Boeing-Embraer Tie-Up

  • OEM Alignment
  • Supply Chain Synergies
  • Product Development Planning

The announcement earlier this week of closer co-operation between Boeing and Embraer will have significant ramifications for each of their respective customer bases as well in the wider manufacturing supply chain.

While many have lauded the bizarre pairing of Bombardier and COMAC, the Boeing-Embraer deal effectively also isolates EADS – not just from a commercial standpoint, but militarily too.Embraer has yet to detail definitive plans to re-engine its E-Jet family, but whatever steps it takes, it’s likely now that it will cap development costs for two key reasons:

  • CSeries market penetration thin & fraught high order cancellation risk
  • Better off working with Boeing on new single aisle family circa mid-2020s

Boeing’s ongoing work on an all new 737 replacement has not stopped since it launched the 737MAX last August. A deeper working relationship with Embraer allows the pair to effectively launch two sets of narrowbody airplane solutions, and one that will ultimately become a true 757 replacement.

Common flight decks, systems, materials and even propulsion will give airlines greater cost savings, despite having two mission differing airplane families.

Where Boeing would focus on a baseline airplane sized slightly bigger than the 737-700, starting at anywhere between 140-150 seats with stretched variants pushing capacity to 240 seats (757 territory), at the lower-end, a joint Boeing-Embraer family comprising a 120-145 seat family would emerge. With question marks about the viability of the Mitsubishi MRJ family swirling, this airplane will be out of the game before the end of the decade if not by 2025, paving the way for a stronger Boeing-Embraer based offering.

This proposition not only kills whatever lacklustre business case the woeful CSeries has, but the equally poor competitive “threats” from the likes of the COMAC C919 and Irkut MS-21 would struggle to make inroads with designs, by which time, would be beyond a half-decade old with severe limitations on their longevity and technological expandability.

In their joint press release, Boeing and Embrarer “have agreed to pursue several areas of cooperation, including commercial aircraft features that enhance safety and efficiency, research and technology and sustainable aviation biofuels,” with the wide inference here that production synergies will be key to future product development plans as well offering customers less complex and costly airplane maintenance solutions.

This wide-ranging partnership may indeed look akin to OEM consolidation – perhaps that is something etched farther down the line, for the interim, it will have certainly rattled competitors nerves in a very big way.

A quick look over the next decade and you see that Boeing’s earnings are going to be significantly bolstered by widebody airplane deliveries, dominated by the 747-8 family, the 787 family, the 777 and the upcoming 777X (which for now will relegate the Y3 planning to 2030). In a decade’s time, the Irkut MS-21, Bombardier CSeries and the COMAC C919 will all have entered production and there will be at least two, if not  all three of them becoming production casualties, especially as the current A320neo and 737MAX continue to amass orders and form the majority of Airbus’ and Boeing’s deliveries in the coming years.

EADS and its Airbus unit are missing from this metric. Have they missed a trick here?

Undoubtedly.

The problem they now have is that whatever step they make to get into this game of pan-global OEM tie-ups, it will be seen more as short shrift rather than cohesive strategy and this could well undo their already-delayed plans for an A320 replacement which has been effectively “killed off” until the cash drains from the loss making A380 and A350XWB flat lines.

Image Courtesy Of Boeing

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