By Jeff Mason FARNBOROUGH, England, July 23 (Reuters) - Brazilian aircraft manufacturer Embraer (EMBR4) (ERJ) said on Tuesday it had agreed an order with India's Jet Airways worth over $500 million and reiterated its delivery forecasts for 2002 and 2003. Jet Airways planned to buy 10 Embraer 175 regional jets and had taken an option on 10 more, Embraer Chief Executive Officer Mauricio Botelho said at the Farnborough air show. The sale, to be negotiated in the coming weeks, would be the first for the Embraer 175, a development of another of the company's regional jets, the company said. The order was valued at about $260 million and would reach $520 million if the options were exercised, the company said. Deliveries were due to run from June 2004 to 2007. The plane, which is expected to have its first flight in the first quarter of 2003, would typically seat 78 passengers. Its sister plane, the 70-seat Embraer 170, flew for the first time in February. Botelho said the company was focusing a lot of its energy on developing the new planes as it worked to strengthen its position in the regional and mainline jet market. "We trust that there is a fertile ground for such sort of aircraft," he said. The company reiterated it planned to deliver 135 jets in 2002 and 145 in 2003. It said earlier this month that it had delivered 30 planes to customers in the second quarter, bringing the total number in the first half of this year to 60. Embraer shares were down 0.28 percent at 14.50 reais in Brazil by 1644 GMT, outperforming a 1.26 percent fall on the benchmark Bovespa (BVSP). Botelho said he was confident that by 2004 regional aircraft deliveries would be back at levels seen before the September 11 hijacked-plane attacks on the United States depressed demand for air travel worldwide. Embraer said its order backlog -- to be delivered over the coming 10 years -- was valued at $10.1 billion as of June 30, while options were valued at $13.7 billion. "The problem is not production," Botelho said. WORLD DEMAND DOWN Embraer Executive Vice President Frederico Curado told reporters the company forecast that the industry would sell 4,100 regional jets seating between 30 and 120 passengers over the next 10 years. That outlook was down from 4,900 planes that Embraer forecast in 2001 for the following 10 years. "September 11 was a catalyst for this situation," Curado said. Nonetheless, Botelho said his company would be back on track earlier than the rest of the industry. "We are going to move ahead as we plan because our mix of products is different from the competition," he said. Separately, Botelho said German airline Deutsche Lufthansa AG (LHAG) was considering planes from four manufacturers after dropping its order for 60 jets from insolvent German planemaker Fairchild Dornier. Lufthansa also had options on 60 additional Fairchild Dornier planes, which are similar to the Embraer 170 and 175. A Lufthansa spokeswoman declined to comment on who it was talking to about the jets. Embraer is the world's fourth-biggest commercial aircraft manufacturer. ©2002 Reuters Limited.