Boeing strikes aircraft deal with Brazil’s Embraer

Boeing has agreed a deal that will give it control of Embraer’s commercial jet business.

The proposed joint venture will give the US aerospace giant a significant stake in the market for smaller passenger planes.

Boeing has been courting Brazil’s Embraer for some time.

The need for a deal has recently become more pressing since its European rival, Airbus, took control of Bombardier’s regional jet programme.

Its deal with the Canadian company had threatened to give Airbus a significant advantage in the global marketplace.

The agreement, which values Embraer’s commercial aircraft operations at US$4.75bn, will restore parity between Boeing and Airbus.

Under the proposed deal, Embraer’s commercial business will be placed in a new joint venture, with Boeing holding an 80% stake worth US$3.8bn (£2.9bn).

Embraer is a Brazilian industrial champion and a major manufacturer of military systems.

Dennis Muilenburg, Boeing chief executive, said: “By forging this strategic partnership, we will be ideally positioned to generate significant value for both companies’ customers, employees and shareholders – and for Brazil and the US.”

Boeing said the deal is expected to close by the end of 2019 pending the necessary approvals.

Image copyright: Getty Images
A Flybe Embraer E175 takes off from Southend airport (Photo Credit: Getty Images)
Analysis

By Theo Leggett, BBC business correspondent

This deal, if it goes ahead, will restore the cosy duopoly between Boeing and Airbus.

In the past, they had the market for large jets to themselves. In the segment beneath them sat Embraer and Bombardier, equally fierce rivals in the market for smaller “regional” jets.

Both companies, however, showed signs of rising above their station. Bombardier developed the C-series, a new highly efficient aircraft capable of competing directly with smaller versions of the Boeing 737 and the Airbus A320.

Embraer, meanwhile, developed the E-195 E2 – slightly smaller, but still capable of playing in the same ballpark.

Boeing tried to kill off the C-series, protesting about its funding in the World Trade Organization. But that simply sent Bombardier into the arms of Airbus, which bought a majority stake in the C-series programme, strengthening its position in the market.

A Boeing-Embraer deal should restore parity – with both of the big players having extended their reach into the market for smaller planes.

Source: BBC

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