RAF FAIRFORD, England — Earlier this month, Boeing and Embraer struck a deal on a joint venture that would give Boeing control of the Brazilian company’s commercial jet business. But what the agreement will mean for their associated defense units is still being hammered out, a Boeing defense exec said Friday.
During a briefing to reporters on the sidelines of the Royal International Air Tattoo, Gene Cunningham, who leads Boeing’s international defense business, called the Embraer-Boeing deal a work in progress, “particularly on the defense side.”
“So to talk about what we’re going to do marketwise or how we’re going to approach [our partnership], that’s probably a little premature right at this point in time,” he said. “I think what’s important is to see the strength of association of the companies and the product lines that are out there, as well as the great services/install base we have and how that really blends and matches for the products and services across the board. And that’s one that we’ve got to work our way through at this point.”
In its initial statement released after the commercial joint venture was announced, Boeing stated that both companies would seek to create another defense-specific joint venture “to promote and develop new markets and applications […] based on jointly identified opportunities.”
Embraer’s KC-390 multi-mission plane was specifically mentioned as an area for potential cooperation. Both companies had already agreed in 2012 to jointly market the KC-390, with a deal signed in 2016 that laid out that Boeing would take responsibility for logistical support of the aircraft as it was sold to customers around the world.
Greg Smith, Boeing’s executive vice president for enterprise performance and strategy and chief financial officer, told reporters Sunday that the KC-390 has a special focus inside the Embraer tie-up.
Asked specifically if Boeing would have a financial percntage in each KC-390 sold, Smith said “we’re still working through final details of that,” but did note that the two companies are going partner together to “sell that aircraft globally,” another sign the KC-390 agreement will cover more than just the services aspect.
It’s possible that Boeing could even begin marketing KC-390 within the United States if an expanded partnership is agreed upon, Richard Aboulafia, an aerospace analyst with the Teal Group, told Defense News.
“Maybe Boeing can convince SOCOM [U.S. Special Operations Command] or somebody to take a few of these. It’s not inconceivable,” he said.
There may be a chance for Boeing to partner in some way with Embraer on the A-29 Super Tucano, which is sold in the United States through prime contractor Sierra Nevada Corp. It could also find a role in Saab’s Gripen E program, where Embraer is doing final assembly of Brazilian jets.
“The potential is great. If you apply Boeing’s’ cost control methods and supply management methods to the Gripen, you get the Gripen product at a lower price point,” he said. “That’s always been the Gripen’s problem. Great plane. Way too expensive for what it is.”
Another potential opportunity lies inside Embraer’s portfolio of business jets, a lucrative business for the Brazilian company that could plug a hole in Boeing’s aviation portfolio.
Boeing’s super-profitable commercial side makes large airliners like the Boeing 777 or the 787 Dreamliner, but doesn’t produce small business jets — which has been a hindrance in international special mission aircraft competitions where foreign nations may prefer a smaller plane, Aboulafia said.
“Not everyone needs a full up Wedgetail,” he said, referencing Boeing’s 737-based airborne early warning aircraft. “They’ve been trying to sell the 737 for everything for so long. It’s a Rivet Joint replacement. […] It’s a Compass Call replacement. But people are pushing back and saying it’s not 737 for all occasions.”
Aaron Mehta in London contributed to this report.