Embraer is now expecting that the final approval of the deal with Boeing to be delayed beyond 23 June. This is because the European Commission has recently stopped the clock again, according to Antonio Garcia, the executive vice president of Finance and Investor Relations for Embraer. Let’s investigate this matter further.
One regulator still stands on their way
Currently, only the European Commission hasn’t approved the Embraer-Boeing partnership. At the beginning of the year, Brazil became the last country to give a green light to this deal. A total of eight jurisdictions —US, China, Japan, South Africa, Kenya, Colombia, Montenegro, and Brazil— have already endorsed the alliance.
Regarding the current state of affairs, Embraer said,
“Boeing and Embraer have been engaged with the European Commission (EC) since late 2018 and we continue to co-operate with the EC as it assesses our transaction and look forward to a positive resolution. We have received unconditional clearance to close our transaction from all necessary jurisdictions with the exception of the European Commission.”
The deal will allow Boeing to take over 80% of the commercial arm of Embraer. It would also allow both companies to launch a joint venture in the military market.
The deal is a priority for Embraer
Antonio Garcia stated that Embraer believes this partnership “is an important strategic partnership” and they’ll make it a priority for the company going forward.
When asked what could be the reason the European Commission hasn’t approved the Boeing deal, Francisco Gomes, CEO of Embraer said that both parties have provided the documents the Commission has asked for and have done it as quickly as they were able to.
Simple Flying made attempts to reach the European Commission for a statement on the matter. We haven’t received an answer. We’ll keep you updated if that changes.
For this partnership, aptly named Boeing Brasil, Boeing is investing $4.2 billion USD. The US manufacturer will get access to the E-Jet family which would create a new era of small Boeing jets. This way, both Embraer and Boeing could compete directly with the Airbus A220 family.
Embraer has no problem with liquidity
One of the top priorities for the air industry right now is to have enough liquidity to face the current crisis worldwide. For example, Embraer says its liquidity position is very strong, with total cash of 2.8 billion USD at the end of 2019. It also stated that it has raised an additional $600 million USD in March.
The Brazilian plane maker has less than 15% of its total debt coming due in the next 24 months. Additionally, most of its debts stretch out to 2025 and 2027, which allows Embraer to surf through the current crisis and possible future recession.
In 2019, Embraer had net revenues of $5.46 billion USD. 41% of these revenues came from the commercial aviation branch. Executive Jets totaled 26% of the revenues; Defence & Security had 14% and Service & Supports had 19% of the total revenues.
Finally, last year, Embraer delivered 89 commercial aircraft and 109 executive jets. The company ended with a firm order backlog of $16.8 billion USD. The commercial branch led the way with 53% of the backlog while the executive jets branch had 9% of the backlog.
Do you think the European Commission will eventually approve the deal? Let us know in the comments.