WSJ | Embraer and Boeing to Collaborate

Embraer SA, the Brazilian plane maker that is seeking to boost revenue from its defense unit, said Tuesday that Boeing Co. will help it develop the KC-390 transport plane.

The two companies will exchange technical and market information as part of the agreement, and possibly team up for commercial opportunities, company executives told reporters in Sao Paulo. Boeing already produces the C-17 transport plane, which carries heavier loads than the KC-390 is being designed for, and will share its experience in producing and selling the plane.

Boeing also produces the F-18, one of three planes the Brazilian government is considering buying as it renovates its air force. Dassault Aviation’s Rafale and Saab AB’s Gripen are also competing for the government order of 36 fighter jets. As part of the purchase, Brazil’s government is examining price, quality and technology-transfer proposals.

“This is a collaboration, with both sides bringing resources to the table,” said Luiz Carlos Aguiar, chief executive of Embraer’s defense unit. Boeing “isn’t taking a stake [in Embraer]. We’re talking about an exchange of information by two leading companies which are willing to trade technical and market information.”

With the partnership, Embraer hopes to expand sales of its transport plane. The company has letters of intent from potential customers for 60 of the KC-390s, Mr. Aguiar said.

The company estimates that the global market for transport planes is about 2,000 aircraft, but discounting markets where local companies already produce comparable carriers or where purchases have been made of planes produced by Embraer rivals, Mr. Aguiar said he sees a potential market of about 700 planes. Embraer could take a share of 15% to 20% of those planes, he said.

“The partnership with Boeing could permit us to increase that number, but we still don’t know by how much,” Mr. Aguiar said. The partnership with Boeing will help Embraer refine its market outlook, he said. Mr. Aguiar and Dennis Muilenburg, chief executive of Boeing’s defense division, declined to specify the markets in which they see potential for sales.

The KC-390, a military transport plane Embraer is developing to compete with Lockheed Martin Corp.’s C-130, is due to enter service in 2015. In April, Boeing and Embraer signed an agreement to work together in several areas of cooperation, including commercial-aircraft features that enhance safety and efficiency, research and technology and the development of aviation biofuels.

By Paulo Winterstein
June 26, 2012

WSJ | Embraer and Boeing to Collaborate

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