenom 100 entry-level jet and Phenom 300 light jet aircraft. This training program has already started to be offered at CAE SimuFlite in Dallas, Texas, following the commencement of operation of the Phenom 100 in 2008, and has expanded to Burgess Hill in the U.K. in 2009. This joint venture is expected to provide entitlement training and post-entitlement training for pilots, maintenance technicians and dispatch personnel.

Liebherr Aerospace

In July 2008, we acquired for US$20.0 million a 40% interest owned by Liebherr Aerospace SAS, or Liebherr, in ELEB–Equipamentos Ltda., or ELEB, a 60%/40% joint venture that we formed with Liebherr in 1999. ELEB is an aerospace system and component manufacturer and its main products include landing gear systems, hydraulics and electro-mechanical sub-assemblies, such as actuators, valves, accumulators and pylons.

Orbisat

In March 2011, we executed a R$28.5 million contract to purchase a 64.7% stake in the capital stock of the radar business of OrbiSat da Amazônia S.A., or OrbiSat, a Brazilian company that created a radar business in 2002 to develop state-of-the-art technology for air, sea and land remote sensing and aerial surveillance. The contract must be submitted to the Administrative Board for Economic Defense of Brazil (Conselho Administrativo de Defesa Econômica), or CADE, for antitrust clearance. This is the first acquisition made by our recently created defense and security business unit.

Atech

In April 2011, we announced the acquisition for R$36 million of 50% of the capital stock of Atech Negócios em Tecnologias S.A., or Atech, with the purpose of increasing our capacity for developing products and services in the area of Command, Control, Communications, Computer and Intelligence, or C4I, systems and improving our

capabilities of providing integrated systems for the defense and security, command and control, air defense and air traffic control markets. The acquisition will be submitted to the CADE for antitrust clearance.

Capital Expenditures: ResearchExpenditures (Property, Plant and DevelopmentEquipment and Development)

We include our investments in both development and property, plant and equipment as part of our capital expenditures.

As part of our transition to IFRS, we have started to capitalize the expenditures incurred with product development as non-current intangible assets on our investments bothbalance sheet when it is probable that the projects will generate future benefits, taking into account their commercial and technological feasibility, availability of technological and financial resources and only if their cost can be reliably measured. We will amortize such assets in researchthe form of charges to cost of sales and services on our income statement, based on the total number of estimated aircraft to be delivered for each new product development and inproject. We also capitalize expenditures with property, plant and equipment.

Capital expenditures relating solelyequipment as non-current assets on our balance sheet and depreciate such assets in the form of charges to researchcost of sales and development, which includes the development of products for the commercial airlineservices on our income statement. For information on how we amortize our intangible assets and executive aviation segments were US$259.7 million in 2007, US$197.0 million in 2008depreciate our property, plant and US$144.0 million in 2009, net of cash contributions provided by risk-sharing partners. Research and development expenses as a percentage of net sales were 5.0% in 2007, 3.1% in 2008 and 2.6% in 2009. In 2007, 2008 and 2009, we recorded US$23.7 million, US$134.8 million and US$102.2 million, respectively, as deductions to our research and development expenses in connection with payments previously received by us from our risk-sharing partners, given that our EMBRAER 170/190 aircraft family and Phenom 100 received their certifications and we fulfilled other contractual milestones under our risk-sharing arrangements. Seeequipment, see “Item 5C.5A. Operating and Financial Review and Prospects—ResearchOperating Results—Principal Operating Data and Development.Components of our Statement of Income—Cost of Sales and Services.”

In 2007, thereal exchange rate increased by 17.2% against the U.S. dollar, which, together with increased research andMost of our development investments in connectionexpenditures are associated with the testing stagesdevelopment of new products either for the Lineage 1000commercial or executive aviation segments. Development expenditures totaled US$162.2 million in 2010 and Phenom 100 following their first flightsUS$205.3 million in the second half2009, inclusive of 2007, impacted our research and development expenses in that year. Our research and development expenses for 2008 decreased mainly because of US$134.8 million receivedcash contributions from risk-sharing partnerspartners. This decrease in connection withdevelopment expenditures is a result of fewer aircraft certifications in 2010, while additional development expenditures were required in 2009 in preparation of the certification of the Phenom 100300 in that year.

We also receive funds from risk-sharing partners to fund our cash costs for our commercial and executive aircraft development programs. Cash contributions provided by risk-sharing partners totaled US$ 99.4 million in 2010 and US$ 102.2 million in 2009. This reduction in cash contributions from risk-sharing partners in 2010 is a result of fewer such contributions in that year due to the certification of the Phenom 300 and the fulfillment of other contractual milestones under our risk-sharing arrangements. In 2009, our researcharrangements in 2009. This reduction in cash contributions from risk-sharing partners was partially offset by contributions to the Legacy 450/500 program in 2010. See “Item 5C. Operating and development expenses decreased by US$53.0 million because our expenses in this area remained focused on making continued improvements to our existing aircraftFinancial Review and aircraft components, including making follow-up investments on our Embraer Entrepreneurial Excellence Program, or P3E. In addition, our research and development expenses decreased in 2009 as a result of the certification of the Phenom 100 in 2008, the platform of which served as a basis for the platform of the Phenom 300, thereby reducing our need for additional product development expenses for the Phenom aircraft family in 2009.Prospects—Research.”

Our main ongoing project is the development of the Legacy 450/500 executive jets. An estimated US$750 million is expected to be invested overall in fixed assets, researchproperty, plant and equipment and development for the Legacy 450/500 programs, which were launched by us in April 2008. The Legacy 500 executive jet is expected to enter into service between 2012 and 2013 and the Legacy 450 is expected to enter service one year after the Legacy 500.

Our total disbursements in capital expenditures related to property, plant and equipment were US$ 73.5 million in 2010 and US$97.1 million in 2009. These investments are related mainly to (1) construction of new facilities and (2) improvements and modifications to our plants and production facilities for the production of new aircraft models.

In 2010,2011, we expect to invest approximately US$300410.0 million in capital expenditures for research and development and property, plant and equipment. Of this amount, approximately US$160210.0 million is expected towill be invested in our research and development activities. This US$160 million amount isactivities, exclusive of contributions fromof risk-sharing partners, but includes estimated costsand US$200 million will be invested in property, plant and equipment. The US$200 million capital expenditures to be disbursed in connection with property, plant and equipment are primarily related to (1) improvements to our existing facilities, (2) the construction of approximately US$100 millionthe Melbourne, Florida plant, which was started in May 2008, (3) the construction of two plants in Evora, Portugal, which was started in July 2008, and (4) investments related to the development of technology, particularly in the robotics infrastructure of our new products, and approximately US$60 million related to the development of technology.Botucatu plant.

We expect to invest in Brazil approximately 70%74% of our budgeted US$300410.0 million capital expenditures for 2011, most of totalwhich will be invested in development activities. The remaining 26% of our capital expenditure, which includes our investments both in research and development andexpenditures will be invested abroad, mainly on property, plant and equipment.equipment at our new industrial facilities in the cities of

Melbourne, Florida and Evora, Portugal. We do not expect to receive relevant amounts of cash contributions from the risk-sharing partners in 2011.

Our capital expenditures are generally financed by funds provided by operations, borrowings under our credit arrangements, cash contributions from risk-sharing partners, advance payments from customers and, to a lesser extent, capital increases to meet these needs. See “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Overview” and “Item 5C. Operating and Financial Review and Prospects—Research and Development.Research.”

We do not incur researchdevelopment expenditures for defense and development expenses for defensesecurity programs as those are funded by the Brazilian federal government and other government customers. Most of our research andcustomers under long-term development expenses are associated with particular programs either in the commercial or executive aviation segments.

For a discussion of our capital expenditures relating to property, plant and equipment, see “Item 4D. —Property, Plant and Equipment.”contracts.

We are one of the leading manufacturers of commercial aircraft in the world, based on 2009 net2010 revenue arising from sales of commercial aircraft, with a global customer base. Our focus is achieving customer satisfaction with a range of products and services addressing the commercial airline, executive jet and defense and security markets and aviation services. Our commercial aviation business accounted for 61.6%53.9% of our net salesrevenue in 2009.2010. We are the leading supplier of defense aircraft for the Brazilian Air Force based on number of aircraft sold, and we have sold aircraft to militaryarmed forces in Europe, Asia and Latin America. Our defense and security business accounted for 9.1%12.5% of our net salesrevenue in 2009.2010. We have developed a line of executive jets based on one of our regional jet platforms and launched new executive jets in the entry-level, light, ultra-large and mid-light/mid-size categories: the Phenom 100/300 family, the Lineage 1000 and the Legacy 450/500 family, respectively. Our executive jet business accounted for 16.4%21.3% of our net salesrevenue in 2009.2010. Providing high quality customer support is a key element of our customer focus and is critical to our ability to maintain long-term relationships with them. Our aviation services business accounted for 10.8%10.5% of our net salesrevenue in 2009.2010. Other related businesses, accounted for 2.1%1.8% of our net salesrevenue in 2009.2010. For the year ended December 31, 2009,2010, we generated net salesrevenue of US$5,466.35,364.1 million, of which more than 89.2%87.3% was U.S. dollar-denominated. On MarchAt December 31, 2010, we had a total firm order backlog of US$16.015.6 billion, which includes 243included 250 firm orders for commercial aircraft.

Our Strengths

We believe that our primary strengths are:

Leading Commercial Aircraft Manufacturer with a Global Customer Base. We are a leading manufacturer of 30-120 seat jets, based on the number of aircraft sold, with a strong global customer base. We have sold our regional and mid-capacity jets to more than 70 customers in the five continents of the world. Our customers include some of the largest and most significant regional, low-cost airlines and commercial carriers in the world.

Aircraft Design; Cost and Operating Efficiency. We conceive, develop and manufacture aircraft to provide our customers with reduced operating, maintenance and training costs due to the similarity and efficiency in design and the commonality of parts within a jet family. These similarities enable us to significantly reduce our design, development and production costs and pass these savings along to our customers in our sales price. These similarities also reduce the development time of our aircraft.

Strategic Risk-Sharing Partners. With respect to our commercial and executive aircraft, we developed strategic relationships with key risk-sharing partners. These risk-sharing partners develop and manufacture

significant portions of the systems and components of our aircraft and contribute their own funds to research and develop these systems and components, thereby reducing our development expenses. These risk-sharing partners also fund a portion of our development expenses through direct contributions of cash or materials. We believe that these strategic relationships enable us to lower our development expenses and risks, improve our operating efficiency, enhance the quality of our products and reduce the number of our suppliers, thereby providing us with flexibility of our production process.

Benefits of Funded Development of Defense Products. Historically, research and development expensesexpenditures related to defense aircraft have been funded in large part by certain of our customers, which in this business segment includes the governments of different countries. These customers have had an important role in our engineering and industrial

development. In addition, we use well-proven platforms developed for the commercial aviation segment as a solution for certain defense products. We also sell to other military forces the proven defense products developed for the air forces of certain countries.

Flexibility of Production to Meet Market Demands. We believe the flexibility of our production processes and our operating structure, including our risk-sharing partnerships, allow us to increase or decrease our production in response to market demand.

Experienced and Highly Skilled Workforce. Our employees are experienced and highly skilled. As of MarchDecember 31, 2010, approximately 23.5%24.3% of our workforce was comprised of engineers. Due to the high level of knowledge and skill of our employees, and our continuous training programs, we are able to efficiently pursue new programs and provide our customers with differentiated technical expertise and guidance.

Business Strategies

With a view to continue growing our business and increasing our profitability, we intend to continue to offer our customers cost-effective, high quality, and reliable aircraft and services. The key elements of our strategy are the following:

Continuing to Market our Commercial Aircraft. We are fully committed to continuing to market our ERJ 145 regional jet family and to aggressively market our mid-capacity aircraft, the EMBRAER 170/190 jet family. As of MarchDecember 31, 2010, we had more than 880885 units of the ERJ 145 jet in commercial operation. We believe a significant market opportunity exists for the EMBRAER 170/190 jet family with regional airlines that are seeking to expand their fleet, as well as increase their penetration in higher density markets and add longer routes. We also believe that the EMBRAER 170/190 jet family will be popular with major low-cost airlines that are right-sizing their fleet in order to adjust capacity to meet demand in less dense routes. As of MarchDecember 31, 2010, we were leaders in the 70-120 seat category in terms of number of aircraft sold. Additionally, we believe that our commercial aircraft will provide us with significant opportunities to increase our competitiveness by offering our customers a full range of jets in the 30-120 seat category.

Strengthening our Position in the Executive Jet Market. We believe that the executive jet market provides us with significant growth opportunities. We expect to offer products in all categories of the executive jet market, from the entry-level to the ultra large categories. We have developed the Legacy 600, a super midsize jet, the Phenom 100, an entry-level jet, the Phenom 300, a light jet and the Lineage 1000, an ultra large jet, and are developing the Phenom 300, the Legacy 450 and the Legacy 500, executive jets in the light, mid-light and mid-size categories, respectively. In addition, in 20092010 we presentedmade the newfirst delivery of the Legacy 650, a large executive jet that will beis positioned in our executive jet portfolio between the Legacy 600 and the Lineage 1000. We have endeavored to understand and respond to market and customer needs, in an effort to continuously improve the product and customer support for our executive jets.

Continue to Pursue Market Niche Opportunities in the Defense and Security Market. We currently offer products for transportation, training, light-attack, intelligence, surveillance and reconnaissance. Since our products offer multi-mission capabilities at a competitive price and are designed to be operated in any environment at low operating costs, we believe our products meet the needs of governments in countering present threats which are a global concern, such as terrorism, drug dealing and weapon smuggling.

Continued Focus on Customer Satisfaction and Support. We believe that our focus on customer satisfaction is fundamental to our entrepreneurial success and our business strategy. Providing high quality

customer support and services is a key element of our customer focus and it is critical to our ability to maintain long-term relationships with our customers.customers and keep our products competitive in the market. As the number of our aircraft in operation continues to grow, and our executive aviation business expands, we have further increased our commitment toin providing our customers with an appropriate level of after-sale support, including technical assistance, pilottraining, maintenance, spare parts and maintenance training and spare parts.other related services. This is evidenced, for example, by the expansion of our customer support and serviceservices base. With respect to

We offer our customers certain facilities for aircraft maintenance, repair and overhaul services, or MRO, we have acquiredMROs, around the world. We own and implemented several new facilities worldwide including (1)operate eight MROs, located in the Nashville, Tennessee MRO facility (2) OGMA, an MRO facilityU.S., Portugal, Brazil and France. In addition,

our network of MROs is also comprised of four authorized third-party centers located in Portugal, which we began to operate in March 2005Brazil, the United Kingdom, China and (3) four new Embraer owned service centers for executive aircraft implemented in 2008South Africa. For further information on our support and 2009. We intend to continue to focus on providing our customers with high quality customer support by expanding our presence worldwide, both through our own operationsservices network, see “—Customer Support and agreements with authorized service centers.Services.”

Continue to motivate our employees and improve our production processes and managerial practices. We are constantly seeking to exceed our customers’ expectations. In order to achieve this goal, we must, on a daily basis, continuously seek to implement the most efficient production processes and best managerial practices. Because the success of our products and services is ultimately a combination of the contribution of our employees and the production processes we have developed over the years, we recognize that we must continue to motivate our employees and refine our production processes. To that effect, we have implemented, and intend to further develop, corporate programs based on a “lean manufacturing” philosophy, such as the Embraer EntrepreneurialEnterprise Excellence Program, that are designed to strengthen our internal culture of excellence and improve the efficiency of our operations.

Commercial Aviation Business

We design, develop and manufacture a variety of commercial aircraft. Our commercial aviation business is our primary business, accounting for 61.6%53.9% of our net salesrevenue for the year ended December 31, 2009.2010.

Products

We developed the ERJ 145, a 50-passenger twin jet-powered regional aircraft, introduced in 1996, to address the growing demand among regional airlines for medium-range, jet-powered aircraft. After less than two years of development, the ERJ 135, a 37-seat regional jet based on the ERJ 145, was introduced in July 1999. In addition, we developed the 44-seat ERJ 140 as part of the ERJ 145 regional jet family, which we began delivering in the second half of 2001. We believe that the ERJ 145 regional jet family provides the comfort, range and speed of a jet at costs comparable to turboprop aircraft. We are continuing to develop the EMBRAER 170/190 jet family, our 70-122 seat platform, to serve the trend in the commercial airline market toward larger, faster and longer range jets and to further diversify our strength in the jet market. We continue to analyze new aircraft demand in the jet market to determine potentially successful modifications to aircraft we already produce.

ERJ 145 Regional Jet Family

The ERJ 145 is a twin jet-powered regional aircraft accommodating up to 50 passengers. This jet was developed in response to the increasing demand from the regional airline industry for an aircraft that offered more speed, comfort and capacity than a turboprop. The ERJ 145 was certified by the Brazilian aviation authorityAviation Authority in November 1996, the FAA in December 1996, the European aviation authority in May 1997, the Australian aviation authority in June 1998 and the Chinese aviation authority in December 2000. We began delivering the ERJ 145 in December 1996. In October 2007, we delivered our 1,000^th ERJ 145 aircraft, manufactured by Harbin Embraer Aircraft Industry Co. Ltd. to the HNA Group.

The development of the ERJ 145 aircraft was partially based on the EMB 120 Brasília and has approximately 30% commonality in terms of parts and components with that aircraft, including the nose section and cabin. The ERJ 145 has a maximum cruising speed of Mach.78, or 450 knots, and a maximum fully loaded range of 1,060 nautical miles in its standard version. The ERJ 145 is equipped with engines built by Rolls-Royce Allison. These engines are designed to operate 10,000 flight hours between major overhauls and operate at a low fuel cost. In addition, the ERJ 145 is equipped with sophisticated flight instruments, such as engine-indication instruments, crew-alert systems and digital flight control systems produced by Honeywell.

The ERJ 145 is also available in a long-range, or LR, version, and, in response to customer requests, we have developed an extra-long-range, or XR, version of the aircraft. The ERJ 145 LR features a larger fuel tank, more powerful engines and greater range than the standard version. The ERJ 145 LR, which was certified by the Brazilian aviation authority,Aviation Authority, the FAA and the European aviation authority in 1998, and by the Chinese aviation authority in November 2000, uses engines that deliver 15% more thrust, allowing the fully loaded aircraft to operate on routes of up to 1,550 nautical miles. The ERJ 145 XR features a new and updated turbofan engine, increased capacity fuel tanks and winglets. The ERJ 145 XR, which was certified by the Brazilian aviation authorityAviation Authority in August 2002 and by the FAA in October 2002, offers reduced fuel consumption, a maximum, fully loaded range of 2,000 nautical

miles and enhanced operational capabilities for hot weather and high altitudes. Deliveries of the ERJ 145 LR began in February 1998, and deliveries of the ERJ 145 XR began in October 2002.

The ERJ 135 is a 37-seat regional jet based on the same design as the ERJ 145 and is manufactured on the same production line. The ERJ 135 has approximately 96% commonality in terms of parts and components with the ERJ 145, resulting in reduced spare-parts requirements and permitting the utilization of the same ground support equipment for customers that use both aircraft. The ERJ 135 was certified by the Brazilian aviation authorityAviation Authority in June 1999, by the FAA in July 1999 and by the European aviation authority in October 1999. Deliveries of the ERJ 135 began in July 1999.

The ERJ 135 has a maximum operating speed of Mach.78, or 450 knots, and a maximum fully loaded range of 1,330 nautical miles in its standard version. The ERJ 135 uses the same engines, sophisticated flight instruments, digital flight control systems and body design as the ERJ 145. The ERJ 135’s fuselage is 11.6 feet shorter than the ERJ 145’s. The ERJ 135 is also available in a LR version, with maximum fully loaded range of l,700 nautical miles. The LR version received certification simultaneously with the standard version and began deliveries in August 1999.

We developed the ERJ 140 in response to customer requests. The ERJ 140 is a 44-seat regional jet based on the same design as the ERJ 135 and is manufactured on the same production line as the ERJ 145 and ERJ 135. The ERJ 140 has approximately 96% commonality with the ERJ 145 and ERJ 135, providing our customers with significant maintenance and operational benefits. The ERJ 140 was certified by the Brazilian aviation authorityAviation Authority in June 2001 and by the FAA in July 2001. The ERJ 140 has a maximum fully loaded range of 1,230 nautical miles in its standard version. The ERJ 140 is available in LR version, with maximum fully loaded range of 1,630 nautical miles. We began delivering the ERJ 140 in July 2001.

The ERJ 145 regional jet family allows for standardized pilot certification and maintenance procedures.

EMBRAER 170/190 Jet Family

The EMBRAER 170/190 jet family provides our customers with a choice of four aircraft in the mid-capacity passenger range. The EMBRAER 170 is a 70-80 seat jet and the EMBRAER 175 is a 78-88 seat jet, while the EMBRAER 190 is a 98-114 seat jet and the EMBRAER 195 is a 108-122 seat jet.

The EMBRAER 170 was certified by the Brazilian aviation authority,Aviation Authority, the FAA, the Joint Aviation Authorityaviation authority of Europe (the former advisory organization that made certification recommendations to non-EU national authorities), or JAA, the EASA and the authority of Poland in February 2004, and deliveries of the EMBRAER 170 began in March 2004. The EMBRAER 175 was certified by the Brazilian aviation authorityAviation Authority in December 2004, by the EASA in January 2005, by TCCA, the Canadian certification authority, in July 2005 and by the FAA in August 2006. The EMBRAER 190 was certified by the Brazilian aviation authorityAviation Authority in August 2005, by the FAA in September 2005 and by the EASA in June 2006. The EMBRAER 195 was certified by the Brazilian aviation authorityAviation Authority in June 2006, by the EASA in July 2006 and by the FAA in August 2007.

We designed the EMBRAER 170/190 jet family to maximize the benefits of commonality. Aircraft in the family share approximately 89% of the same components. The high level of commonality in this new jet family lowered our development expenses and shortened our development period. We anticipate that this commonality will lead to significant savings to our customers in the form of easier training, less expensive parts and maintenance and lower operational costs. Due to differences in size and weight, the EMBRAER 170/190 jet family will not share the same wing design. This new mid-capacity jet family has engines fixed under its main wings—a design intended to enhance power, improve fuel economy and minimize turnaround times. All of the aircraft models of this family are powered by engines manufactured by General Electric and contain state-of-the-art avionics manufactured by Honeywell.

The EMBRAER 170/190 jet family’s principal features are:

195 have maximum fully loaded ranges of 1,700 and 1,500 nautical miles, respectively, and will be available in LR versions with maximum fully loaded ranges of 2,300 and 2,100 nautical miles, respectively.

EMB 120 Brasília

The EMB 120 Brasília is a pressurized twin wing-mounted turboprop aircraft that accommodates up to 30 passengers. The EMB 120 Brasília was developed in response to the commercial airline industry’s demand for a high-speed and fuel-efficient 30-seat regional aircraft. The EMB 120 Brasília was certified by the FAA in May 1985 and by the Brazilian aviation authorityAviation Authority in July 1985. Since its introduction in 1985 and through December 31, 2008, we have delivered 352 EMB 120 Brasília for the regional market and six EMB 120 Brasília for the defense and security market. We currently manufacture the EMB 120 Brasília only upon customer request.

Customers

We believe we have a diverse, global customer base, mainly in the commercial airline market in Europe, the Middle East, Africa, Asia (particularly China) and the Americas. Our major customers for commercial aircraft include some of the largest regional, low-cost and mainline airlines in the world. As of December 31, 2009,2010, our largest customers, by firm orders, were JetBlue Airways, US Airways, Northwest Airlines, Air Canada, Republic Airlines, Express Jet, American Eagle, Northwest Airlines, JetBlue Airways, Flybe, US Airways, Republic Airlines, Azul (the new Brazilian airline founded in 2008), HNA Group, Lufthansa, Air Canada and Regional (a subsidiary of Air France), Lufthansa, and Azul, the new Brazilian airline founded by David Neeleman in 2008..

For a discussion of these significant customer relationships, see “Item 3D. Key Information—Risk Factors—Risks Relating to Embraer—We depend on key customers and key suppliers, the loss of any of which could harm our business.” See also Note 7 to our audited consolidated financial statements for additional information on our largest customers.

We generally sell our commercial aircraft pursuant to contracts with our customers on a fixed-price basis, adjusted by an escalation formula that reflects, in part, inflation in the United States. These contracts generally include an option for our customers to purchase additional aircraft for a fixed price option, price, subject to adjustment based on the same escalation formula. In addition, our contracts provide for after-sales spare parts and services,include a product support package to cover the entry into service of our aircraft, as well as warranties of our aircraft and spare parts.a general warranty for such aircraft. Other provisions for specific aircraft performance and design requirements are negotiated with our customers. Finally, some of our contracts contain cancellation provisions and trade-in options and financial and residual value guarantees. See “Item 3D. Key Information—Risk Factors—Risks Relating to Embraer—OurCertain of our aircraft sales aremay be subject to financial and residual value guarantees and trade-in options that may require us to make significant cash disbursements in the future” for a more detailed discussion of these provisions.

Sales and Marketing

Our current marketing strategy is based upon our assessment of the worldwide commercial airline market and our assessment of the current and future needs of our customers. We actively market our aircraft to international airlines and regional affiliates of major global airlines through our regional offices in the United States, Europe and Asia. Our success depends, to a significant extent, on our ability to discern our customers’ needs, including needs for customer service and product support, and to fill those needs in a timely and efficient manner while maintaining the high quality of our products. Our market and airline analysts focus on the long-term trends of the market, competitive analysis, product-enhancement planning and airline analysis. In terms of direct marketing to our customers, we rely heavily on the media, as well as participating in air shows and other cost-effective events that enhance customer awareness and brand recognition. We have regional sales offices in Le Bourget, France; Fort

Lauderdale, Florida; Beijing, China; and Singapore. We sell our ERJ 145 regional jet family in the Chinese market exclusively through our joint venture in China, which had 46 firm orders from Chinese airlines since the beginning of 2004, 3944 of which had been delivered by MarchDecember 31, 2010.

Production, New Orders and Options

Prior to starting production or development of a new project, we secure letters of intent representing future orders for a significant number of aircraft. We typically begin taking orders and building a backlog two years before we begin producing a new aircraft model, aiming to receive a significant number of orders before we deliver the initial aircraft. Once an order is taken, we reserve a place for that order on the production line, ensuring that we will maintain production sufficient to meet demand. Once a place is reserved on the production line, we are able to give customers delivery dates for their orders.

We include an order in backlog once we have received a firm commitment, represented by a signed contract. Our backlog excludes options and letters of intent for which definitive contracts have not been executed. For the sales of our commercial aircraft, we customarily receive a deposit upon signing of the purchase agreement and progress payments in the amount of 5% of the sales price of the aircraft 18 months before scheduled delivery, another 5% twelve months before scheduled delivery and another 5% six months before scheduled delivery. For the EMBRAER 170/190 jet family, we receive an additional 5% progress payment 24 months before scheduled delivery. We typically receive the remaining amount of the sales price upon delivery of the aircraft. The deposits and the progress payments are for the most part nonrefundable in the event orders are cancelled.

Our options generally provide our customers the right to purchase an aircraft in the future at a fixed price and on a specified delivery date, subject to escalation provisions, under a purchase agreement. Once a customer decides to exercise an option, we account for it as a firm order. Occasionally, we have extended the exercise date for our options and renegotiated the delivery schedule of firm orders, as well as allowed customers to convert their firm orders or options for one aircraft into firm orders or options for another aircraft within the same commercial aircraft family.

Competition

We generally face competition from major manufacturers in the international aircraft market. Each category of our products faces competition of a different nature and generally from different companies. Some of our competitors have greater financial, marketing and other resources than we do.

30-60–seat category

The main competitors of the ERJ 145 regional jet family are:

Given the success of our regional jet family, the maturity of this market segment and the significant entry barriers in this segment, due mainly to the high development expenses of a new model and the extensive and time-consuming development cycle of a new jet, we believe that we are well-positioned to maintain our market share in the 30-60–seat category with our ERJ 145 regional jet family.

61-90–seat and 91-120–seat categories

We currently face our strongest competition in the 61-90– and 91-120–seat categories. We currently compete against the following aircraft in these categories:

We expect new developments in this market segment from current and new competitors, including:

The key competitive factors in the markets in which we participate include design and technological strength, aircraft operational costs, price of aircraft, including financing costs, customer service and manufacturing efficiency. We believe that we will be able to compete favorably on the basis of our aircraft performance, efficiency, low operating costs, product development experience, global customer base, market acceptance, cabin design and aircraft price.

Defense and Security Business

Recently, Embraer added capabilities and broadened the scope of its corporate unit dedicated to the defense and security market. The creation of the new Embraer defense and security units is an important step towards consolidating Embraer as a key supplier of defense and security solutions for the Brazilian federal government, as well as other governments worldwide.

We conceive, design, develop, manufacture and support a wide range of integrated solutions for the defense and security market. Our products include training/light attack aircraft, C4ISR (Command and Control, Intelligence, Surveillance and Reconnaissance) systems, aerial surveillance platforms, military transport aircraft, and government transport aircraft.aircraft and Command, Control, Communications, Computer, Intelligence, Surveillance and Reconnaissance systems, or C4ISR systems. We offer a complete portfolio of customer services, ranging from maintenance and material solutions to complete Contractor Logistic Support programs. As of December 31, 2009,2010, we had sold more than 6801,150 defense aircraft, including government transport aircraft, to 20more than 25 armed forces and operators worldwide. We are also the leading supplier of defense aircraft to the Brazilian Air Force based on the total number of aircraft in its fleet. Our defense and security business accounted for approximately 9.1%12.5% of our net salesrevenue for the year ended December 31, 2009.2010.

Products

C4ISR Systems

Embraer has developed three cost-effective, reliable and flexible special-mission aircraft based on the ERJ 145 regional aircraft platform: the EMB 145 Airborne Early Warning and Control, (AEW&C),or AEW&C, the EMB 145 Multi

Intel and the EMB 145 MP (Maritime Patrol).Maritime Patrol, or MP. Since its first delivery, a total of 1415 such aircraft have been manufactured for the Brazilian, Air Force, the Mexican Air Force and the Greek Air Force.Forces.

We believe EMB 145 AEW&C is the most advanced and affordable Airborne Early Warning and Control aircraft available in the market. It combines Embraer’s reliable and cost-effective ERJ 145 regional airplane platform with a unique, high-performance, multi-mode active phased-array AEW radar, a powerful command and controlC4I system and a comprehensive set of support systems such as self-protection and communications, including data-links. The EMB 145 AEW&C is operational in the Brazilian, Mexican and Greek Air Forces. In addition, in 2008 we signedexecuted a contract with the Indian Air Force to sell them fourthree units of our EMB 145 AEW&C aircraft, which we are currently assembling in compliance with the delivery schedule for this contract.

The EMB 145 Multi Intel, also known as the EMB 145 RS/AGS (RemoteRemote Sensing/Airborne Ground Surveillance)Surveillance, or RS/AGS, aircraft is designed to accomplish the electronic and reconnaissance missions. It features state-of-the-art sensors for IMINT (Image Intelligence)Image Intelligence (IMINT), SIGINT (Signal Intelligence)Signal Intelligence (SIGINT), and MASINT (MeasurementMeasurement and Signature Intelligence)Intelligence (MASINT), and is capable of providing real-time imagery and signals intelligence over ground objectives. It is equipped with extensive sensor suites ranging from high-performance synthetic aperture radar to electro-optical sensors, and includes communications and electronic exploitation systems capable of gathering complete intelligence information. The EMB 145 Multi Intel is currently operational in the Brazilian Air Force.

The EMB 145 MP aircraft is designed to address coastal and blue-water threats. The EMB 145 MP is designed to carry out maritime patrol and anti-submarine warfare missionsby using maritime and ground surveillance radar and electro-optical sensors, as well as dedicated communications and surveillance equipment. In the ASW configuration, the EMB 145 MP is designed to carry out anti-submarine warfare missions. The EMB 145 MP is operational in the Mexican Air Force.

Embraer also develops and integrates state-of-the-art Command and Control, Intelligence, Surveillance and Reconnaissance (C4ISR)C4ISR systems for defense customers that require accurate information on a real-time basis. Our C4ISR systems operate in all three of our EMB aircraft. The information provided by C4ISR systems seeks to give top defense organizations the capability to collect, process and disseminate an uninterrupted flow of accurate and timely data that enables them to make better decisions and act faster and more effectively. We believe that the entry of Embraer in the C4ISR systems sector is made possible by Embraer’s technical understanding of several key topics such as knowledge management, visualization technologies, decision-making tools and concept-development methodologies. One recent practical example of Embraer’s participation incontributions to the C4ISRCS4ISR field is the definition and development of a new datalink protocol the Link BR2, delivered to the Brazilian Air Force early in 2009.

Training and Light Attack – Super Tucano

The Super Tucano, designated as A-29 by the Brazilian Air Force, is a single-engine, multipurpose, military turboprop that combines effective training and operational capabilities with low acquisition and operating costs. It is an evolution of the EMB-312 Tucano, a prior trainer aircraft with a proven track record, of which more than 650620 units were sold to 15 air forces around the world.

It offers solutions for basic to advanced weapons training, such as in-flight virtual training. It also offers operational capabilities required for border surveillance, close air support operations and counterinsurgency (COIN), missions. It offers avionics comparable to those of fourth generation fighter jets, ejection seats, an onboard oxygen-generating system and outstanding external load capability.

The Super Tucano is used for advanced pilot training and for surveillance operations in the Amazon region of Brazil in connection with the Brazilian federal government’sSistema de Vigilância da Amazônia – SIVAM (System for the Surveillance of the Amazon) program. Since its first delivery in 2004 until December 31, 2009, 83

The Super Tucano is still one of the highlights of our defense and security business unit due to its versatility, its excellent performance for training, operational missions and its competitive pricing together with its low operating and maintenance costs. The Super Tucano currently has a backlog of 180 aircraft, and 150 Super Tucanos have been delivered since this aircraft was launched.

Throughout 2010, 35 Super Tucanos were delivered, six of which to the Brazilian Air Force, six to the Dominican Republic Air Force, eight to the Chilean Air Force and 15 to the Ecuadorian Air Force. In 2010, we

In December 2005, we received firm orders for 25delivered the 89^th unit out of the 99 Super Tucano aircraft frombacklog with the Colombian government and by the endBrazilian Air Force. We also completed deliveries of 2008 all aircraft had been delivered. In 2009, we delivered the first four Super Tucanos12 units purchased by the Chilean Air Force under a contract for a total of 12 aircraft, and the first two Super Tucanoseight units purchased by the Dominican Republic Air Force underForce. Recently, a contract was signed for a totalthe sale of eight aircraft. The first Super Tucano deliveriesaircraft to Indonesia, which represents the Ecuadorian Air Force, which has ordered 24 aircraftentry of the Super Tucano in 2008, are scheduled for January 2010.the Asia Pacific market.

Military Transport – KC 390KC-390

In April 2009, Embraer signed the KC-390 development contract with the Brazilian Air Force. This new jet will meet the needs of the Brazilian Air Force, and will be in compliance with the new National Defense Strategy. The aircraftfirst flight of the KC-390 prototype is expected to enter serviceoccur in 2015. Research2014, and development expensesthe initial deliveries are expected for 2016. Development expenditures associated with the KC-390 will be borne by the Brazilian Air Force.

The KC-390 development program is ongoing and on schedule. The main industrial partners and suppliers for this project are expected to be selected by mid-2011, when the joint definition phase commences.

The KC-390 program already has 60 purchase intentions: 28 aircraft for the Brazilian Air Force, 12 for the Colombian air force, six for the Chilean air force, two for the Argentinean air force, two for the Portuguese air force and two for the air force of the Czech Republic.

This jet will have a cargo bay equipped with an aft ramp to transport a wide variety of cargo, including armored vehicles, and will be equipped with the most modern systems for handling and launching cargos.

The KC-390 can be refueled in flight and can be used for in-flight or on-ground refueling of other aircraft. The cargo bay will allow configurations for Medical Evacuation (MEDEVAC) missions. The technical advances of the KC-390 include fly-by-wire technology, which lessens pilots’ work load by optimizing mission results and increasing safety and the capability for operating on short and rustic runways.

Government Transport Aircraft

We are marketing our wide line of commercial and executive jets, as well as derivatives of these airplanes to defense customers. For example, in 2007, we delivered one Legacy 600 to the Angolan government, and one ERJ 145 to the Nigerian government. In 2008, we delivered one Legacy 600 to the Ecuadorian government.

Another important example of our sales of commercial jets to defense customers includes our deliverygovernment and in 2009 of two modified versions of the EMBRAER 190 commercial aircraft to the Brazilian Air Force to serve as the presidential aircraft. These aircraft have a spacious and comfortable cabin, including space for meetings and a private area for the Brazilian president. These jetsIn 2009, Embraer also have special safe communications systems, and can carry up to 54 passengers and crew members. The nonstop range of these jets from Brazil’s capital city, Brasília, reaches any destination in South America, thereby offering great operating flexibility. In addition, in 2009 we delivered two ERJ 135s to the Thai Armed Forces for VIP transport and twofour Phenom 100s to the Pakistani Air Force.air force. In 2010, two other aircraft for the transportation of authorities were delivered: an ERJ 135 to the Thai Navy and a Legacy 600 to the government of Panama.

In addition to Brazil,these governments, our other governmentbase of customers operating Embraer jets for the transportation of government authorities includeincludes Belgium, Greece, Colombia, Ecuador, India, Thailand,Angola, Nigeria and Angola.India.

Other Projects and ActivitiesModernization Programs

We offer military aircraft modernization services and we currently have twothree ongoing programs contracted with the Brazilian Air Force.Force and Brazilian Navy. The first one, known as F-5BR, is focused on performing structural and electronics upgrades for 46 F-5 fighter jets. As the prime contractor, we are responsible for integrating the multi-mode radar, the advanced navigation and attack systems, and the enhanced self-protection systems into the existing aircraft platform. In 2010, we completed the delivery of 39 upgraded F-5 aircraft. The second ongoing contract, known as the A-1M modernization program, focuses on modernizing the AMX. The goal of this modernization project is to keep the fleet of 43 AMX jets on active duty for another 20 years.

Brazilian Navy Aircraft Modernization Program

In April 2009, Embraer entered into an agreement with the Brazilian navyThe third modernization program is to modernizeupgrade 12 of its A-4 Skyhawk aircraft. This is the first contract withaircraft of the Brazilian Navy and the upgrade will incorporatewith a view to incorporating new technology to those aircraft,for these aircrafts including new avionics, radar,radars, power production and autonomous oxygen generating systems.

Customer Service

In 2010, we continued to develop the training and operation support system to support operators of Super Tucanos, such as the air forces of Chile, Ecuador and the Dominican Republic. These training programs may include flight simulators, computer-based training, or CBT, Mission Planning Station, or MPS, and Mission Debriefing Station, or MDS. We also provided basic, advanced and instructor training sessions. In addition, in 2010 we provided training services for Thailand (in connection with the ERJ 145 jet family), Panama (in connection with the Legacy 600) and the Brazilian federal government (in connection with the EMBRAER 190-PR). A new contract of training support was signed in 2010 to support the operation of eight Super Tucanos sold to the Indonesian Air Force.

Competition

Our defense systems aircraft face rigorous competition from various manufacturers from different countries in each market segment.

The Super Tucano competes in the basic/advanced training market with the Pilatus PC-9M (basic) and the PC-21 (advanced) aircraft from Switzerland, the Beechcraft T-6A/B (basic/advanced) from the U.S., and the Korea Aerospace IndustriesIndustries’ KT-1 (basic). In the Light Attack market, the Super Tucano competes with the Beechcraft AT-6 and Korea Aerospace IndustriesIndustries’ KO-1.

In the special mission aircraft market, which includes Airborne Early Warning & Control, Remote Sensing, Airborne Ground Surveillance, Maritime Patrol, Anti-Surface Warfare and Multi-mission Aircraft, there are several platforms with a wide range of sensor combinations that compete with our products, namely,products: the Bombardier Global Express, Boeing 737, Northrop Grumman E-2C/D Hawkeye, Gulfstream G550, SAAB 2000, Alenia ATR 42 and 72, EADS CASA CN-235 and C-295, and the Bombardier Dash 8, among others.

In the military transport segment, our competitors include the Lockheed Martin C-130, the Airbus A400M, the Alenia C-27J and the CASA C-295.

Executive Aviation Business

We developed a line of executive jets: the Legacy 600, a super midsize jet, followed by the Phenom 100, an entry-level jet and the Phenom 300, a light jet. The Lineage 1000, an ultra-large jet, was added as the largest executive jet in our executive jet portfolio and, during 2008, we have launched the Legacy 450 and Legacy 500, a mid-light and a mid-size jet, respectively, that we believe will establish our executive jet portfolio as one of the most comprehensive of the executive aviation industry. The Legacy 450 and 500 development program continues on track, with more than 650 employees fully engaged in these projects, and the first flight of the Legacy 500 is planned for the second half of 2011. In 2009, we presented the new Legacy 650, a large executive jet that will be positioned in our executive jet portfolio between the Legacy 600 and the Lineage 1000. In 2010, the Legacy 650 received its certification and began operating in November 2010.

We are marketing our executive jets to companies, including fractional ownership companies, charter companies and air-taxi companies, and high-net-worth individuals. Our executive aviation segment accounted for 16.3%21.3% of our net salesrevenue for the year ended December 31, 2009,2010, resulting from the delivery of 1810 Legacy 600600/650 jets, 93100 Phenom 100 jets, one26 Phenom 300 jetjets, five Lineage 1000 and three Lineage 1000Embraer 190 Shuttle jets. On MarchDecember 31, 2010, our firm orders in backlog for our executive jets totaled US$5.54.7 billion.

The Legacy 600 shares important qualities with our regional jet platform. However, although the Legacy 600 has some of the same components of our airliners, such as the ERJ 135, the Legacy 600’s interior, fuel tank, controller and indication systems and its winglets differ from those of our airliners. The executive version of the Legacy 600 was certified by the Brazilian aviation authorityAviation Authority in December 2001, by the JAA in July 2002 and by the FAA in August 2002.

In May 2005, we launched the Phenom 100 and Phenom 300, which are executive jets in the entry-level and light jet categories, respectively. The Phenom 300 carries up to nine people and has a larger fuselage and wingspan and longer range than the Phenom 100. It is powered by Pratt & Whitney Canada’s PW535E engine and has entered into service in the second half of 2009. Pratt & Whitney Canada, Garmin and Eaton were our risk-sharingrisk-

sharing partners for this program. The Phenom 100 jet carries from six to eight people and is powered by Pratt & Whitney Canada’s PW617F engine. In the second half of 2008, the Phenom 100 entered into service.

In May 2006, we launched the Lineage 1000, an ultra-large executive jet based on the EMBRAER 190 commercial jet platform. The Lineage 1000 is configured to accommodate up to 19 people in a total cabin volume of 4,085 cubic feet (115.7 cubic meters), and is powered by GE CF34-10E7 engines. The Lineage 1000 has entered into service in the first half of 2009.

In April 2008, we formally launched two new programs in the medium jet categories, namely the mid-light Legacy 450 jet, with a 2,300 nautical mile range, and the mid-size Legacy 500 jet, with a 3,000 nautical mile range. Both programs were approved by our Board of Directors in March 2008. The Legacy 450/500 jets are positioned in our executive jets portfolio between the Phenom 300 and the Legacy 600.

In October 2009, we presented the new Legacy 650 jet during a press conference at the 62^nd Annual Meeting and Convention of the National Business Aviation Association, in Orlando, Florida. The Legacy 650 is a large category jet based on the successful platform of the super midsize Legacy 600 and will have a longer range for up to 14 passengers. The Legacy 650 willmay fly up to 3,900 nautical miles nonstop with four passengers or 3,800 nautical miles with eight passengers, that is approximately 500 nautical miles more than the Legacy 600’s range.

The competitors of the Legacy 600 and the Legacy 650 include aircraft produced by Dassault Aviation, Bombardier, Gulfstream and Hawker Beechcraft. Phenom 100 and Phenom 300 competitors in the entry-level and light jet categories include Cessna Aircraft Co. and Raytheon. Boeing and Airbus are the main competitors for the Lineage 1000 ultra-large jet.

We include an executive jet order in backlog once we have received a firm commitment, represented by a signed contract. We customarily receive a deposit at the time of order, progress payments totaling 15% to 30% of the aircraft price, and the full payment of the balance is due upon delivery. We generally receive between US$10,000 and US$200,000 for each option to purchase an executive jet.

Aviation Services Business

We provide after-sales customer support services for the fleetsfleet of our commercial, executive and defense customers. Activities in this segment include the sale and pool programs of spare parts, maintenance and repair, customer training and other product support services. Revenues for the aviation services segment accounted for 10.8%10.5% of our net salesrevenue for the year ended December 31, 2009. Our after-sales customer support and spare parts business falls into several categories:2010.

This business is expected to continue to grow as the number of our aircraft in service increases. Our customers require aircraft manufacturers and their suppliers to maintain adequate spare parts and ground support equipment inventories for a period of ten years after the production of the last aircraft of the same type, or until fewer than five aircraft are operated in scheduled commercial air transport service. We also established a pooling programprograms that allows customers to exchange used parts for new or refurbished parts.parts and total support programs like our EEC – Embraer Executive Care, a total care program that includes parts exchange and complete service and maintenance packages.

We expect to enhance customer support and services offered to the executive aviation segment. WeIn this respect, we have added four wholly-owned service centers since 2007, and are revamping the authorized service center network for executive jets. ByAt the end of 2010, we estimate that we will havehad 38 service centers to support our executive jet fleet. We also offer our executive aviation customers a total care program, known as “EEC – Embraer Executive Care,” which provides a comprehensive package of services. In 2006, we entered into an agreement with CAE to form a global training joint venture, which willto provide comprehensive pilot and ground crew training to customers of the Phenom 100 entry-level jet and Phenom 300 light jet aircraft. The initial training program has started to be offered at CAE SimuFlite in Dallas, Texas, as the Phenom 100 started to operate in 2008, and has expanded to Burgess Hill in the U.K. in 2009. This joint venture will provideprovides entitlement training and post-entitlement training for pilots, maintenance technicians and dispatch personnel. We also plan to continue to invest in parts inventory and logistics worldwide as well as in the improvement of our special maintenance programs forexecutive aircraft fleet continues to grow. In 2010, we expanded our support and services package to the Phenom 300 and the new Legacy 650, and also plan to offer itour services in new regions, particularly in Asia.

Other Related Businesses

We recognize revenues related to the selling or leasing of used aircraft to customers primarily through our leasing subsidiary, ECC Leasing Co. Ltd., or ECC Leasing. In addition, we provide structural parts and mechanical and hydraulic systems to Sikorsky Corporation for its production of helicopters. We also manufacture, on a limited basis and upon customer request, general aviation propeller aircraft, such as executive planes and crop dusters, also known as light aircraft. Our other related businesses accounted for 2.1%1.8% of our net salesrevenue for the year ended December 31, 2009.2010.

Subcontracting

We provide subcontracting services to Sikorsky Corporation in connection with the development and manufacture of the landing gear, fuel system and fuel tanks for the S-92 Helibus helicopter. We also act as a risk-sharing partner to Sikorsky. These contracts expire in 2015.

General Aviation Aircraft

We build general aviation propeller aircraft. These aircraft include a six-passenger aircraft that is produced only on demand for use by corporations and by air-taxi companies. We have delivered a total of 2,326 of these aircraft, and the last delivery of this type of aircraft was in 2000. We also developed a crop duster aircraft pursuant to specifications of the Brazilian Ministry of Agriculture. These aircraft are produced only on demand. Through December 31, 2009,2010, we had delivered a total of 1,0751,115 of these aircraft, including 3440 in 2009.2010. We had no crop duster aircraft in backlog at December 31, 2009.2010.

Aircraft Operating Lease Activities

In order to provide better financial support to our commercial activities, as well as to manage and reduce financial risks related to the marketing of aircraft, we created, in September 2002, two wholly-owned subsidiaries: ECC Leasing Co. Ltd. and ECC-Insurance & Financial Co. Ltd.

The mission of ECC Leasing Co. Ltd is to manage and remarket Embraer’s aircraft portfolio, which as a result of contractual obligations, may be acquired by us as trade-in transactions. We also provide re-marketing services to third parties looking to sell their Embraer manufactured aircraft.

The consolidated pre-owned aircraft business, through ECC Leasing Co. Ltd. in Ireland, has contributed accumulated net income of US$37.219.2 million since its inception through December 31, 2009.2010. Sales campaigns of new aircraft, where the acceptance of trade-in aircraft as part of payment were accepted, have been successfully completed. Additional revenues have also been generated through the sale and lease of aircraft received as trade-in. Furthermore, leasing operations, involving EMBRAER170, EMBRAER175 and EMBRAER 190 pre-series aircraft, contributed to the current results. During this period,Since its inception, ECC Leasing and one other Embraer wholly-owned subsidiary has managed a portfolio comprised of 79111 aircraft, of which 2530 are currently under operating leases, 1136 are currently available or under lease/sale negotiations, nineeight are currently performing flight tests at Embraer, and 3437 were sold to airlines, corporations and government entities in North America, South America, Asia and Europe. Of the 111 aircraft that have been managed by ECC Leasing and this other Embraer subsidiary, a total of 30 aircraft were acquired in 2010, a year in which ECC Leasing acquired 25 Citation Ultras as result of the exercise of trade-in options under an agreement executed with NetJets Inc., which were accounted as resale inventories, and another five aircraft from other customers.

All sale and leasing transactions were executed based on market rates, thereby helping to sustain the present and future values of our products. In addition, we continue to actively work with third parties to facilitate the placement of their aircraft.

The continued improvement in financial performance is directly related to ECC Leasing’s ability to re-market aircraft in its existing portfolio with similar conditions as those currently in place, as well as to sell aircraft to operators, leasing companies and/or financial institutions, at values close to market rates and without any guarantee from Embraer.

Furthermore, we believe the results of ECC Leasing Co. Ltd and ECC-Insurance & Financial Co. Ltd will be largely dependent on market conditions, aircraft availability levels and the demand for regional jets in the 37- to 50-seat category. Although new markets such as Eastern Europe and Latin America are important, the risks related to operator’s credit and asset repossession will continue to require an adequate financial evaluation by Embraer.

As more pre-owned aircraft begin to trade in the market, Embraer and ECC Leasing Co. Ltd. have created the “Embraer Lifetime Programme” to better support our customers. The program will allow customers to select from a wide array of services, including, among other things, training, spare parts, technical support, engine programs, technical representation, maintenance and overhaul coverage. Customers who opt into this program will pay us periodic fees, so that we can provide them with scheduled and unscheduled maintenance, support and repair services, among other things. The program will allow us to continuously improve the level of support we offer to our pre-owned aircraft customers. We believe this program represents an innovative approach, which offers our customers an attractive combination of pre-owned aircraft backed by Embraer’s comprehensive support package.

Markets

The following table sets forth our net salesrevenue by line of business and geographic region of the end users of our aircraft for the periods indicated.