Boeing, Embraer Eye 'Potential Combination'

The Boeing Company and Embraer confirmed recently that they are engaged in talks over a “potential combination.” The companies issued a short statement saying the basis of a combination remains under discussion and that “there is no guarantee a transaction will result from these discussions.” Such a move, though, would be subject to regulatory and shareholder approvals, the companies said, declining any further comment.

Boeing/Embraer talks do not come as a surprise, given the looming alliance of rivals Airbus and Bombardier. Airbus and Bombardier have formed “clean teams” as they finalize plans for the European manufacturer to take a 50.01 percent stake in the C Series Aircraft Limited Partnership (CSALP). Under the agreement, Bombardier Aerospace and Québec provincial economic development agency Investissement Québec will reduce their stakes in CSALP to 31 and 19 percent, respectively. In addition, Bombardier has extended its supplier relationship with Airbus.

Boeing and Airbus have been fierce rivals. Boeing has accused Bombardier of dumping the C Series in the U.S. to the determent of 737 sales. A teaming with Embraer would give Boeing a direct competitor against the C Series.

The prospective alliance would come as Embraer prepares to bring the first of its E-Jet E2 family, the E190-E2, to market in 2018. Embraer Commercial Aviation CEO John Slattery had indicated that any stimulation of the narrowbody market resulting from Airbus’s involvement in the Bombardier C Series program could also serve to stimulate Embraer’s E190-E2 and E195-E2, the primary challengers of the C Series in the under-150-seat market segment.

While Bombardier has been engaged in its dispute with the U.S. Commerce Department, Embraer has faced its own scrutiny for dealings in the past by the U.S. government. The Brazilian company agreed to a $200 million settlement in late 2016 with the U.S. Justice Department and the Securities and Exchange Commission.