NZ Herald business reporter Grant Bradley takes a look inside Brazilian plane-maker Embraer.
A deal in which Boeing will take an 80 per cent stake in Embraer's commercial aircraft division marks a new course for the Brazilian planemaker and could give its ambitions in New Zealand a shot in the arm.
As part of the proposed deal, both companies say they will create a joint venture to promote and develop new markets and applications for defence products and services, especially the twin-jet KC-390 multimission aircraft, based on jointly-identified opportunities.
The T-tail heavy lifter is in the running to replace New Zealand's ageing Hercules aircraft, and having Boeing's weight behind the fledgling programme will help sell the aircraft that is yet to enter active service.
"Joint investments in the global marketing of the KC-390, as well as a series of specific agreements in the fields of engineering, research and development and the supply chain, will enhance mutual benefits and further enhance the competitiveness of Boeing and Embraer," said Nelson Salgado, Embraer's executive vice president of financial and investor relations.
Boeing was successful in selling the New Zealand Government its P-8A Poseidon maritime patrol aircraft to replace 1960s-era Orions in a $2.3 billion deal announced on Monday.
The pressure to replace the five-strong Hercules fleet, which also dates back 50 years, is just as great and an announcement is expected this year. The latest model Hercules is a strong contender, and Embraer, which has shown its plane to Defence staff, also faces competition from a Kawasaki twin-jet and the large Airbus A400M.
The proposed Boeing-Embraer commercial aircraft deal gives Boeing access to the smaller aircraft market. Rival Airbus already has a partnership with Bombardier in the under 150-seat market and this week flew the first of what used to be the C Series aircraft in its own livery. The CS100 is now the A220-100, while the larger CS300 is now the A220-300.
Airbus has a 50.1 per cent stake in the Canada-based firm and provides procurement, marketing, sales and customer support expertise.
Under the terms of the Boeing-Embraer agreement, the United States company will hold an 80 per cent ownership stake in the joint venture, with the Brazilian company owning the remaining 20 per cent.
Fuselage sections of Embraer E Jets at the manufacturing plant near Sao Paulo. Photo / Grant Bradley
The transaction values 100 per cent of Embraer's commercial aircraft operations at US$4.75b ($7b), with the value of Boeing's stake put at US$3.8b.
"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," said Dennis Muilenburg, Boeing's chairman, president and chief executive.
On finalisation, the commercial aviation joint venture will be led by Sao Paulo-based management, including a president and chief executive, while Boeing will have operational and management control of the new company.
Embraer has just launched a new version of its E-Jets. Close to 1400 of the earlier generation E1 planes have been delivered.
The firm was started by Brazil's military Government in 1969 and was built initially on the success of the rugged Bandeirante, which helped open up far-flung parts of Brazil (and was later exported to dozens of countries including New Zealand).
The sprawling Embraer plant near Sao Paulo has its own fire department. Photo / Grant Bradley
The company endured financial and political pressure leading up to privatisation in 1994 and has since been hit by volatility afflicting planemakers around the world.
It has commercial, military and private jet making operations with close to 20,000 workers concentrated at São José dos Campos, São Paulo State, but with a strong presence in the United States and more than 15 other countries.
Want to buy a $24m private plane?
It's compulsory shoe protectors and hairnets on before stepping aboard Embraer's $24 million Legacy 450 executive jet in Brazil.
The sleek plane parked at Aeroporto de Sao dos Campos is a brand spanking new "white tail" aircraft — one without a dedicated buyer — and was opened to a small media group.
So Embraer doesn't want rogue shoe dust or any stray hairs on the luxurious interior of the aircraft parked near the runway at its main manufacturing base near the sprawling southern city of Sao Paulo.
The Legacy 450 is a mid-size jet capable of flying 1017km/h, with a range of 5370km, and can fly up to 45,000 feet. It boasts a fly-by-wire technology, a stand-up cabin, fittings crafted in Austria and up to nine seats for passengers, including one cushioned boat-style seat in the toilet.
Private planes are promoted as an essential business tool allowing connectivity, meeting space and avoiding airport security hassles.
Embraer is a relative newcomer in the corporate aircraft market and its range of planes takes on established competitors such as Bombardier's Learjet, Cessna's Citation and Dassault's Falcon. More than 1000 Embraer executive jets have been sold in 60 countries, from four to seven-seat Phenom 100s that sell for US$4.5m to the Lineage 1000 that can seat up to 19 and sell for US$55m.
The smaller jets are used by some airlines for training, while one of the most recent customers for the big suite-laden Lineage is casino operator MGM.
Embraer executive jet customers: •Actor Jackie Chan has a Legacy 650 and a Legacy 500. •British magnate Lord Alan Sugar has a Legacy 650, his third. •MGM Resorts International bought 3 Legacy 590s and 3 Lineage 1000Es. •Warren Buffet's NetJets has 125 Phenom 30s on order, of which over 60 have been delivered. •Finnair, Etihad, Emirates and Australia Flying School (China's Southeastern Airlines) have Phenom 100s for jet pilot training
