Boeing, Embraer to establish joint venture in Brazil

Aircraft makers' partnership brings Chinese players more challenges

United States aircraft manufacturer Boeing Co and Brazil-based plane-maker Embraer SA announced on Thursday they will form a joint venture as part of a strategic partnership.

China's single-aisle C919 passenger jet will face a stronger competitor as the rivals consider further consolidations, but the airworthiness certification work for the C919 plane is advancing steadily, and it would ultimately gain its market share as well, analysts said.

According to the statement, the new joint venture will be based in Brazil and comprise Embraer's commercial aircraft and services business, which will align with Boeing's commercial development, production, marketing and services operations, according to a statement.

Under the terms of the agreement, Boeing will hold an 80 percent stake in the joint venture, and Embraer will own the remaining 20 percent stake. The transaction values Embraer's whole commercial aircraft operations at $4.75 billion, and values Boeing's 80 percent ownership stake at $3.8 billion.

The transaction is expected to close by the end of 2019, according to the statement.

The two companies said they also plan to create another joint venture to promote and develop new markets and applications for defense products and services.

Earlier, Boeing's European rival Airbus SE agreed to buy a majority stake in Canadian manufacturer Bombardier Inc's 110 to 130-seat C Series jets, rivals of Embraer's E-Jets.

"The move can be a challenge to China's efforts to grow its presence in the aircraft manufacturing sector and the C919's prospects. We should have a tolerant attitude toward and firm belief in the C919 aircraft," said Lin Zhijie, an aviation industry analyst and columnist at Carnoc, one of China's largest civil aviation websites.

"Before, Commercial Aircraft Corp of China, the manufacturer of the C919, Bombardier and Embraer could work together to grow market share and compete with the duopoly of Boeing and Airbus," he said.

"Now, Airbus has acquired the C Series of Bombardier, Boeing has improved its product portfolio, and their competitive advantages will strengthen further as they have complemented their product chains."

The C919, China's first domestically produced narrow-body passenger jet, made additional test flights in Shanghai and Xi'an, Shaanxi province, at the end of June.

COMAC earlier said it would send six aircraft on test flights, and complete more than 1,000 compliance tests. Two other aircraft will only undergo ground tests, including static and fatigue tests. The C919 model is expected to be put into use in the market in 2021. So far, it has netted 815 orders from home and abroad.

Lin said in the short term, the C919 aircraft won't have a significant impact on the market share of Boeing and Airbus. But in the long term, it has the potential to be exported to more countries.

Embraer, the third-largest aircraft manufacturer after Boeing and Airbus, mainly manufacturers regional jets with 70 to 130 seats. Currently, the company accounts for 61 percent of global deliveries in the 70 to 130 seat jet segment, followed by Canada's Bombardier and Russia's JSC Sukhoi Co with 31 percent and 4 percent of the market, respectively.

The Boeing and Embraer partnership will cover aircraft models that contain between 70 and 450 seats.