C Series, Airbus will have its hands free for a year
The news of the day in the world of aerospace is the signing of a Memorandum of Understanding (MOU) between Boeing and Embraer on Embraer’s commercial aircraft division.
According to theMOU, Boeing would take an 80% stake for US $ 3.8 billion in the new entity that would manufacture the E-Jet and its re-engineered version of the E2. It is also expected that the two parties will form another corporate entity to promote and sell the products of Embraer’s military division. It should be remembered that the MOUis not binding on both parties and does not contain any obligation of result.
Boeing and Embraer find themselves in the same situation where Airbus and Bombardier were in October 2017; that is to say, the outline of the agreement is drawn and we now know what kind of agreement is aimed at both partners. It also means that Boeing can’t start selling Embraer’s commercial aircraft until the agreement is completed and approved by regulatory authorities.
The two parties are giving each other 18 months to reach a final agreement while Airbus and Bombardier have given themselves 14 months. But the difference in the case of the C Series is that the administrative entity, the C Series limited partnership, had already been created on July 1, 2016 following the agreement with the Government of Quebec. This means that its operation was already established and that the services to be billed to it were known. It was for this reason that Airbus and Bombardier took only 8 months to complete the transaction. In the case of Embraer commercial aircraft; Once the agreement is finalized, they must first set up the new company, see what services will be provided by Embraer and Boeing. The devil is in the details they say and it could be very long before everything can be tied up.
When Airbus and Bombardier announced that they had signed there MOU, the Canadian and Quebec governments hastened to approve it, giving both partners the flexibility to complete the negotiations. In the case of the agreement between Boeing and Embraer, the Brazilian government has a veto right over any agreement to sell some or all of Embraer’s activities. The Brazilian government has already refused to hand over Embraer’s military division to Boeing forcing the two sides to find a different solution. Since there will be a general election in October in Brazil, opposition candidates will certainly not miss their opportunity to demonize the deal. It only takes a popular anti-Boeing slogan for the situation to turn against the deal.
Meanwhile, Airbus has full control of the C Series and has the freedom to offer it to airlines. It is in his interest to sign as many orders as possible and even offer substantial discounts to encourage buyers to pre-empt their purchases. All C Series sales that Airbus will conclude before the completion of the Boeing-Embraer partnership are potential customers lost to E2 for the next 20 years.
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