Czech Republic in talks to buy Embraer military cargo jet

By Jason Hovet and Gabriel Araujo

PRAGUE/SAO PAULO (Reuters) -The Czech Republic said on Tuesday it had started talks with Embraer on the possible acquisition of two C-390 Millennium military transport aircraft, lifting shares of the Brazilian planemaker.

The move comes after neighbouring Austria tapped the C-390 Millennium to refresh its fleet in a possible joint order with the Netherlands, underscoring demand for the new aircraft aimed at replacing Lockheed Martin’s Hercules C-130s.

Embraer shares rose more than 1.5% on the news, among the top advances on Brazil’s benchmark stock index, which was near flat.

“The ramp-up of C-390 deliveries are an important aspect of our overweight-rating on Embraer,” analysts at JPMorgan said. “Moreover, the increased backlog bodes well for our expected margin improvement in the segment during the coming years.”

Embraer and the Czech government did not provide details on pricing, but JPMorgan estimated the potential order to be worth around $240 million.

The Czech Defence Ministry said it wanted to negotiate the shortest possible delivery time for the aircraft, which it noted could be used for evacuations from crisis areas.

The Czech Republic, which is ramping up defence spending to meet its NATO commitments, currently lacks aircraft in the niche for medium and long haul flights.

Embraer had been long courting the country for an order as the company’s defence unit aims to expand its footprint abroad.

“The C-390 Millennium is drawing the attention of several nations around the world,” Bosco da Costa Junior, chief executive of Embraer Defense & Security, said in a statement.

He had told Reuters last month that the company was in the “final stages” of talks with multiple countries to place orders for the aircraft.

The Czech Republic is lining up to be the fourth NATO country in Europe with the C-390 in its fleet, following Portugal, Hungary and the Netherlands. Sweden and Austria are among non-NATO nations also discussing possible acquisitions.

Brazil’s armed forces already operate the plane, which has drawn interest as far away as India and South Korea.

(Reporting by Jason Hovet and Gabriel Araujo; Editing by Alison Williams, Susan Fenton, and Deborah Kyvrikosaios)