A few days after Airbus formally took possession of Bombardier’s CSeries product line, aircraft manufacturers Boeing and Embraer announced that they have finally signed a memorandum of understanding (MoU) that formalizes the partnership between the two companies. By the end of 2019, Boeing will keep 80 percent of the commercial aviation division of Embraer.
On the surface, the agreement is quite similar to the one that Airbus and Bombardier signed a few months ago and completed just this week. Taking recent events into account, however, the situations in which both agreements were signed are completely different.
Airbus found Bombardier seemingly cornered by an impending ruling that everyone thought would give Boeing a favorable outcome in the dispute over the CS100s sold to Delta. The association between them was born out of one’s desperate situation and the other’s sense of opportunity to find a profitable workaround to what turned out to be a non-issue.
In the case of Boeing and Embraer, however, there is also a question of clear need. Boeing did not have any aircraft in the segment that goes from 100 to 150 seats, excluding the 737 MAX 7. Embraer, on the other hand, has been specifically dedicated to this segment. In that de facto division of the market, the union resembles a fantastic win-win for both companies.
The agreement makes São Paulo a “center of excellence for the design, construction and support of commercial aircraft, and will be fully integrated into the supply chain and the production chain,” according to a statement issued by Boeing.
Boeing will benefit from an engineering center that has been studying and working with state-of-the-art materials for years, exemplified in the series E2 of the E-Jets. Producing the new series of jets involved a huge qualitative leap to the point of calling the new series “The Profit Hunter,” as it attacks the points that were criticized in the first series of E-Jets.
Aerolineas Argentinas CEO Mario Dell’Acqua has said that the E190AR is an excellent airplane, but has a very high operating cost. The consumption reports of the new E190-E2 and E195-E2 are determinant to establish the differences. Put simply, what Boeing just bought is a fierce contender to the CSeries with a proven and well-known predecessor.
Today, they are two of the few Western products that have been designed from scratch in recent years. And, like Bombardier, have plenty of room to grow.
With no limitation to compete against the big ones — because they are now part of the big ones — both the CSeries and the E2 will be able to extend their designs and be platforms for new products. The aircraft are closer to market needs that Boeing and Airbus require to fulfill, especially with Boeing’s lacking in the middle of the market.
The partnership has the potential to formulate the base of the highly-anticipated 797. If the idea is to arrive with an airplane that enters service in 2025, there is not much scope to come and go with sketches. If the new partner has a design with solid growth potential, it may not be necessary to re-invent the wheel.
In addition to that advantage, there is another one imposed by globalization: the costs of human resources in Brazil will always be immensely lower than those of the United States. Boeing has had a constant problem with the costs of its engineering departments and being able to access engineers with excellent backgrounds, experience and training at a fraction of the cost is always a competitive advantage.
The partnership with Embraer is not something improvised, nor has it emerged from a hurry. The two companies have been working together for over 20 years, if not in a direct collaboration. They knew how to coordinate so as not to bother each other.
This acquisition makes Embraer play an important role in the near future of the global aviation industry and even in the medium term. By 2030, someone must make a bitter and unfriendly decision, retiring the 737. When the FSA (Future Small Aircraft) program is launched, it is highly likely that Embraer’s design teams will take the lead in the drawing.
It is clear that Boeing chose to sign a deal with Embraer with the intention of completing a product portfolio that goes from the E-175-E2 to the 747-8. It is also clear that the Western duopoly will have to strengthen its power and prepare for the tough competition that will have the most attractive market in the coming years, China and Southeast Asia.
It will be time to see COMAC and Russia’s design bureaus with another eye, which are growing rapidly, and which will be a rival to fear when they can replace many of the western suppliers of systems and components, which today are seen as guarantors of flight safety.
Technology and systems expert, occasional spotter, not-so-dynamic midfielder, blogger, husband, father of three cats; he believes that Latin America's aviation industry past, present, and future offer a lot of stories to be told.
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