Boeing and Embraer Within Weeks of Deal: Report

Jun 13, 2018

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Boeing may soon have a 100-seat regional jet to sell around the world. The catch: It’s not really a Boeing — it’s the Embraer E2, which it is close to buying from the Brazilian company.

Fresh on the heels of Airbus closing the acquisition of the Bombardier C Series program, Boeing and Embraer are poised to announce their own deal for the US company to acquire the Brazilian planemaker’s commercial jet operations, according to a report from Bloomberg late Tuesday. That would give Boeing a product in the 100-seat regional airliner market, to compete with Airbus’s newly-acquired C Series.

Sources told Bloomberg that Brazilian President Michel Temer has “endorsed the partnership in principle”. This is a major step towards government approval in Brazil, with the president endorsing the recommendation of his cabinet colleagues.

Embraer is the third-largest maker of commercial airplanes in the world by sales after Boeing and Airbus, but it’s still much smaller than the big two.

“I’m sure the fact that they were suddenly the last small jetmaker in the world was a motivator too,” said Richard Aboulafia, vice president at Teal Group, an aviation consulting firm. “It’s all about keeping your supply chain costs low, and the big players have so much more leverage against their vendors.” 
Aboulafia also noted that Airbus got the Bombardier jet for a symbolic sum of one Canadian dollar. “The main difference is that Bombardier gave up their jet to Airbus for free, and even guaranteed them against further development cost overruns.  By contrast, Boeing has to pay for their part of the Embraer joint venture,” he said in an email to TPG.

Brazil’s Defense minister Joaquim Silva e Luna had told Bloomberg in May that “there was concern about preserving investments in our defense base, so that strategic projects wouldn’t be interrupted. That has been overcome.”

The announcement could come within weeks, as previously speculated. 

Embraer would retain control of its defense manufacturing business, but Boeing and Embraer would jointly operate manufacturing, sales, and marketing of the latter’s commercial plane program and in particular the Embraer E2 program. The E2 competes head-to-head with the Airbus-Bombardier C Series program, the 100+ seat twinjet. The C Series is slightly larger than the E2, but occupies the same market segment for single-aisle airplanes smaller than the Boeing 737 and Airbus A320 families.

Featured image of an Embraer E190-E2 by Emily McNutt/The Points Guy

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