BestsellerMagazine.com - CATEGORY Latest news: TITLE
Airbus plans to add the CS100 and CS300 jets to its product lineup. Image source: Airbus.
This would put Boeing at a disadvantage, as its smallest model (the 737 MAX 7) is larger and significantly more expensive to operate than either CSeries jet. Meanwhile, Embraer would find itself competing directly with a company more than 10 times its size. It already has a hard time convincing airlines to look beyond Boeing and Airbus for their aircraft purchases.
Putting the Boeing and Embraer product lines together would make a lot of sense. Embraer's commercial jet portfolio covers the 70- to 130-seat range, while Boeing's starts at about 140 seats. Furthermore, the first planes from Embraer's new E2 family are set to enter service next year, so Boeing would be getting a fresh product without taking on any meaningful development risk.
A joint venture might be perfectly adequate
While the Brazilian government is likely to prevent Boeing from buying Embraer, it wouldn't block a joint venture between the two companies. (Indeed, Boeing and Embraer already have a joint venture in the defense space covering international sales and support for Embraer's new KC-390 multimission military jet.) A joint venture -- perhaps including a minority investment -- could unlock many of the benefits of a full merger.
Boeing's main interest in a deal is broadening its portfolio. If Airbus offers a package of smaller and larger aircraft to a potential customer, Boeing wants to be able to counter with a similar offer. For this purpose, Boeing doesn't necessarily need to own a 100-seat jet program outright. It just needs the ability to sell a plane in that size range.
From Embraer's perspective, the main goal of a tie-up would be to spur sales of E2-series jets. Embraer believes that many airlines would be more profitable if they added smaller jets to their fleets to serve lower-demand routes. However, Boeing and Airbus tell those same airlines that it's more efficient to have a uniform fleet of larger jets. A joint venture with Boeing would change those conversations, giving Embraer a shot at dramatically expanding its customer base.
Buying Embraer might be the most straightforward way for Boeing to counter Airbus' CSeries deal. But a joint venture (or some other formal marketing partnership) would be nearly as good for both sides -- and far easier to pull off.
More From The Motley Fool
- 3 Growth Stocks at Deep-Value Prices
- 5 Expected Social Security Changes in 2018
- 6 Years Later, 6 Charts That Show How Far Apple, Inc. Has Come Since Steve Jobs' Passing
- 10 Best Stocks to Buy Today
- The $16,122 Social Security Bonus You Cannot Afford to Miss
- Bitcoin's Biggest Competitor Isn't Ethereum -- It's This
BestsellerMagazine.com, index News of business criminal law politics soccer sports celebrity lifestyle video images in the world and the world today.
Source : https://finance.yahoo.com/news/boeing-kicks-tires-embraer-202000529.html