Boeing, Embraer in talks over potential tie-up

The talks between the aerospace companies focus on joint ventures or joint business agreements, not a change of control, a Brazilian paper said.
A Boeing plant in Renton, Washington. Any partnership between Boeing and Embraer would require approval by Brazil's government, which holds veto power over strategic moves at Embraer.
A Boeing plant in Renton, Washington. Any partnership between Boeing and Embraer would require approval by Brazil's government, which holds veto power over strategic moves at Embraer.PHOTO: REUTERS

Move could create passenger jet duopoly if Brazil gives approval

SAO PAULO • Planemakers Boeing and Embraer are discussing a"potential combination", they said on Thursday, in a move that could consolidate a global passenger jet duopoly provided Brazil's government gives its blessing.

The Brazilian government, which holds veto power over strategic moves at Embraer, would support a partnership in commercial aviation with Boeing but would block any takeover attempt, a senior government official told Reuters.

The news comes just two months after Boeing rival Airbus agreed to buy a majority stake in Bombardier's CSeries jetliner programme, a direct rival of Embraer's biggest E-Jets.

For decades, Canada's Bombardier and Embraer have faced off in the 70-to 100-seat regional jet segment that is just below the radar of Airbus and Boeing's larger commercial jet line-ups, but the CSeries alliance may have tipped that delicate balance.

Boeing has approached Embraer about a deal twice before, more than a decade ago, but was rebuffed due to the government's veto, according to a person with knowledge of the matter.

Any tie-up involving Embraer would require approval by Brazil's government, which holds a "golden share" in the planemaker, formerly a state-run company that was fully privatised in 2006.

Brazilian President Michel Temer took office last year with a market-friendly agenda focused on privatising state utilities and reducing political influence in state firms such as oil company Petroleo Brasileiro.

In September, Brazil's Finance Ministry asked an audit court to study how the government could exit the golden shares it holds in former state monopolies.

Mr Temer's policies contrast with those of the Workers' Party that governed from 2003 until last year, placing an emphasis on state-led development and "national champions" in strategic industries.

Still, foreign control of the planemaker at the apex of Brazilian industry appears to be a stretch even for Mr Temer.

"Embraer will never be sold in my government," he told military aides in a meeting on Thursday, according to a report by Brazilian newspaper Folha de S.Paulo.

Folha, which did not say how it obtained the information, said the meeting was called after a report in The Wall Street Journal that Boeing was in talks to take over Embraer.

Ms Adriana Fortes, spokesman for the Defence Ministry, which works closely with Embraer on military programmes, said it was premature for the government to say anything that could upset the talks.

"They still have to consult the government. We are following closely but there is nothing concrete yet and anything we say now could be imprudent and harm the talks," she said. "Not even the companies have agreed on anything concrete."

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 23, 2017, with the headline 'Boeing, Embraer in talks over potential tie-up'. Print Edition | Subscribe