Boeing and Embraer are joining forces. The US aviation giant and the Brazilian planemaker on Thursday announced a preliminary agreement to establish a joint venture.
The new joint venture will consist of Embraer’s commercial aircraft and services divisions and Boeing’s commercial development, production, and marketing and lifecycle services operations.
“By forging this strategic partnership, we will be ideally positioned to generate significant value for both companies’ customers, employees, and shareholders — and for Brazil and the United States,” Boeing CEO Dennis Muilenburg said in a statement. “This important partnership clearly aligns with Boeing’s long-term strategy of investing in organic growth and returning value to shareholders, complemented by strategic arrangements that enhance and accelerate our growth plans.”
Boeing will hold an 80% stake in the new joint venture, while Embraer, long considered a beacon of Brazilian industrial might, will retain the rest. The deal values Embraer’s commercial aircraft business at $4.75 billion, with Boeing’s stake in the joint venture valued at $3.8 billion, the parties said in a statement.
The deal is expected to close by the end of 2019. According to Boeing, the deal is projected to deliver $150 million in annual pretax cost savings by its third year.
With the joint venture in place, Boeing can offer a portfolio of commercial aircraft ranging from 70-seat Embraer regional jets to its next-generation 500-seat 777X wide-body.
The deal’s announcement comes days after Airbus completed its 50.01% take of the Canadian aircraft maker Bombardier’s critically acclaimed C Series program. It gives Boeing’s sales team a direct rival to the 100-seat C Series in the form of the new Embraer E190-E2.
Both Boeing and Airbus abandoned the 100-seat-airliner market over the past decade, instead focusing on larger, more lucrative jets. This allowed traditional regional jet makers like Bombardier and Embraer to not only thrive but move into the segment vacated by the all-powerful duo.