Page 19 - AAA MARCH - APRIL 2018 Online Magazine

Boeing and Embraer have made WAITING GAME
progress in their talks for a
possible tie-up, but there is no
official word yet on when a deal
will be struck

Arun Sivasankaran

hen Boeing and Embraer
confirmed in December
last year that they were
Win talks regarding a pos-
sible deal, many industry watchers
predicted that a major announce- The Proposal Airbus-Bombardier partnership
ment was imminent. transforming the entire market land-
More than two months later, According to sources, Boeing has scape, a lot hinges on the proposed
the excitement generated by the presented a new proposal to the deal for both the world’s largest aero-
announcement has given way to a Brazilian government that would give space company and the third-largest
realization that while the two com- it an 80 to 90 percent stake in a new passenger jet maker.
panies may yet be able to strike a venture encompassing Embraer’s Industry analysts expect Embraer,
deal, it is not a foregone conclusion commercial jet business, according whose 70-130 seat E-Jet faces com-
that they will. A merger, which had to reports last week. petition from Bombardier’s 110 to
seemed a distinct possibility, has all Last month, CNBC quoted Boeing 130-seat C Series, to benefit from
but been officially ruled out. CEO Chief Executive Officer Dennis Boeing’s global reach and its market-
The delay in announcing a part- Muilenburg as saying that the com- ing muscle if a deal is clinched. The
nership is due to the fact that Boeing pany was getting closer to a deal Brazilian company would need the
was initially eyeing nothing less than with Embraer. According to local American aerospace giant’s backing
a takeover while Embraer wasn’t media reports, Boeing has submitted to compete with the C Series, which
interested in one and wanted to be a new proposal which, if approved, is now under a financially healthy
remain in control of its own destiny. would give it an 80 to 90 percent Airbus, they say.
With negotiations on converting stake in a new commercial jet busi- Boeing has its own compulsions
Embraer into subsidiary not head- ness venture involving the two as well. With the C-Series adding to
ing anywhere, Boeing was forced to companies. Boing officials believe Airbus’ product line and expanding
think of other ways of making the that it would be easier to get Brazil’s its reach, the American company
partnership work, sources said. blessings if defence operations are is banking on a deal with Embraer,
What makes the partnership kept outside the ambit of the pro- which is the world leader in the 70
harder to clinch, compared to a posed company, thus enabling the to 130-seat jet market, to match its
normal business deal, is that the government to keep its golden share main rival in the regional jets cate-
Brazilian government has a golden in Embraer. gory. The tie-up, when it happens,
share in Embraer. This makes it According to industry watchers, would result in Boeing becoming
the deciding authority on decisions the Brazilian plane maker senses that the market leader in the smaller
involving military programmes and it can now play hardball, given that passenger jet market, thus causing
any potential change of company Boeing is now under pressure due headaches for the C Series pro-
ownership. Reuters reported that to Airbus taking over Bombardier’s gramme.
while the Finance Ministry and devel- C Series operations. The O Globo Boeing’s interest in striking a deal
opment bank BNDES, which owns 5 newspaper reported late last month with Embraer is not solely because
percent of Embraer, are in favor of that Boeing has agreed to have only it wants to go one up on Airbus in
the deal, military officials do not want a 51 percent controlling share in the the regional jet category. With the
to even entertain the idea of ceding new venture. small jet market growing by leaps
control to Boeing. and bounds and expected to sustain
Raul Jungmann, Brazil’s defence New Urgency its growth well into the next decade,
minister, told Financial Times that A final decision on the tie-up talks, the company is aware that it needs a
while he hoped the two companies which began after Airbus sprung a solid presence in the market to stave
would agree on a partnership, the surprise by acquiring control over off competitions from other small-
only limitation he saw was the trans- Bombardier’s C Series program, is jet manufacturers such as China’s
fer of shareholding control. ““Other likely before July, according to Paulo Comac and Russia’s Sukhoi.
than that, partnership, joint venture, Cesar de Souza e Silva , Embraer
whatever it is, is very welcome.” chief executive officer. With the

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