Eleven years after the 106-seat Boeing 717 met a perhaps untimely demise, Boeing is back in pursuit of the commercial aircraft market below 126 seats after revealing on 21 December ongoing talks with Brazilian manufacturer Embraer on a potential “combination”.

Any deal with one of the jewels of Brazilian industry will require the support of the government in Brasilia, which quickly signaled in Brazilian press reports that it is open to associations between Embraer and Boeing that stop short of a full transfer of control.

Such a stance would open the door to a wide range of possible transactions, from the sale of elements of Embraer’s business to a joint venture not unlike the pending agreement between Airbus and Bombardier giving the former control of the CSeries.

That surprise agreement announced by Airbus on 16 October likely formed the catalyst for Boeing’s current talks with Embraer. In the logic of a market duopoly, Boeing cannot allow Airbus’ proposed acquisition of a new family of aircraft ranging from 108-147 seats go unanswered. A new clean-sheet development project for a sub-150-seat aircraft family does not appear to rank highly on Boeing’s priority list, so acquiring Embraer’s firm grasp on that market with the E-Jet family makes an attractive option.

Boeing’s interest in the Brazilian manufacturer, however, long pre-dates the proposed Airbus acquisition of the CSeries joint venture.

In 2012, Embraer and Boeing agreed to collaborate in several areas. At the time, Boeing’s interest seemed driven by a chance to sell F/A-18E/F Super Hornets to the Brazilian air force. But even after the government selected the Saab Gripen a year later, the partnership between Boeing and Embraer continued and deepened.

For example, Boeing agreed to provide technical, marketing and sales support for the KC-390, a tactical airlifter and tanker that competes with the Lockheed Martin C-130. Boeing also has agreed to help Embraer with weapons integration on the A-29 Super Tucano, a light attack turboprop under consideration by the US Air Force.

In the commercial aircraft market, the relationship between the companies is already stronger. Beginning in 2012, Embraer and Boeing agreed to jointly develop a runway situation awareness tool to improve operational safety for the aircraft families of both companies. The companies also collaborated on developing Brazilian-sourced biofuels to use as a renewable aviation fuel. More recently, Boeing has selected an Embraer-owned E170 flying testbed as the new ecoDemonstrator, which is used to evaluate five emerging technologies designed to improve fuel efficiency or safety.

The American and Brazilian manufacturer still have significant differences. Boeing has interests in the business jet market, but no aircraft type devoted to solely to that segment. Whereas, Embraer has developed two families of clean-sheet executive jets, along with offering derivatives of their commercial aircraft. In the commercial market, an acquisition involving the E-Jet E2 family could put Boeing in an awkward position with some customers. In 2011, Mitsubishi Aircraft selected Boeing to be the global supplier for support services for the Mitsubishi Regional Jet, an aircraft aimed squarely at the 76-seat E175 and E175-E2.

But the biggest obstacle to consummating any “combination” between Boeing and Embraer remains the Brazilian government. The Brazilian air force created Embraer in 1969 as a state-owned company. The government agreed to privatise Embraer in 1994, but retained a golden share with veto power over any proposal that would transfer control of the company’s shares to a new owner. The Brazilian air force remains deeply invested in Embraer’s activity, having financed development of the KC-390 and assigned Embraer to participate with Saab in development of the Gripen E fighter.

At the same time, Boeing appears to have decided it can no longer afford to ignore the sub-150-seat commercial market. The 717, which began as a McDonnell Douglas development project, was allowed to expire after a seven-year run in 2006. In that same year, Boeing delivered the last 737-600, a short-lived successor to the 737-500. The company has not secured a major new customer for the 138-seat 737 Max 7 in four years. But Boeing must find a way to respond to the Airbus take-over of the CSeries programme, and its first – and probably best – option is the E-Jet.

Source: Cirium Dashboard