SINGAPORE- Some of the world’s biggest aircraft buyers are urging the European Union to clear Boeing’s tie-up with Embraer, fearing Embraer’s commercial aviation business would struggle on its own now Airbus has swallowed its main competitor in regional jets.
Airbus, Europe’s biggest planemaker, on Thursday increased its controlling stake in the A220 regional jet program – Embraer’s main rival – as Canada’s Bombardier sold out of the project it had set up.
That deal leaves Embraer looking increasingly exposed, despite its long history as an independent manufacturer, and ratchets up pressure on the Brazilian company and US giant Boeing to complete a similar tie-up, buyers and analysts said.
Their $4.2 billion deal would in part see Embraer cede 80 percent of its commercial arm to Boeing. It has been slowed by an EU competition probe expected to last until the end of April.
The EU is worried that whirlwind consolidation triggered by Bombardier’s decision to exit the market over losses would leave airlines too little choice, cutting the number of key suppliers from four to three, and then just two if Embraer is swallowed.
But in an unusual twist – as buyers typically favour greater choice of suppliers – airlines and lessors contacted by Reuters backed the Boeing-Embraer deal, expressing fears whether Embraer would be able to offer an indefinite alternative to a jet now backed by a much larger manufacturer.
“Now you have got the heavyweight boxer in the ring with someone who is about seven divisions lighter — there is only one outcome,” said Aengus Kelly, chief executive of leasing giant AerCap, the world’s largest buyer of commercial planes.
Kelly urged the European Commission to back the deal.
“I think it’s a must: if Embraer don’t do it, it’s likely that Airbus will corner part of the narrowbody market which will be poor for the consumer,” he said in a telephone interview.
“It just won’t happen that Embraer is a viable long-term competitor, standalone, against the power of Airbus.”
Embraer and Airbus had no immediate comment. Boeing BA.N declined to comment. The EU is expected to restart its probe into the Boeing-Embraer deal next week after halting the process while waiting for data, a person familiar with the matter said. – Reuters
