European Commission To Investigate Boeing – Embraer Deal

Boeing’s new partnership with Embraer faces an investigation by the European Commission. Boeing is looking to take majority control of Embraer’s E-Jets, however, this venture is under scrutiny even before taking off.

EGLF - Embraer E190-E2
Boeing’s planned investment of Embraer’s commercial aircraft faces a challenge from European Union authorities. Photo: Steve Lynes via Flickr

Former rivals

The US and Brazilian manufacturers were hoping to join forces to compete against Airbus’ Bombardier partnership. The three companies are the only large-scale aircraft producers in the world and, if the partnership goes through, this will bring competition down to two. Boeing plans to hold 80 percent of Embraer’s commercial stock while the South American firm maintains independence in military operations.

The partnership was formed in February earlier this year, with a deal expected to close in early 2020. However, antitrust legislation may impact the manufacturers’ proposals. Sam Chui reports that the European Commission has opened up an investigation into the project. The EU governing body has opened up the case following concerns over competition as both firms manufacture similar-sized airliners.

Boeing 737-9 MAX
Boeing will be looking to revamp its operations following the grounding of the 737 MAX this year. Photo: Jeff Hitchcock via Wikimedia Commons

Tight market

Boeing and Embraer both make lines of aircraft that hold between 100-150 seats. Therefore, without strong competition, the partnership can create a duopoly within this market. This could create an even tighter industry with the two companies dictating operations and prices.

Embraer has built over 1,500 units of its E-Jet family. These narrow-body airliners were first introduced in 2004 and have become popular with airlines on every continent. One of the biggest markets for the E-Jets is in the United States.

SkyWest Airlines initially ordered 100 of the aircraft type in July 2013 and have placed a further seven orders in July this year. United Airlines also placed a sizable order for Embraer’s E175 jets this summer. The carrier has made 20 firm orders with an option for a further 19 in a deal set to be worth $1.9bn.

Video of the day:

EGLF - Embraer E190-E2 - PR-ZGQ
Due to the technical similarities of certain aircraft produced by the two companies, there are concerns over market dominance. Photo: Steve Lynes via Flickr

New opportunities

The newly named, Boeing Brasil-Commercial partnership would see Boeing invest $4.2 billion for trading to commence. Despite concerns, the partners claim that the operation will increase value for both airlines and passengers. With Boeing still facing huge issues following the grounding of the 737 MAX, the investment can reconcile the manufacturer’s lost revenue.

The Independent reports that the firm made a $3.4 billion loss in the second quarter of this year thanks to these groundings. This is a complete opposite of the $2.2 billion it made in profit during the same period for the previous year. Boeing has set aside $4.9 billion for compensation to airlines unable to operate its jet.

The venture with Embraer is the perfect opportunity for the aircraft powerhouse to remain in control of its financials heading into the next decade. Ultimately, the two groups will be hoping that the investigation does not drag out too long, with plans to operate from early next year.

Do you think that the Boeing and Embraer partnership will have a negative impact on the market? Let us know your thoughts on the venture in the comments.

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TheDude

Euro pouting because the WTO ruled against them.

Henrique Abreu

European Bureaucrats being European Bureaucrats. Goddamn protectionists…

Ron

Fair’s fair! I mean – what about the Americans being protectionists and the way they treated bombardier and airbus? Surely the Europeans have the right to check this partnership isn’t too dodgy and give it the same sort of scrutiny their activities received from the US?

It may just be big business and politicians playing politics – but honestly think they’d be pretty remiss not doing so here. And hey – tit for tat!

In-Frequent Flyer

Nothing will come out of that investigation. EU is more so sour they got hit with Tariffs for Airbus products. Could be tit for tat, but feels more like a response to the court order.

Lalo Galo

thats karma for boeing. they accused embraer of dumping the c series to delta. boeing should have minded their own business and maybe this wouldnt have happenes

Gerry Stumpe

My sentiments exactly.

Air dude

Fair is fair? So what ever came of the unfair government subsidies ruling against Airbus for launching new aircraft?