The deal between Boeing and Embraer has received wholehearted support from Germany’s Lufthansa Group, according to its CEO Carsten Spohr. The chief executive claimed that the proposed $4.2bn takeover of the commercial aircraft activities of Embraer by the US aerospace giant would lead to a more level playing field.
Healthy competition
Speaking at yesterday’s Airlines For Europe (A4E) Aviation Summit in Brussels, Lufthansa Group CEO Carsten Spohr made clear his support for the Boeing-Embraer tie-up. He’s reported by Reuters as having said,
"We would rather have two healthy competitors.”
As the launch customer for the Bombardier CSeries, Lufthansa has been closely involved in the Airbus takeover of the program. While some might think this would make the Group’s view of the Boeing-Embraer deal more negative, Spohr clearly believes that healthy competition is good for the industry.
Boeing currently lacks any direct competitor to the Airbus A220, with no regional jet in the 110 – 130 seat market. Adding Embraer to its books would allow it to market the popular E2 jets under the Boeing brand, adding value and increasing the competition for Airbus.
With increased competition always comes increased pressure on pricing, so Spohr is likely right in his opinion. Getting the go-ahead for the deal would, eventually, mean more competitive pricing on both regional jet products.
Awaiting EU approval
The deal between Boeing and Embraer was outlined as long ago as July 2018. The two companies fleshed out the details over some further five months, with Boeing finally agreeing to pay $4.2bn for a stake of 80% in Embraer. The new venture, dubbed Boeing Brasil-Commercial, was anticipated to be signed and sealed by the end of 2019, but things haven’t gone as smoothly as either party would have liked.
Having ironed out the political issues in Brazil, Boeing has faced another headwind, this time from the European Union. The EU believes that the rapid consolidation of Bombardier into Airbus and Embraer into Boeing would leave too little choice on the market, and as such has opened an in-depth investigation into the matter.
Twice, so far, the EU has paused the clock on the investigation as it demanded more information from the two companies. The latest pause is expected to take the deadline for a decision to June 23rd this year. While the deal is likely to be approved, the delay is just another headache for Boeing at a time when it could do with at least something going well.
Despite the current EU block of the tie-up, Boeing has received widespread support for the deal. In mid-February, Reuters reported that some of the world’s largest aircraft buyers were throwing their weight behind the tie up, expressing concern that Embraer would not be able to survive on its own now that it is in direct competition with the popular Airbus regional jet.
Reuters cites Aengus Kelly, CEO of AerCap, as saying that,
I think it’s a must: if Embraer don’t do it, it’s likely that Airbus will corner part of the narrowbody market which will be poor for the consumer. It just won’t happen that Embraer is a viable long-term competitor, standalone, against the power of Airbus.”
What do you think about Boeing Brasil-Commercial? A good move that the EU should get on and approve, or too much consolidation among plane makers? Let us know in the comments.