Bombardier to face pressure

The planned tie-up between Boeing Co. and Embraer SA will result in stiffer competition for the Airbus-controlled C Series and Bombardier Inc.’s regional aircraft business, industry observers said Thursday.

Boeing will own 80 per cent of the joint venture valued at US$4.75 billion and Embraer the remaining 20 per cent. The deal is expected to close toward the end of 2019.

The partnership is a direct response to Airbus partnering with Bombardier on the C Series, its largest commercial aircraft, analysts say.

“This is really about the C Series,” said Richard Aboulafia of the Teal Group.

Getting the support of one of the world’s largest aircraft makers restores equilibrium to a commercial aircraft market following the AirbusBombardier joint venture that closed on Sunday, he said.

Gaining Boeing’s help was essential to help Embraer restore the competitiveness of its largest commercial planes against the CS100, Aboulafia said in an interview. In order to really challenge the C Series, Embraer had to restore the cost competitiveness of its larger 190 and 195 E2 jets.

“I think Embraer realized that with Airbus’ help, the C Series was suddenly far more competitive in its sales campaigns. If you want to look at a single smoking gun behind today’s announcement, that’s it.”

Ninety per cent of the deal is aimed at reducing Embraer’s cost base by using Boeing’s leverage to force supplier deals that will allow the Brazilian company to more aggressively compete with the C Series for orders, he said.