Brazil's new government has approved a proposed partnership between Embraer and Boeing, clearing a critical hurdle for a tie-up that was challenged in court by Brazilian politicians and labour unions.

Embraer's board of directors must approve the deal next, before the planned partnership is submitted for approval by shareholders and regulatory authorities in the USA, Brazil and other jurisdictions, says Embraer.

It expects the deal to close by the end of this year, in line with earlier expectations.

Under the proposed partnership, Boeing will pay $4.2 billion for an 80% share of a new company created from Embraer's commercial aircraft portfolio and aftermarket support services, with Embraer holding the remaining 20%.

The new company will be based in Brazil with a president and chief executive, but Boeing will have management and operational control, both manufacturers have said.

Separately, Boeing and Embraer will form a second joint venture for the KC-390 military transport aircraft, of which Embraer will hold a 51% stake and Boeing the remaining 49%.

The two firms first unveiled their planned partnership in July 2018, during the administration of former Brazil president Michel Temer. President Jair Bolsonaro, who began his term on 1 January, had appeared to express apprehension over the deal in recent days, casting uncertainty over its fate.

While the tie-up between the two companies was challenged in court by local lawmakers and Embraer's unions, Brazil's courts overturned two injunctions last month that would have blocked the deal.

Boeing and Embraer's partnership plans were unveiled as Airbus took control of the Bombardier CSeries programme, now rebranded the Airbus A220. The CSeries was the centre of a bitter trade dispute between Boeing and Bombardier, before a US trade panel in January 2018 overturned proposed tariffs by the US Department of Commerce against the aircraft.

Brazil, supported by Embraer, is in the midst of pursuing a separate dispute at the World Trade Organisation against Canada. Embraer says the CSeries, which competes against its E-Jet family, had benefitted from billions in subsidies from the Canadian and Quebec governments.

Source: Cirium Dashboard