Fresh from grumbling about the proposed purchase of the Bombardier C Series by Airbus, it has emerged that Boeing and Embraer are close to a merger.
A statement issued yesterday reads: “The Boeing Company and Embraer confirm the two companies are engaged in discussions regarding a potential combination, the basis of which remains under discussion. There is no guarantee a transaction will result from these discussions. Boeing and Embraer do not intend to make any additional comments regarding these discussions. Any transaction would be subject to the approval of the Brazilian government and regulators, the two companies’ boards and Embraer’s shareholders.”
We were warned by many in the industry to expect a “big announcement” at our Dublin conference in January, so the timing is a surprise. But the move makes sense for both companies. After all, what do you do when your closest rivals link up – build up your own scale and offerings of course. This is not great news for the consumer though – the airframe manufacturer duopoly has become even more pronounced and competition has been dampened once more. Still the discounting will likely continue even though the emphasis now for all manufacturers must be on ramping up production and fulfilling all those outstanding orders to fund the need for constant R&D spend in a rapidly changing world where the future of transport is moving towards electric.
Although the deal is nowhere near certain, shares in Embraer have jumped by 40 percent – surely enough to indicate a done-deal? If so, what does that mean for Embraer and Boeing’s complaints against Bombardier and Airbus C Series partnership? The latter is still awaiting approval from the relevant anti-trust regulators, which will also have to examine any Boeing-Embraer merger. The Brazilian government will also need to approve the deal since it holds a golden share in Embraer, which enables it to veto any transfer of control in the company. Brazil’s national development bank, BNDES, holds a 5.4 per cent stake in the company and would need to approve any deal as well. So there’s a long way to go until this is solidified.
As we close our office for the holiday period, we would like to wish all our readers a very peaceful season and prosperous New Year. See you all in 2018!