June 13, 2017 / 2:47 PM / in a year

Embraer nears sale of five military cargo jets to Portugal-sources

RIO DE JANEIRO, June 13 (Reuters) - Embraer SA expects to reach terms on the sale of at least five KC-390 airlifters to Portugal within three months, landing the first foreign order for the new plane with a NATO member country, two people familiar with talks said on Tuesday.

The Brazilian planemaker is in negotiations that are in various stages with around ten countries, including Sweden and New Zealand, for the military cargo jet, according to the sources, after six nations showed formal interest during early development.

The Brazilian Air Force has ordered 28 of the aircraft for 7.2 billion reais ($2.2 billion), with two deliveries set for 2018 and three in 2019.

Among foreign governments, talks with the Portuguese are the most advanced after Lisbon authorized negotiations for five KC-390s, the sources said. One said there may be an option for a sixth KC-390 focused on domestic firefighting missions.

Common shares of Embraer rose 0.6 percent to 15.75 reais in Sao Paulo trading, trimming year-to-date losses to 0.5 percent.

“Embraer does not comment on potential sales,” the company said in a statement.

The new cargo jet represents a bid by Embraer to take a bite out of a military transport segment long dominated by the workhorse Hercules C-130, made by U.S. aerospace firm Lockheed Martin Corp.

Embraer has previously forecast a market worth over $50 billion in the coming decades to replace more than 700 older Hercules aircraft, some of them in service since the 1960s.

Portugal, a founding member of the North Atlantic Treaty Organization, was one of the first countries to express interest in the KC-390 in 2010, along with Argentina, Brazil, Chile, Colombia and the Czech Republic. Embraer’s Portuguese subsidiary OGMA has helped to build the jet’s fuselage and other parts.

Chief Executive Paulo Cesar Silva said last month he was “very confident” Embraer would get its first KC-390 order from outside of Latin America this year.

In April, Embraer’s defense unit head Jackson Schneider said the KC-390 could yield the company $1.5 billion in annual exports once the jet enters service next year.

$1 = 3.32 reais Writing and additional reporting by Guillermo Parra-Bernal and Brad Haynes; Editing by Bill Rigby and Bernadette Baum

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