Closer political ties raise prospects for renewed alliance between Dassault and Embraer

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Growing political ties between Brazil and France may possibly lead to the rebirth of an even more powerful Dassault/Embraer alliance stretching beyond even their common interests in business jets and combat aircraft.

A joint communiqué issued by presidents Nicolas Sarkozy of France and Luiz Inacio Lula da Silva of Brazil commit their governments to pursing closer links in the aerospace industry.

Brazil initially appeared to agree to buy 36 Dassault Rafale F3s for the FX-2 contract, but the country's defence minister later clarified that negotiations were continuing with all three bidders, including the Boeing F/A-18E/F Super Hornet and Saab Gripen.

Nevertheless, it was clear that da Silva's strongly favoured the Rafale proposal, as he praised the French government's promises on price and technology transfer.

Meanwhile, France agreed to buy 10-12 Embraer KC-390 tanker-transports, with Dassault and other French companies invited by the Brazilian government to participate in the development.

 

Details of these negotiations remain far from settled, but it is clear that the KC-390 agreement especially binds Embraer and Dassault together, reprising a previously strong partnership that had withered in recent years.

The possibility of a resurgent alliance raises new possibilities for collaboration in several market areas, from business jets to a next-generation narrowbody to Brazil's stated goal to eventually develop its own fifth-generation fighter.

"We are open to any co-operation that Embraer would like to propose," says Dassault, noting that no formal agreement has been signed between the rivals. "So far, there has been no proposal. Maybe during the FX-2 competition, it was probably a little too sensitive to go into those subjects. Once Rafale is selected, maybe there will be other opportunities of co-operation that open."

Embraer has been unavailable to comment.

Dassault and Embraer are not industrial strangers, despite their transatlantic distance. The French company has previously owned as much as 20% of Embraer's stock value. But that stake has been "considerably diluted" in recent years, Dassault says, to roughly stake today.

EQUAL PARTNERS

Yet, a Dassault and Embraer alliance would create a partnership of equals rarely matched in the aerospace industry. Similar in size and market strategy, the two companies have dominated several niche markets between them, including regional jets, business jets and combat aircraft.

Neither competes with the large commercial airliners of Airbus and Boeing, but Embraer is eyeing the opportunity to develop an alternative in the Airbus A320 and Boeing 737 class. A collaboration with Dassault, which abandoned the narrowbody market in the mid-1970s after the Mercure debacle, could add needed engineering and design skills to the project.

Such a partnership is "not totally crazy", says Richard Aboulafia, vice-president for the Teal Group consulting firm. "Anything that introduces critical mass and efficiency helps you launch new products. It's not inconceivable."

rex features/sipa press
 © Rex Features/Sipa Press

Aboulafia expects a more near-term opportunity for collaboration to exist within the business jet market, where the product line-ups of Dassault and Embraer have "almost no overlap".

The Embraer Lineage 1000 competes in the same market space as the Dassault Falcon 7X and the Embraer Legacy 600 fights the Dassault Falcon 2000 series for orders. However, Dassault has no peer against Embraer's hot-selling Phenom series of light and very light jets.

"A Dassault-Embraer business jet joint venture or even merger would be a huge change to that market," Aboulafia says.

FIFTH GENERATION

When Brazil released its request for proposals for the FX-2 contract last year, government officials spoke of seeking technology transfer that would allow the country to develop a fifth-generation fighter capability in the "medium term".

Dassault has a long history in developing fighters, having produced the Mirage and Rafale series. The company is also open to further collaboration with Brazilian industry on a fifth-generation fighter.

"If the Brazilian industry wants to get the capability to design and develop a fifth-generation aircraft that's up to them to take that decision," Dassault says. "[Dassault] may help them to reach that goal. That's very possible. For the time being we have not been asked specifically to co-operate on the design of a new combat aircraft."

Rebecca Barrett, a Latin American and Caribbean analyst for Forecast International, considers the design of future combat aircraft to be a natural follow-on project for a Dassault-Embraer partnership.

"It wouldn't surprise me at all with the relationship that's been growing," Barrett says. "It seems like almost the logical next step. I don't see it as being unrealistic."