Frederico Curado - President and CEO José Filippo - Chief Financial Officer and IRO Eduardo Couto - Director of Investor Relations.

Myles Walton - Deutsche Bank Turan Quettawala - Scotia Bank Stephen Trent - Citi Pete Skibitsk - Drexel Hamilton Alexandre Falcão - HSBC Cai von Rumohr - Cowen and Co Darryl Genovesi - UBS Derek Spronck - RBC Capital Markets

Good afternoon, ladies and gentlemen and welcome to the audio conference call that will review Embraer’s Fourth Quarter 2015 Results, 2015 Annual Results and 2016 Guidance. Thank you for standing by. This conference call is being held during the Embraer Day in Brazil with the presence of investors and market analysts. At this time, the company will present its fourth quarter 2015 results, 2015 annual results and 2016 guidance. Afterwards, we will conduct a question-and-answer session and instructions to participate will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded and webcasted at ri.embraer.com.br. This conference call includes forward-looking statements or statements about events or circumstances, which have not occurred. Embraer has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the business and its future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things, general, economic, political and business conditions in Brazil and in other markets where the company is present. The words believe, may, will, estimate, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements. Embraer undertakes 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 on this conference call might not occur. The company’s actual results could differ substantially from those anticipated in the forward-looking statements. Participants on today’s conference call are Mr. Frederico Curado, President and CEO; Mr. José Filippo, Chief Financial Officer and IRO and Mr. Eduardo Couto, Director of Investor Relations. I’ll now like to turn the conference over to Mr. José Filippo. Please go ahead, sir. José Filippo: Okay, thank you, good morning and good afternoon. Welcome to Embraer financial results call. As usual, we’ll go through the presentation and after that will be open questions from the audience here and also from people outside. So planning to start with presentation in Page 3, with the highlights, financial highlights for the year. We had as we anticipated in some quarters before our record ever backlog of $32.5 million in the end of the year. Free cash flow generation here of $178 million. Net cash position as of December of $7.2 million and revenues of $5.9 billion. Also we had an important non-recurring event which was the filing of Republic Airway Chapter 11 which led us to record provision of $101 million that impacted the results, we will give more details during the presentation and we showed the figures also whether we can [Indiscernible] that impact. Now in terms of result, we reported the EBIT of $332 million with a margin of 5.6%, adjusted for the Republic impact; it would be $432 million and a 7.3% margin. In terms of net income, reported a $69.2 million of profit and without the Republic $372 million. Moving to next page, starting the highlights for each business units and first commercial aviation for the year 2015, we had delivery of 101 E-Jets and net firm orders for 155 airplanes in 2015. This returns into a book to bill ratio of 1.5, very important for the company and a big highlight for this business. We added new operators in 2015 and also in the end of the year we reached the trademark of over 70,000 [ph] aircraft delivered in the E-Jet program. Also, an milestone of the E2 development program was the role of the first E190 which happened last week. Next page still in commercial aviation but more focussed on the fourth quarter. We had the deliveries of 33 E-Jets in the quarter including the delivery of the aircraft number 1,200 for Azul. Regarding new orders, we had the SkyWest order for 19 E175 that we fly for Delta and the options, two options confirmed by KLM Cityhopper which will be actual confirmed in the last quarter. We are also finalizing the highlights of the commercial aviation, another commercial related to the E2 development was the successfully started off the flight test of the new engines. Moving to next page, highlights for Executive jets engineer. In 2015, we delivered 120 Executive jets broken by 82 Light and 38 Large jets and as also we have in the commercial aviation the book-to-bill ratio was there positive as well there. We had a 1.1 ratio in 2015 book-to-bill for executive jets. Regarding our programs, the Phenom 300 was again the most delivered aircraft in the Executive jet business in the year. This is now two years in a role of that performance. Finalizing the highlights for Executive jets, the program of the Legacy 500 and 450, we had the certification in terms of service of the Legacy 450 in the end of 2015 which we delivered last year. Next page in terms of the fourth quarter had a delivery of 45 Executive jets, 25 light and 20 large. In terms of commercial activities, we had the order for Emirates flight training academy for 10 Phenom 100 and also the delivery of two Lineage 1000 in the U.S. market. Also in the fourth quarter as we mentioned the Legacy 450 entered into service and we will deliver three aircraft in that quarter. Next page, Defense for 2015 regarding the KC-390 program we -- first flight of the KC-390 happened in the early last year in February and now this plane is in certification process over the 100 hours of flight in this process. In terms of commercial activities, we reached 15 deliveries of the total of 20 order for the United Air force, U.S. Air force, 11 of those delivered last year. Regarding the Grippen program we already started the works in Brazil and Sweden and we now have 46 engineers working in Sweden in the preparation of the program. Finalizing the defense highlight the Sisfron project advanced and reached over 50% of execution. Next page, fourth quarter for defense an important order of six Super Tucanos for the Lebanese Air force and in relation to the defense programs, Atech completed its first phase of air traffic management system to be implemented in India and the Brazilian Geo Stationary satellite began the integration in testing phase. Completing the highlights, the U.K. Armed forces select the Phenom 100 to train their crew. Okay, now with that we close the highlights and we are entering the financial results, starting in page 11 with the backlog, as we already mentioned we have the $22.5 billion in the end of December, a record ever of the company in the year end position, a little bit broken by 7% of that amount related to commercial aviation, 21% related to defense and 9% for executive jets. Next page, as far as deliveries we had already mentioned there were 101 deliveries for E-Jets in the year and 120 aircraft delivered in those executive jets broken by 82 light and 38 large. Next page, net revenues reached a total of $5.9 billion in 2015 within our guidance range. And your next page, spot on here a bit more details on the revenues break down by segment and region. In terms of segment, the reduction in defense revenues was related to the dollar appreciation in 2015 and out of the represented last year actually 13% of the revenues from 23% since 2014. We saw a participation of 56% of commercial and 30% of Executive jets in terms of the revenue breakdown. When you go to the right side of this page, by region the highlight is 65% delivered to the North American market base related to the orders and deliveries to United States. The next page revenues by segment, our business reported the revenues within the guidance range but the negative highlight was the defense revenues as we mentioned before due to the weaker Brazilian real that produced its participation here, basically this is the breakdown by segment. Next page, just to SG&A expenses. SG&A expenses page 16, a positive reduction reported in 2015 in both U.S. amount in percentage of net revenue reaching 9% of revenues in 2015 that confirms our focus in commitment to really reduce the cost and take the opportunity as we can in terms of adding value and creating positive results for the result in terms of expenses and costs. Next page, page 17, just the information broken by quarter, the SG&A expenses and we see how to worked -- it’s almost the same trend throughout the year. I mean Brazilian reais and in U.S. dollars. Next page, page 18 and here’s until I break a little bit more because of the impacts that we had here. We reported a total of $332 billion with a margin of 5.6%. December was negatively impacted by a non-recurring event of the mentioned Chapter 11 of Republic areas and excluding that amount the EBITs would have been $432 million with a margin of 7.3%. But also as we indicated and we mentioned that when we reported the third quarter results, there were risks that could prevent us to reach the guidance range by year end or at that in that moment we indicate that we will be targeting the lower end of the range and in fact those negatives impact actually happened, which were the impairment of U.S. and their aircraft coupled with the cost being [Indiscernible] in defense due to the devaluation of the real in the end of the quarter and especially in the middle of last, the last quarter of last year. If we take those effects out in a pro forma basis, we would have been reporting EBIT of $494 million an 8.3% margin in 2015. Next page in terms of EBITDA the reported amount of $648 billion with a 10.9% margin excluding the non-recurring Republic effect, the amount would have been 749 with a 12.8% margin. In terms of net income, next page, page 20 we reported a $69 million net income with a 1%, 1.2% margin. Here the two important effects that we would like to detail and adjust on the calculation. The first event was the Republic effect as we already mentioned and the other was the devaluation of the real that causes to have a income tax deferred income tax where we had that thing during these quarter, but in this quarter we also had and the combination of everything return into the year impact. So if we return to those non-recurring effects, the net income would be $272 million with a 4.6% margin. Next page, earnings paid for ADS reported $0.38 per ADS with a 49% payout as we have been anticipating by quarter dividends because of the adjustment in the end of the year for the Republic effect. It returned from a higher payout which was 49%. But if we adjust for the Republic non-recurring effect the earnings per ADS would be $1.49. Next page, page 22 in relation to investments we had a total of $518 million in 2015 broken by $42 million in research, $288 million development and $188 million in CapEx. The weaker real was the main reasons for the reduction compared to our guidance, as we already continued the programs and investment phase for the program as we expect. Next page, 23, free cash flow, we had a positive free cash flow of $178 million in 2015, primarily due to the strong cash generated in the last quarter as a consequence of lower investment and working capital reductions, so we managed to have in the total year $178 million with $895 million generated by operating activities, $290 million negative of additions to PPE and 428 in tangible assets additional negative due to the investment in the programs or development of our programs. Next page, before we talk about the guidance 2016, our capital structure, we reported a net cash of $7 million in December 2015, coming from net debt in previous quarters. In relation to our debt, it is still very comfortable and adapted to our profile, which has maturity average of 6.2 years. With that, we finalized the results and we now get into the presentation of the 2016 outlook. Page 26, outlook for revenues, consolidated revenues estimated in the range of $6 billion to $6.4 billion, which include Commercial Aviation $3.45 billion to $3.65 billion in 2015, Executive Jets $1.75 billion to $1.9 billion, defense $0.70 billion to $0.75 billion and Other revenues $100 million. That’s sum up to the $6 billion to $6.4 billion. In terms of percentage that represents 57% to Commercial, 30% for Executive and 12% Defense. In terms of deliveries for Commercial Aviation, we estimate deliveries in the range of 105 million to 110 E-Jets in 2015 and in terms of Executive Jets, 115 to 135 airplanes, broken by 75 to 85 light jets and 40 to 50 large jets. The next page, operating results and investments. Our forecast for EBIT in the range of $480 million to $545 million, with an EBIT margin of between 8% to 8.5%. In terms of EBITDA in the range of $800 million to $870 million, with an EBITDA margin from 13.3% to 13.7%. Free cash flow is expected to be a use of less than $100 million and regarding investment, total of $650 million is broken by $50 million in research, $325 million in development and $275 million in CapEx. With that, we finalized the presentation and now we are ready for the questions. We will open now for the audience first. But the people outside they can also put the questions and we are ready to answer. Thank you. Q - Myles Walton: Thanks. Myles Walton, Deutsche Bank. Could you touch on the margins in the fourth quarter by segments in particular within the area that seem to be the biggest surprise business, Executive Aviation and touch on what the effect is of any trade-ins and kind of what the underlying clean margin would have been in Executive Aviation?

Yes. In terms of margin for 2015, we have 10.4% in commercial, 3.4% Executive and a negative 11.5% for Defense. It’s good to be called that Commercial Aviation or it is reflect the impact of the Republic provision, so without Republic provision Commercial will report 13.4% margin.

So, the question is on the Executive Aviation is at 3.4% and I imagine that means, the fourth quarter was pretty low. Can you touch on what was driving that in the fourth quarter?

Yes. In fourth quarter we have situation, though we had a number of tradings larger than nobody had, that impacted, because some of those tradings were most of them not our aircraft, so we have situation in this quarter. So, we use when we sold those used aircraft and recorded or sold the recorded impairment of them, that return in the end of year a provision, so that’s mostly was impacted the last quarter of Commercial or Executive Aviation. José Filippo: Mark, to your question, we have this list of used aircrafts. Many of them were not Embraer made. We prioritize reduction on inventory and cash generation. Operating margin drop I think close to zero in the Executive Aviation fourth quarter.

0.5%. José Filippo: Just to clarify if the margins, the business for the quarter we had 6.3% margin on Commercial Aviation that include the Republic impact, if we exclude the Republic impact margin, EBIT margin for Commercial was 15.3%. On Business Jets the margins were 0.5% in the fourth quarter. On the defense and security minus 5.5%, consolidated margins 3.2%, excluding Republic 8%.

Okay. Just to wrap up that line of question, I mean, what left in your growth of non-Embraer aircraft and inventory that you have liquidate? And what’s implied in your 2016 guidance for the Business Jets margin profile?

Yes. I think its pretty much [Indiscernible] used aircrafts, I would not know by heart how many airplanes we had in inventory, but its much, much lower than what we had because as we concentrate to deliver the fourth quarter we have this concentration also for tradings and we decided to move them quickly. Looking forward, looking towards 2016, our guidance, I mean, we have historically resisted market share versus margin, so we always favoured margin and cash generation vis-à-vis market share. So it’s listed in our forecast for next year. We probably could think about a little bit higher volume. We believe the volume that we are setting is more adequate to resist the pricing pressure which there is out in the market. So, combination of better organized rampart, a relatively lower, then it could be volume, its going to be higher than 2015 annually, but maybe somebody could argue, it could be a higher volume. That would give us pricing power. That will give us more resilience against pricing pressure and also trading which in the end historically should left several months have shown the secondary market should be a little bit depressed. I would just add that we still are positive on the U.S. market which is the market which is fundamentally is demanding Executive just right now. What we have seen in this first 60 days of the year is due to the volatility of the markets we have seen a delay in decisions of our traditional Executive Jets aircraft. Is that something – is that a trend? Maybe not, not necessarily but [Technical Difficulty] [Indiscernible] skyline I can tell that it is better than what we have last year, so, but [Indiscernible] business aircraft market.

Hi. [Indiscernible] smaller plays being important player also TSA, right, the business on [Technical Difficulty] [Indiscernible] So the major airlines do depend upon the regional airlines, so I think it’s definitely important part of their business model to buy CPAs from the regional airlines to fly these smaller jets. So, regional airlines fly regional jets, smaller jets much more efficiently than the majors would do, so that is an integral important part of their business plans. Regarding Republic, my take on the Republic is that -- very important for America, for Delta and for United Republic nowadays operates about 250 aircraft. When we talk to the three major airlines, so they like Republic, they believe Republic; they have a very good service. They have, I would say, a cautious structure which is okay. Of course now they will have to renegotiate the CPA given the pilots issue, right. But the pilot issue, the pilot, I would say, the pilot request for increasing salary, so this is not owned on the regional line, so this is across the board in the USA given that airlines are making money right in the U.S. now. So, apart from that both has a very good service, good reliable about service and perk is very important, so it has a meaningful wide business for these airlines. So I believe Republic do survive, I believe I don’t exactly which format Republic will take going forward. But I believe Republic will be a survival, give the importance of Republic in the system. I also believe that same consolidation in the regional airlines in the U.S. maybe necessary, so going forward, so we are seeing they may just very strong, and we are seeing some regional not very weak but somehow little bit in need for Moscow in order to negotiate be in a better position to negotiate within a years.

Thanks very much. Related question just relate -- pertains to your mix on the commercial side, you did have a very good evolution in terms of your E175 that we saw decline in the order, E190s and E195s and could you give us some sense of first off, what’s build into your numbers, your forecast for 2016 and when we might see a recovery in demand for the E190 and E195? Thanks.

For 2016, so the book of our deliveries will be in the United States, it’s the [Indiscernible] E175 of course. There would be also some 190, 195 outside the U.S. but by far the book will be in the U.S. We are seeing good demand for the 190, 195 outside the U.S. We are involved in transactions that involves the two right types. And we are -- I mean for both E1 and E2. So when we look our sales last year 176 aircrafts were sold last year, right. When we look at that, so we see a very good combination of 190s, 190 family and 175, also good combination E1s, E2s, so I think we are to be continue to see a good market, of course a good market for our market size, right so we are talking about the segments between 70 and 130.

Thank you. Turan Quettawala from Scotia Bank. My question on the D&A segment. I’m just wondering was the total base revisions were in 2015 on that segment. What the BRL assumption rate for 2016, and I guess how do you expect the cost base divisions to flow through in 2016? José Filippo: In terms of 2015 it was about $130 million an impact. As we said that there was not the only impact there. This is one of the major of course. There were, of course, lot of revision of the problems that we had last year. For this year this cost growth which is devaluation of Brazilian Real although it’s still we cannot anticipate, but we don’t see the volatility we had last year. So, maybe this is still be something that we have to consider and to be aware of, but we don’t expect to see in that situation we had last year. It’s more now to really focus on the development of programs and cost in terms of discipline in terms of cost, it’s more likely we see -- I think the problems are already adjusted for the base that we agree with the customer in that case basically that’s what we’ll expect to see this year, the same situation.

So if the cost base division is zero in your guidance, embedded in your guidance? José Filippo: Yes. That’s we work on the flat exchange rate.

Thank you.

Good afternoon guys and thank you for the time. It’s Stephen Trent from Citi. Just one or two questions if I may. First is I was wondering in the commercial segment, are you seeing any shift so to speak when you think about your competitors with respect to the amount or maybe the undo amount of how that some of your competitors are getting from their home government. And I’m wondering if you’ve noticed any difference in that over the last year? And that’s my first question.

Some competitors, one specific, they’re not on hemisphere. Yes, of course we’re watching that closely, I mean, following at we do not have any other information other than what we read in the press. It is of course the matter of concern that not just showing balance maybe introduced in the marketplace. We of course are not the position to say that the state is gain done in adequate or inadequately, we have to wait and see. It is equity as we had seen probably something within the framework of the WTO [ph] Brazilian government is already following up this development. And there has been great discipline since the panels [ph] in the last decade, which affected Brazil and Canada, but also it’s followed by U.S. and also signatory of the ASU, Aircraft Sector Understanding. So we have not seen in the last several years, probably a decade any of disrespect to sales finance. What you see now, $2.5 billion investment something new we are watching. So, and you may recall our last capital increase was back in 2000, so we have not increase our capital for the last 16 years. Fundamentally, finance our development, our strong R&D and CapEx with cash generation of the company. And we – that’s how we plan to continue to do.

Great. Thank you very much, Freddie. And just one other question for now, when I think about the defense segment what seems to be very successful deployment of the A-29 programs by the United State in Afghanistan, to what degree do you think there is possibility with other foreign militaries are maybe taking look at the product?

Yes. I absolute – yes, we are very bullish on A-29. A-29 is a Super Tucano. Very bullish this aircraft has been, I think very well specified. Spec for very good done by the Brazilian Air Force and I think Embraer also did good job in developing and producing superior aircraft for that mission. The U.S. Air Force is a huge endorsement to the product, so the first collateral results of our 20 aircrafts order for the U.S. Air Force, out of which how many have you deliver at Jackson [ph], 16?

16.

And we have I think 8 already in Afghanistan delivered 11 on order, so that came as a results of that operation in Jacksonville, We have produce also in Jacksonville, so there is second trench, second patch for the U.S. Air Force which we hope maybe with the concerned, we don’t have that information yet, but that’s our expectation. And we believe that out that facility, out of Jacksonville we may actually have a strong export, because for the wrong reason and unfortunately the world have more and more cost rates which are typical requiring aircraft of that size and that agility and that low cost offer. So we are bullish. Jackson in his presentation we have detail how spread our customer base is becoming in A-29

Very helpful I’ll get back in the queue. Thank you very much.

Pete Skibitsk, Drexel Hamilton. Just curious how conservative your free cash flow guidance is for 2016, if the Real stays where it is, is there another opportunity to undercut on the development expenses and if you could imagine capital and is there an opportunity to outperform a free cash?

Yes. I think what we saw in 2015 was the phase of investment was pretty much related to the labor and engineering phase, so the exchange rate has a lot without effecting the development capacity. I think that there’s still an opportunity that you may have. However, now we enter in different phases of the development more related to dollar denominated costs of the development, so I think this will be something that could be very clear that’s going to be impact, but you have to understand the difference between what we faced last year and this year following phases of the development. José Filippo: Maybe just following you on that question probably could benefit us everyone. We have assumed the flat exchange rate of 3.9 Real per dollar, so the plan that you see in front has this assumption.

Is there any good meaning cash payments on the KC-390 or Other Defense programs that are still awaiting from the Brazilian government or is that customer called up in all that [Indiscernible]?

Not all. But we have, as we said mid last year, we would make a strong effort not to let accounts receivable increase and we did that. Actually, I think there was a little bit of an increase. But it was to a large number there, not accounts receivable from the government. So this first 60 days we did receive payments regarding KC-390. We of course are aware of the increasing difficulties of the Brazilian budgets, recent announcement of further cut in the budget, which we do not know whether or not it’s going to affect our programs. But we are much more prepared to face this situation now than we were let’s say, 12 months ago when we were really hit without much advanced noticed. So, again, what you have already presented represents a 3.9 real, if the real further devaluates to 4, 4.5, of course that’s going to impact the Defense business again but probably to a much lower extent than we anticipated we had last year.

If I could sneak one last on segment margins. In 2016, commercial seemed to be doing really well even at worse mix for the 175s. I’m just wondering kind of what you are assuming in your EBIT margin guidance, especially Defense, are we assuming breakeven on Defense in 2016 or just wondering with the calculations there?

Yes. I think probably, we can think about the commercial jets, again, pulling the average upwards, probably again, low single -- low double digits for commercial. Defense from low to mid one digit margin and Executive Jets from mid to high single digits margins, that’s roughly what we would expect averaging our this 8.5% that we represented. We’ve had some questions from the broadcast.

Thank you. [Operator Instructions]

Go ahead, Alexandre. Alexandre Falcão: All right. This is Alexandre Falcão from HSBC. I have a quick question regarding the backlog. Given everything that’s going on with Republic, do you believe that there is any risk in terms going forward beginning 2016, perhaps with decrease in the backlog or do not see any risk? And furthermore, second part of the question would be, is everything that’s going on, does that create any risk in terms of deliveries looking forward for 2017 or you are trying to bridge the gap, just want the detail?

The first part of the question, so Republic deliveries backlog. So, we have this year 9 deliveries to Republic from August to December and we have 15 additional next year and all of them in connection to our contract, CPA agreement between Republic and the United Airlines. So, United has a big need for this aircraft. So it’s being set right by United whether do they do need those aircraft. So being Republic or being other regional airlines, so we believe that we will deliver this aircraft. So it is a still little bit early stage to say what will be the structure or the format once the Chapter 11 was filed last Friday, right. But we are working on this now and as the next delivery is now with only, so we had enough time to structure something. But I’m very confident that this aircraft will be delivered given the need that United has right on them. José Filippo: I think it is fair also to add that Republic has already, represent as well. They do want the aircraft. The question is whether or not which format, we will be able to deliver. But I think the first question was related to that. We do not see airplanes exiting at Republic fleet. I actually do not see them, even waiving the deliveries that they have in backlog. So, we really believe those airplanes will be delivered, hopefully to Republic. But if not, I think alternatively, we will show up because the airplanes are meant, they are bagged to fly for United and American. In this case, just United, but also American is not a part of their contracts. Hello.

Important to mention that Republic restructuring is all about the 50 seater, so it’s not at all about a 76 seater. So there will be a signal aircraft operator by going forward. That’s where they find that it will be more quite efficient but going forward now given the pilot issues of flying a slightly bigger aircraft. Alexandre Falcão: All right. Thank you.

Now, we are going to take question from the phone.

Certainly. Thank you. Our first question comes from the line of Cai von Rumohr from Cowen and Co. Please go ahead.

Yes. Thank you very much. So, Fred, you said you expect double digit, low double-digit margins in commercial but looking at your guidance it looks like the margin would be down in commercial from 13.4%. In 2015, you had very good margins in the fourth quarter. You look for higher deliveries and you say the mix is about the same. Why are the margins down? Are you assuming any residual value guarantees in there or why do they appear to be lower?

No, not average here, probably mix. We still have in 2015 some E190, 195 contracts, which helped to boost the margin up. So, I think, fundamentally, it makes in all those specifics. José Filippo: It’s always based on mix, so not only more 190s, 195s in 2016 but also very good margins which have been specific about deliveries.

Excellent. And then the last one. You talked a little bit more in your release about the FCPA investigation and your negotiations with the DOJ. Is it your hope and expectation to kind of resolve that matter in this next calendar year?

We don’t really have any specific comments. I hope, yes, expectation. No. I mean, we cannot have any expectation. We have to abide by the disclosure that we have made. So the only thing we can keep collaborating in full and waiting for the results.

Terrific. Thank you very much.

Thank you. And your following question comes from the line of Darryl Genovesi from UBS. Please go ahead.

All right, guys. Thanks for the time. Just looking at your margin profile from 2015, I think you said excluding the used inventory charge and excluding the adjustment of the Defense business, you did about 8.3% EBIT margins in 2015. And your guidance overall would have been relatively flat margin profile in 2016 from that level. And just wondering, if you are counting on real at 3.9 reais per dollar, which is where we are today, that still embeds a 15% to 20% weakening relative to the average level from 2015 and just wondering why we are not seeing any incremental margin upside as a result of that?

Well, there is a combination of variables. Defense for example, we are having a further reduction in activity and of course, the more you reduced revenues, the harder it is to lower the fixed costs. We just explained also about a slight reduction in commercial jets, although it is robust two digit margins. So the combination that we are in, we hope to have some recovery on business jet. So, I think the effect of real is more pronounced in a cash flow, specifically on the R&D. That’s engineering part of R&D expenses. But as Filippo said that also in 2016, you have higher dollar denominated expense portfolio because of the flight test campaign, tooling, et cetera. So, I guess it’s a combination of several different things.

Thanks for that. Fred, just as a follow-up, it may be a little bit bigger question on roughly the same topic. Historically, we’ve seen a very high degree of correlation between your EBIT margin you reported and the real dollar exchange rates. But that correlation seems to have broken down the cycle, not just in 2016 but basically since kind of 2008, 2009. Should we sort of think of you longer term as a beneficiary of a weaker real, or does the downsize at the Defense business, essentially offset any gain that you get at the commercial and Executive Jets business?

I think we really tend to look at exchange rates as a tailwind or as a headwind, not as a definition of our competitiveness. We are for example moving the whole of [Indiscernible] to the United States to a higher cost, labor cost environment because we believe this makes all sense, strategic sense, supply chain, logistics sense, risk, et cetera. So, we see our business as a global one. We see Embraer and its endeavor to become more and more a global company and it’s not by arbitrating labor costs, which as everyone knows is not a significant part of the costs of supply chain equipment. It is the significant portion of our part of our any OEM COGS. So that’s how we see. So, yes, the real, the weakened real is a tailwind. It’s welcomed. It’s not what defined our competiveness. We have to be competitive regardless of the stronger or weaker real. We were in an upside situation three or four years ago and we were competitive and we are now so. But we have benefited, yes, from this devaluation.

Great. Thank you.

Thank you.

We will come back to the analysts here, question. Yes. Okay. But then I think there is time to finish this piece of the event today. So, we will be ready now to go to the presentation of each business. I don’t know if I have to turn back to the Founder.

Are we done with the conference call? We may have time for one more question. And we will take the final question and conclude the Q&A if there is one. Operator?

Thank you. We have a question on the phone and it comes from the line of Derek Spronck from RBC Capital Markets. Please go ahead.

Thanks for taking my question. When we consider your CapEx spend levels over the next few years, would you consider 2016 as the highpoint of your annual CapEx spend, the Legacy 450 pipelines that are now launched and should we start to think about it coming down in 2017 and beyond?

With the current programs probably maybe ’16, maybe ’17, will still be significant. But you are probably right under the existing programs.

Okay. Thanks. And just quickly on the KC-390, are you seeing any increase in international demand for that program?

We’ve seen a lot of interests. Many airlines -- sorry, many air forces visiting and taking questions and getting acquainted with the product. The second prototype will join the flight test campaign very soon. The airplane’s flying really well. I think Jackson is going to talk about it in a minute. So, we are all set to go to have this airplane certified by end of next year and start delivering units in 2018, so far so good.

Okay. Thanks.

Okay. I think we have the last question here in the audience.

The analyst from [Indiscernible]. If you could talk about cash flow generation 4Q, so you had sort of a positive number and you said that you reduced CapEx maybe by $100 million. Was there any other effect that you could think?

Okay. Basically, the fourth quarter is the most active quarter where we have a lot of activity and most of deliveries are concentrated, if you take the speed by quarters. So that is exactly what happened last year again. But that combined with -- there is a combination of that with the low investment, not that we didn’t invest in terms of the advance of the programs. It’s more like an opportunity and because of the exchange rate that effected positively there. There were working capital gains as well. We realized there in terms of an advance from customs because of the sales increase and we were able to reduce use of inventory if you compare to the end of ’14. So it was a good combination that we had but basically, it didn’t change in terms of the pattern that we see, which is more activity in the last quarter of the year. That’s basically why you see cash generation positive in the last quarter.

Thank you.

Thank you. That concludes Embraer’s audio conference for today. Thank you very much for your participation. Have a good day.