The Boeing Co. confirmed that it is in discussions with Brazilian manufacturer Embraer. In a terse press release, the companies said that “there is no guarantee a transaction will result from these discussions,” and added that no additional comments about them will be made.
If the combination occurs, it would potentially give Boeing’s commercial product line a far broader sweep. Embraer’s E170, E190, E195 and E2 series of airliners could augment Boeing’s airline fleet by adding shorter-haul capabilities in the regional market. Currently, Boeing’s smallest airliners are iterations of the basic 737 design, which debuted in 1964 and evolved into today’s 737-700, -800, and -900ER models.
The discussions come on the heels of corporate jousting among Boeing, Bombardier, and Airbus. Airbus recently purchased a 50.01-percent stake in Bombardier’s C-series of narrow-body, medium-range airliners. Boeing has argued that Bombardier’s C-series is heavily subsidized by the Canadian government and suggested the company was planning to dump the aircraft on the U.S. market. Subsequently, the U.S. Department of Commerce announced a 292-percent tariff on C-series imports. If Boeing and Embraer end up as a single unit, then its newly-acquired E-Jets would have a competitive advantage.
But none of this is certain. Embraer was owned by the Brazilian government until 1994, when it was privatized. Under the terms of the privatization agreement, the government retains a controlling share over Embraer’s business activities, and foreign ownership of voting shares is limited to 40 percent. The government’s share, dubbed the “golden share,” gives the government veto power over changes in the control of the company. This includes the power to nix any changes in Embraer’s corporate ownership, business direction, or alteration of its defense programs.
The press release acknowledged this and other hurdles. It closed out by saying, “Any transaction would be subject to the approval of the Brazilian government and regulators, the two companies’ boards and Embraer’s shareholders.”