You may not have heard of a small Brazilian company called Embraer. Although calling them small would be a disservice to them as they are the third-largest aeroplane manufacturer in the world. Embraer produces a range of aircraft from commercial planes to military and even private craft.
Whilst they don’t make the large super jets that we have come to know today (such as the Airbus A380 or than Boeing 777), they’re very proficient at making the small planes that operate in regional areas, such as their E series, a direct competitor to the Airbus-Bombardier C Series.
It’s for this reason why Boeing has now taken a keen interest on the Embraer operation, making it its mission to absorb the firm. The December 2017 Wall Street Journal reports that they have been in talks regarding taking over Embraer.
A Take Over of Embraer May Not be Easy
Unfortunately, Boeing’s plan would not be so easy as Embraer has military contracts with the Brazilian government. Technically, a foreign organisation cannot buy the company. The Brazilian government would have the true power over any new ownership split of Embraer.
“No country in the world would release its grasp on control of a company like (Embraer). It has a nucleus of a defence that is inalienable,” Brazilian Defense Minister Raul Jungmann
However, the government has not ruled out a joint venture agreement between the two firms. Both Boeing and Embraer have signed a non-binding Memorandum of Understanding to work together. This sees Boeing taking 80% ownership of the joint venture and Embraer holding the remaining 20%.
This joint venture will mean that now Embraer commercial planes and operation will integrate into Boeing’s business model. Thus allowing Boeing to offer customers a portfolio that ranges from small private planes to large 450 seater super jets.
“The business combination with Boeing is expected to create a virtuous cycle for the Brazilian aerospace industry, increasing its sales potential, production, creating jobs and income, investments and exports, and in doing so, adding more value to customers, shareholders and employees” Embraer chief executive Paulo Cesar de Souza e Silva.
This move is in direct competition to Airbus absorbing Bombardier on July 1st.
We can expect Boeing to assign Embraer planes Boeing call signs. The military branch will remain under Brazilian government control.
This is yet another power move between two of the world’s largest aerospace companies. It remains to be seen how this will affect the industry which seems to grow smaller with every merger.