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Boeing and Embraer form partnership


Boeing and Embraer diversify, gain an edge on competitors

Boeing and Brazil-based jet manufacturer Embraer announced on Thursday that they are partnering in a deal worth $4.75 billion. This quid pro quo deal will help Boeing and Embraer compete in the aerospace industry in multiple ways.

First, the joint partnership benefits Boeing significantly. Moreover, it will allow Boeing to breach the market for smaller aircrafts and better compete with Airbus. However, even beyond that, Embraer will help Boeing produce airplanes more cheaply and efficiently, at which the Brazilian firm excels. In fact, Boeing announced that the partnership will create $150 million in savings.

Additionally, the deal will also positively impact Embraer. One of Embraer’s major competitors, Bombardier, recently partnered with Airbus in a similar nature. This joint venture with Boeing will help level that playing field. Plus, Embraer will have access to Boeing’s global network, which will help it expand immensely.

Under the deal, Boeing will have an 80% stake in the partnership, and Embraer will hold the remainder. The joint company will be based in Brazil, but Boeing will head all operations and management.

Investors don’t seem very moved by the news, as Boeing’s stock (BA) slid by less than a percent on Thursday. However, it is picking up steam on Friday, rising almost half a percent. Although this venture seems like a major decision for the company, it isn’t enough to sway investors because of the sheer size of the company. Unless Boeing made a monumental change, the aerospace giant’s stock is likely to stay relatively stagnant.

Interestingly, Embraer’s stock has also fallen by almost 8% since its opening on Thursday. Investors may be reluctant because the deal won’t come into fruition for a year or so after approval, but Embraer will likely see its stock skyrocket in the future once it has access to Boeing’s resources.


Featured image via Wikipedia

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