Money Embraer joint venture with Boeing could make life tougher for Bombardier: analysts

09:16  06 july  2018
09:16  06 july  2018 Source:   cbc.ca

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Boeing and Embraer are joining forces. The US aviation giant and the Brazillian planemaker announced on Thursday a preliminary agreement to establish a joint venture . Seriously: Although each airline is different, agents can and do make comments on a traveler's record.

Boeing and Embraer have collaborated on projects for decades and have been in talks since last year on a The companies also said that they would form another joint venture focused on “new markets and That deal closed earlier this week, and could allow Bombardier to sidestep American duties

a screenshot of a computer: Boeing's partnership with Embraer is a direct response to Airbus partnering with Bombardier on the C Series, its largest commercial aircraft, analysts say.© Richard Drew/ The Associated Press Boeing's partnership with Embraer is a direct response to Airbus partnering with Bombardier on the C Series, its largest commercial aircraft, analysts say.

The planned tie-up between Boeing Co. and Embraer SA will result in stiffer competition for the Airbus-controlled C Series and Bombardier Inc.'s regional aircraft business, industry observers said Thursday.

Boeing will own 80 per cent of the joint venture valued at $4.75 billion US and Embraer the remaining 20 per cent. The deal is expected to close toward the end of 2019.

The partnership is a direct response to Airbus partnering with Bombardier on the C Series, its largest commercial aircraft, analysts say.

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Embraer ’s new E2 jets and Bombardier ’s C Series planes in turn face new competition from smaller airliners built or being developed in China, Japan and Russia. Boeing and Embraer said they also will create a joint venture to make and sell products and services for military aircraft

Embraer 's new E2 jets and Bombardier 's C Series planes in turn face new competition from smaller airliners built or being developed in China, Japan and Russia. Boeing and Embraer said they also will create a joint venture to make and sell products and services for military aircraft

"This is really about the C Series," said Richard Aboulafia of the Teal Group.

Getting the support of one of the world's largest aircraft makers restores equilibrium to a commercial aircraft market following the Airbus-Bombardier joint venture that closed on Sunday, he said.

Gaining Boeing's help was essential to help Embraer restore the competitiveness of its largest commercial planes against the CS100, Aboulafia said in an interview.

In order to really challenge the C Series, Aboulafia said Embraer had to restore the cost competitiveness of its larger 190 and 195 E2 regional jets.

"I think Embraer realized that with Airbus' help, the C Series was suddenly far more competitive in its sales campaigns. If you want to look at a single smoking gun behind today's announcement, that's it."

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Boeing and Embraer announced Thursday a joint venture to make regional jets, in competition with Airbus and Bombardier .

Geek Life . Boeing and Embraer forge .75 billion jet venture to counter Airbus and Bombardier . Embraer ’s engineering expertise could also come into play as Boeing gears up to design and produce a new breed of midsize jet variously known as the New Mid-Market Airplane

Ninety per cent of the deal is aimed at reducing Embraer's cost base by using Boeing's leverage to force supplier deals that will allow the Brazilian company to more aggressively compete with the C Series for orders, he said.

Airbus forced Embraer's hands, agreed Ernie Arvai, a partner at commercial aviation consultancy AirInsight.

"It's a more equal competition than having Embraer alone against Airbus," he said.

Arvai said the Boeing joint venture won't necessarily be smooth sailing because of the vastly different corporate cultures and organizational structure of the two companies.

But he said Bombardier can hold its own — as it has shown by recently winning regional jet orders from Delta Airlines and American Airlines — as long as scope clauses remain in the United States that limit the size of aircraft that an airline can contract out to a regional airline.

Boeing and Embraer attempt a joint venture

  Boeing and Embraer attempt a joint venture NEW YORK - Boeing and the Brazilian jet maker Embraer will attempt to form a joint venture that would push the U.S. aerospace giant more aggressively into the regional aircraft market. The new company, which has faced heavy scrutiny from lawmakers in Brazil, is being valued at about $4.7 billion.

Boeing and Embraer have signed a preliminary agreement to form a joint venture . The new two-tier duopoly, putting Airbus and Bombardier on one side against Boeing and Embraer on the other, strengthens established Western planemakers against new entrants such as China, analysts say.

An industry source familiar with the talks said progress was being made by Boeing and Embraer . But people familiar with the negotiations told Reuters Boeing was unlikely to agree to a joint venture in which it held less than 80-90 percent to have full operational control.

That gives Bombardier's CRJ 700 and 900s an advantage over Embraer's E175 E2.

While Embraer will be backed by a company with deep pockets, he said Boeing can't react as quickly or provide the same level of personalized attention that Bombardier can.

Arvai said there is a window of opportunity for Bombardier to remain quite competitive.

"I think you're always worried when you have a company with deep pockets but I don't think I would panic at this point."

But Walter Spracklin of RBC Capital Markets said Bombardier's regional aircraft could be at a disadvantage as it competes alone against Embraer, which will have more sales and marketing clout through the American aerospace giant.

"Nevertheless, we see Bombardier's regional jets as having a competitive cost element — and we are maintaining our (already muted) sales forecasts in regional aircraft," he wrote in a report.

Benoit Poirier of Desjardins Capital Markets said Embraer will also have financial support to pursue new "growth initiatives" in the business jet segment and possibly a turboprop to compete with Bombardier's Q400.

David Olive: Break up Bombardier to keep it from going off the rails

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But even a partnership could give Boeing a product offering in the 100-seat category to counter a new threat from Airbus SE When Airbus secured its role in the space by announcing a joint venture with Bombardier in October, he said, that raised the question, “Does Boeing rethink Embraer ?”

Airbus took control of Bombardier Inc.’s C Series jet on July 1, through a joint venture it forged with no out-of-pocket cost. Boeing was left without a comparable offering, while Embraer — Bombardier ’s main rival — faced a tough new competitor in Airbus’s global marketing organization.

"On the positive side, the commercial aircraft industry will evolve from four key players to two, which should bring a more rational pricing dynamic, in our view," he wrote.

Bombardier has a year and half to be aggressive in the market before any Boeing deal is finalized, added Karl Moore, professor at McGill University's Desautels Faculty of Management.

Without the shadow of the C Series, Bombardier can attract attention to its regional aircraft as recreational products division BRP Inc. did when it split in 2003 from the transportation giant and now thrives.

"They had all of the attention and that can be good."

On the Toronto Stock Exchange, Bombardier's shares gained 3.6 per cent at $5.18 in afternoon trading.

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