Embraer formalizes military cargo aircraft sale to Sweden, latest in NATO push

By Gabriel Araujo

SAO PAULO (Reuters) -Brazilian planemaker Embraer tied up a deal on Monday to sell four military cargo planes to Sweden to replace the European nation's aging aircraft, the latest under a joint procurement program with other countries in the region.

Sweden will purchase Embraer's C-390 Millennium aircraft after selecting the model last year, joining an agreement led by the Netherlands which is acting as agent and representative for the other countries in the strategic partnership.

"Under that contract, the Netherlands added seven more aircraft for ally nations," Embraer's defense head Bosco da Costa Junior said in an interview. "This government-to-government process speeds up the purchasing process here in Europe."

Shares in the planemaker rose around 3% in afternoon trading, making it one of the top gainers on Brazil's Bovespa index.

The Swedish order also includes an option for seven additional aircraft, which analysts at BTG Pactual noted was a "positive surprise."

In turn, Brazil is expanding its fleet of Gripen fighter jets from Swedish planemaker Saab. Saab and Embraer have had a joint production line for Gripens in Brazil since 2023, with Costa saying the first made-in-Brazil Gripen should be delivered to the Brazilian Air Force early next year.

Embraer has been working to expand its defense footprint abroad, primarily through C-390 sales.

"We hope to have new announcements coming very soon," Costa said.

While Costa declined to name potential buyers, Brazilian Defense Minister Jose Mucio has suggested Finland and Turkey could purchase Embraer aircraft.

"Minister Mucio always says wise things," Costa said. "I hope he is right this time too."

U.S. AMBITIONS

Embraer has long been pushing to crack the U.S. market, though tariffs on imports of its planes could stymie those plans. While U.S. President Donald Trump exempted aircraft from a 50% tariff on goods from Brazil, they still face a previously imposed 10% duty.

The planemaker lobbied hard for tariff relief, especially after a U.S.-European Union deal was reached on aircraft.

As part of its pitch to be exempted, Embraer has floated building a $500-million U.S. assembly line for the KC-390, should the country decide to purchase the military jet. 

However, the KC-390 competes with U.S.-based Lockheed Martin's C-130 Hercules.

"We have been very vocal, saying clearly that we have every interest in assembling and building the KC-390 in the U.S.," Costa said. 

The executive had previously mentioned Northrop Grumman had the capacity to help Embraer develop the aircraft in the U.S.

"Maybe we can announce this partner to the market by the end of the year. That's what we're working toward," Costa said.

(Reporting by Gabriel Araujo; Additional reporting by Isabel Teles; Writing by Kylie Madry; Editing by Richard Chang)