World AirNews June 2018

NEWS
NEWS
BOEING AND
EMBRAER
LIKELY TO
REACH A DEAL
Defence chief says the two manufacturers
are nearing an agreement
B
OEING AND EMBRAER were getting closer to a deal, Brazil’s
new defence chief said, as talks advance to forge the
second global alliance between major airplane manufacturers in
six months.
Negotiators are deep into intricate, three-way discussions involving
the manufacturers and the Brazilian government amid a politically
fraught environment. The parties finally “are getting closer”
to an agreement, said Defence Minister Joaquim Silva e Luna.
“I would say, in short, this will end in marriage,” Silva e Luna,
appointed six weeks ago, said in a recent interview at a security
trade show in Sao Paulo.
The comments marked a change of tone at the defence ministry,
which has been cautious about ceding control of Embraer, a Brazilian
innovator and industrial champion that is a crucial supplier of
military hardware. The Brazilian government controls a so-called
golden share that gives it veto power over any tie-up.
Embraer’s American depositary receipts rose 6, 3 percent to
$26.17 at the close in New York, the biggest gain in a month. Boeing,
which also reported strong first-quarter orders and deliveries,
climbed 3, 8 percent to $334, 83. That was the biggest advance on
the 30-member Dow Jones Industrial Average.
Despite all the above, neither company commented.
COMMERCIAL JETS
The two industrial giants have been crafting a commercial joint
venture, to be controlled by Boeing, that would enable them to
combine their marketing, manufacturing and engineering prowess,
Bloomberg reported earlier this year. Embraer needs to keep its
engineering force engaged after development ends on its new
E2 family of jets, while Boeing is marshalling resources for a new
mid-range airliner.
“This is something we’ve been working on for some time,” Boeing’s
Chief Executive Officer, Dennis Muilenburg, said in February.
“And when you look at product line development and where we’re
at in our product cycles and how our product lines fit together,
now seems to be a good time to combine forces.”
Although the two companies are long-time partners, the talks
to forge a closer relationship have gained urgency as Airbus SE
prepares to take control of Bombardier Inc’s C Series jet, the biggest
rival to Embraer’s single-aisle aircraft. Boeing may be moving
pre-emotively to prevent Commercial Aircraft Corp of China from
pursuing a closer relationship with Embraer, Ronald Epstein, an
analyst at Bank of America Corp, also suggested.
For Embraer, the leading manufacturer of smaller jetliners, the
new competitive threat from Airbus comes as deliveries -- and
revenues -- are slowing amid a transition from earlier-generation
E-Jets to the redesigned E2.
COMPLEX OPERATION
The discussions are going “very well,” Embraer Chief Executive
Officer, Paulo Cesar de Souza e Silva told reporters last month,
while delivering the first E190-E2 jet to Norwegian airline,
Wideroe, in Sao Jose dos Campos, Brazil, where the company is
based.
“It’s a complex operation, and all the parts need to be comfortable,”
he said.
Although this was the first hint of approval from the minister to a
possible deal since he took over, Silva e Luna signaled that talks still
had a long way to go, noting that what’s on table are “studies, not
a formal proposal.”
He provided few details of the potential transaction between
Embraer and Chicago-based Boeing. “Don’t ask me which kind of
marriage, if it is with total sharing of assets, with partial sharing of
assets or with separation of assets,” he said.
But a deal would potentially go beyond commercial planes, Silva
e Luna said, citing an opportunity for Brazil to get help from Boeing
in selling Embraer’s KC-390 military-transport aircraft.
“This is one of the ‘wins’ for Embraer,” he said. “Boeing can facilitate
the marketing of the KC-390. Boeing can offer that. So in these
talks, this makes talks easier.” Q
World Airnews | June 2018
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World Airnews | June 2018
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