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Boeing and Brazilian aircraft maker Embraer have agreed to form a commercial jet joint venture. As reported by Brazil’s Globo TV, Embraer has accepted Boeing’s offer to create a joint venture for commercial jets. The US aerospace giant had been in talks for a potential takeover of Embraer, but the Brazilian government made it clear that it would not allow the acquisition to occur if it involved the weakening of its control of Embraer’s military division.

The joint venture will not involve Embraer’s military division. But could potentially make a Boeing – Embraer aircraft possible.

Immediately following the report, Embraer’s shares rose 5%.

Neither Boeing nor Embraer did not immediately comment on news of the agreement.

At this point, it’s not known exactly what the effect of the deal will be. It could mean that Boeing helps market the new Embraer E2 family of aircraft, which cover the 100-seat market, in which Boeing does not have a real competitor. Its smallest products, the 737-700 and its successor 737 MAX 7, are larger and much heavier than Embraer’s 100-seaters, making them less fuel-efficient. And with archrival Airbus buying the Bombardier C Series jet program, Boeing risks losing out on a lucrative market for highly advanced jets that transport up to 150 people.

Alternatively, the new joint venture could produce a new aircraft for that market. It’s worth noting that manufacturing the aircraft in Brazil would be cheaper than in the US, and with a quality workforce already in place: Brazil has a rich tradition of engineering excellence in aerospace, and Embraer is already the biggest seller of regional jets in the world.

Featured image by Roslan Rahman / AFP / Getty Images.

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