Boeing and Embraer approve terms of strategic joint venture

Boeing and Embraer waiting for the Brazilian government approval of strategic joint venture

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Boeing is expected to further expand its business aviation segment with the strategic joint venture with Embraer – one of the major business jets and light jets manufacturers.

The joint venture terms, which include the commercial aircraft and services of Embraer, are approved by the respective companies. The proposed partnership will comprise 80% share acquired by Boeing for USD 4.2 billion. The proceedings remain subject to the Brazilian government approval. After the approval, the management for the commercial aviation partnership will be operated by the Brazilian-based management, including President and Chief Executive Officer.

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The strategic partnership will have a positive impact on both the companies, providing Embraer access to the global market while diversifying Boeing’s product portfolio in the business jet and light jet markets.

The partnership with Boeing will help Embraer gain advantage over its competitors. On the other hand, Boeing will gain access to the engineers of Embraer, as more than 5000 engineers and technicians at Boeing will be in the retirement age in the next decade.

The strategic joint venture will also help Boeing level the playing field with its main rival Airbus (France), as Airbus has announced that it will be collaborating with Bombardier.

A key challenge for the deal to go through would be to get approval from the Brazilian Government which apparently is concerned about US influencing the Embraer defense unit. Embraer will control the business jet and defense activities in the joint venture and will only share the 80% of the commercial aviation activities with Boeing. Moreover, most of the Embraer’s debts will be transferred to Boeing.

After approval from the Government of Brazil, both companies have agreed for another partnership. This proposed partnership will comprise Embraer owning 51% of the shares in the partnership and remaining by Boeing. This joint venture will focus on the development of new markets for the multi-mission medium airlift KC-390. The airlift received its type certificate from the Brazilian Government in October and is expected to reach its final operation and military certification by the end of 2019.