Defense Partnership With Embraer Will Test Brazil's Boeing Appetite

A prototype of an Embraer E-190 E2 passenger aircraft stands on display during a media preview day at the Singapore Airshow in Singapore on Feb. 4 2018. Bloomberg

A prototype of an Embraer E-190 E2 passenger aircraft stands on display during a media preview day at the Singapore Airshow in Singapore on Feb. 4 2018. Bloomberg

By adding Embraer's E-Jet family to its portfolio, Boeing will expand its manufacturing base overseas while extending its reach into the market for 100-seat planes.

Boeing is forming a $4.75 billion venture with long-time industrial partner Embraer, a move that will bolster its arsenal in the newest battlefront with Airbus: the market for smaller jetliners. Boeing said it expects the deal to add to its earnings per share starting in 2020 and generate estimated annual pre-tax cost savings of approximately $150 million in the third year.

The statement gave no indication of any payment Boeing was making under the deal.

The two companies announced a joint venture on Thursday valued at $4.75 billion.

The Boeing-Embraer alliance, following on the heels of the Airbus-Bombardier tie-up announced previous year, represents the biggest realignment in the global aerospace market in decades, strengthening established Western planemakers against newcomers from China, Russia and Japan, analysts say.

However, the pressure for an alliance accelerated when Airbus a year ago announced it would take control of the CSeries jet, which had been struggling in its battle with Embraer at the small end of the airliner market.

Boeing will pay $3.8 billion for its stake in the venture - a valuation that prompted Embraer investors to look for the exits. Airbus's deal with Bombardier, and Boeing's pact with Embraer, signal that the big planemakers intend to deny a foothold in the lucrative narrow-body market to ambitious newcomers, such as Commercial Aircraft Corp. of China.

Iranian general blames drought on Israeli ‘cloud theft’
He claimed these countries had affected the climate with their technologies. Iran's own meteorological service struck a skeptical note, however.

Additionally, the companies will create another agreement to market new applications for defense products and services, including the KC-390 multi-mission aircraft, Boeing said. The transaction is expected to close by the end of 2019.

On finalisation, the commercial aviation joint venture will be led by Brazil-based management, including a president and chief executive.

The commercial venture will be run by a Brazil-based CEO and management team, while Muilenburg will have ultimate control.

Richard Aboulafia, an aerospace industry analyst for the Teal Group consulting firm, noted that Airbus basically "got a jet for free", thanks to the terms of its C Series deal with Bombardier.

The CSeries was the subject of a surprise ruling by the U.S. International Trade Commission in January that eliminated massive duties against Bombardier that were imposed after Boeing submitted a complaint and prompted a Commerce Department investigation. The Embraer deal isn't quite as beneficial to Boeing, he said.

The promise of a future joint venture for military jet production is also a plus.

The Embraer-Boeing tie-up took shape more than 2 years after the idea was first presented internally to Boeing's board and reflects a longstanding affinity between the two planemakers, a person familiar with the discussions said. "I'm not seeing it", he said.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.