OPINION: Boeing and Embraer have much to gain from tie-up

A combination of Boeing and Embraer would make a powerful team in commercial aviation, deepen a potentially disruptive alliance with Saab in the defence market, and could upset the business aviation status quo.

It remains unclear what level of combination is under discussion after the two parties acknowledged ongoing discussions on 21 December.

But it is already obvious that both companies have much to gain from a well-managed partnership of any kind, and little to lose.

On the surface, Embraer seems well-positioned as the world’s third-largest aircraft manufacturer, with a broad portfolio of positions in commercial, defence and business aviation.

But the manufacturer is entering a critical period. The E190-E2 and the KC-390 are set to enter service later this year, but are yet to gain significant order traction, despite impressive potential. Unless new deals materialise soon, it could be years before deliveries of the E2 family match the annual pace of 90-100 set by the original E-Jets. And the KC-390 still has to prove it can compete with the Lockheed Martin C-130J. A partnership with Boeing could provide a serious boost for both jets.

Boeing also has much to gain from a commercial alliance with Embraer. First, the Seattle airframer obtains a product to compete with the pending joint venture between Airbus and Bombardier on the CSeries. But Boeing also has ambitious cost targets to meet in order to deliver a competitive new mid-market airplane in the mid-2020s. Embraer has 4,000 engineers on the payroll with no obvious new projects after the E175-E2 arrives in 2021. The timing works perfectly for both companies.

The defence sector – a sensitive area for the Brazilian air force – also offers opportunities beyond the KC-390. Embraer and Boeing are involved in separate projects with Saab to develop new aircraft – Brazil’s Gripen E/F fighter and a T-X trainer candidate for the US Air Force. By deepening the relationship between the three companies, Boeing would command a formidable alliance of top engineering talent and low-cost manufacturing.

Even the business jet market creates some intriguing possibilities, especially in light of Embraer’s acknowledged lack of an ultra-long-range, large-cabin product.

Many obstacles remain to completing a deal between Boeing and Embraer, with the Brazilian government’s golden share a potentially insurmountable hurdle.

But the opportunities on both sides are too big to ignore forever.

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