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Is it time for Boeing Co. to worry
about its proposed joint venture
with Embraer SA? As the crisis of
its grounded 737 Max jet drags on,
Boeing’s planned partnership with the
regional-aircraft maker hasn’t gotten
much attention, but more than a year
and a half after it was announced, the
deal still hasn’t closed.
Boeing and Embraer outlined a pre-
liminary agreement for a joint ven-
ture to sell regional aircraft—typically
planes with 150 or fewer seats—in July- It took five more months to hammer out the details,
with Boeing ultimately agreeing to pay $4.2 billion for an
80% stake in the business, later dubbed Boeing Brasil–
Commercial. Embraer and Boeing repeatedly projected
confidence the deal could be wrapped up by the end of - It wasn’t to be.
While the transaction was expected to be a political hot
potato in Brazil—where Embraer is a national champion—
and in China—which was fighting a trade war with the U.S.
when the venture took shape—the biggest roadblock turned
out to be the European Union. In October the EU warned
that a Boeing-Embraer deal could damp competition in
commercial aircraft and opened an in-depth investigation.
It’s since stopped the clock on its review twice in the quest
of more information from the two plane makers, with the
latest halt pushing the deadline for a decision to June 23.
The venture was widely seen as a defensive response
to rival Airbus SE’s move in late 2017 to take control of
Bombardier Inc.’s CSeries program, now
called the A220. That deal, in turn, was
precipitated by Boeing’s campaign to
get tariffs slapped on Bombardier jets,
which it said competed unfairly with
the smallest of its Max jets. The U.S.
International Trade Commission even-
tually ruled against that claim in January- But the uncertainty created by
Boeing’s protests depressed sales of the
CSeries, leading Bombardier to turn to
Airbus for financial help.
As it happens, Embraer’s largest
model, the E195-E2, also competes with the smallest Max
in certain configurations. This time it’s in Boeing’s inter-
est to downplay the overlap.
Ultimately, the Boeing-Embraer venture is likely to get
EU approval, because the Max crisis makes it difficult for
regulators to argue the product mashup gives Boeing lever-
age to raise prices, Bloomberg Intelligence analyst Aitor
Ortiz wrote in a Feb. 24 note. Boeing, which didn’t sell a
single commercial jet in January, is likely to offer steep dis-
counts to entice buyers for the damaged Max brand.
Also, European regulators didn’t object to the Airbus-
Bombardier tieup. The Wall Street Journal reports that’s in
part because Boeing’s trade complaints kept such a tight
lid on CSeries orders that the purchase didn’t meet the rev-
enue threshold that triggers a review. Having not stepped
in to block a similar deal may make it difficult for the EU
to take a hard stance on this one.�Sutherland is a
ILLUSTRATION BY GEORGE WYLESOL columnist for Bloomberg Opinion
By Brooke Sutherland
Boeing’s Other Headache
Is Its Embraer Deal
◼ LAST THING
With Bloomberg Opinion