Boeing on board for Embraer

US support could help Brazil sell its Hercules replacement to NZ

Adeal in which Boeing will take an 80 per cent stake in Embraer’s commercial aircraft division marks a new course for the Brazilian planemaker and could give its ambitions in New Zealand a shot in the arm.

As part of the proposed deal, both companies say they will create a joint venture to promote and develop new markets and applications for defence products and services, especially the twin-jet KC-390 multimission aircraft.

The T-tail heavy lifter is in the running to replace New Zealand’s ageing Hercules aircraft, and having Boeing’s weight behind the fledgling programme will help sell the aircraft that is yet to enter active service. “Joint investments in the global marketing of the KC-390, as well as a series of specific agreements in the fields of engineering, research and development and the supply chain, will enhance mutual benefits and further enhance the competitiveness of Boeing and Embraer,” said Nelson Salgado, Embraer’s executive vice president of financial and investor relations.

Boeing was successful in selling the New Zealand Government its P-8A Poseidon maritime patrol aircraft to replace 1960s-era Orions in a $2.3 billion deal announced on Monday.

The pressure to replace the fivestrong Hercules fleet, which also dates back 50 years, is just as great and an announcement is expected this year. The latest model Hercules is a strong

Hcontender, and Embraer, which has shown its plane to Defence staff, also faces competition from a Kawasaki twin-jet and the large Airbus A400M.

The proposed Boeing-Embraer commercial aircraft deal gives Boeing access to the smaller aircraft market. Rival Airbus already has a partnership with Bombardier in the under 150-seat market and this week flew the first of what used to be the C Series aircraft in its own livery.

The CS100 is now the A220-100, while the larger CS300 is now the A220-300.

Airbus has a 50.1 per cent stake in the Canada-based firm and provides procurement, marketing, sales and customer support expertise.

Under the terms of the BoeingEmbraer agreement, the United States company will hold an 80 per cent ownership stake in the joint venture, with the Brazilian company owning the remaining 20 per cent.

The transaction values 100 per cent of Embraer’s commercial aircraft operations at US$4.75b ($7b), with the value of Boeing’s stake put at US$3.8b.

“By forging this strategic partnership, we will be ideally positioned to generate significant value for both companies’ customers, employees and shareholders – and for Brazil and the United States,” said Dennis Muilenburg, Boeing’s chairman, president and chief executive.

On finalisation, the commercial aviation joint venture will be led by Sao Paulo-based management, including a president and chief executive, while Boeing will have operational and management control of the new company.

Embraer has just launched a new version of its E-Jets. Close to 1400 of the earlier generation E1 planes have been delivered.

The firm was started by Brazil’s military Government in 1969 and was built initially on the success of the rugged Bandeirante, which helped open up far-flung parts of Brazil (and was later exported to dozens of countries including New Zealand).

The company now has commercial, military and private jet making operations with close to 20,000 workers concentrated at Sao Jose dos Campos, Sao Paulo State, but with a strong presence in the United States and more than 15 other countries.