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Embraer progresses with divesting its commercial aircraft unit

Embraer is well into the work of splitting off its commercial aircraft division into a joint venture controlled by Boeing – and the costs of the separation are now hitting Embraer's bottom line.

The Brazilian company logged $19.5 million in "separation costs related to the strategic partnership between Embraer and Boeing" during the second quarter, it reports on 14 August.

Those costs add to related first quarter expenses, bringing to $31.8 million the total cost of the separation during the first six months of 2019.

Embraer still earned a profit of $7.2 million in the second quarter, which sharply reverses its $131 million loss in the same period last year.

Last year's loss, however, reflected a $127 million charge stemming from additional costs for developing the KC-390 transport.

The pending Boeing deal calls for the US manufacturing giant to buy 80% of Embraer's commercial aircraft division, which makes the E-Jets line of regional jets, for $4.2 billion. Boeing and Embraer also plan to form a joint venture to promote KC-390 sales.

Embraer will retain its business aircraft unit. The companies expect the deal will close by year end.

Speaking during Embraer's second quarter earnings call, chief financial officer Nelson Salgado says Embraer has already shouldered expenses related to separating the commercial unit.

The costs stem from information technology work, and relate to transferring employees and infrastructure from Embraer's Sao Jose dos Campos site to its new headquarters in Eugenio de Melo, which is in the same district as Sao Jose dos Campos.

Boeing is retaining Embraer's prime Sao Jose dos Campos E-Jet production site and will rename the operation Boeing Brasil – Commercial, the companies have said.

Embraer's other expenses related to the deal include those of moving its Praetor business jet production line from Sao Jose dos Campos to a site in Gaviao Peixoto. Those cities are about 170nm (315km) apart.

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