Boeing, Embraer Plan Second Joint Venture for Defense Market

By Calvin Biesecker | July 10, 2018
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A KC-390 transport and tanker mid-takeoff. (Embraer)

Boeing moved a step closer to establishing a strategic partnership with Brazilian aircraft maker Embraer Thursday, announcing a pending $3.8 billion majority ownership stake in a commercial aircraft joint venture as well as a second, separate joint venture focused on defense.

A key part of the second joint venture will be Embraer’s multi-mission transport aircraft for the medium airlift market. Last December, the KC-390, which is being developed for cargo, transport and aerial refueling missions, achieved initial operational capability with the Brazilian air force.

“Joint investments in the global marketing of the KC-390, as well as a series of specific agreements in the fields of engineering, research and development and the supply chain, will enhance mutual benefits and further enhance the competitiveness of Boeing and Embraer,” Nelson Salgado, Embraer’s EVP for financial and investor relations, said in a statement.

Sheila Kahyaoglu, an aerospace and defense equity analyst with Jefferies, said in a client note that the pending defense joint venture expands an existing agreement between the two companies for jointly marketing and supporting the KC-390. She said Boeing won’t have operational management of the venture.

In the cargo and aerial refueling space, Boeing is in low-rate production of the KC-46 aerial refueling tanker for the U.S. Air Force and also built the C-17 transport for the Air Force. The KC-46 can carry a significantly larger fuel load than the KC-390.

Embraer’s Defense & Security segment posted $950.7 million in sales in 2017 and at the end of the year had a backlog of $4.2 billion. In addition to the KC-390, the company also manufactures the A-29 Super Tucano single-engine turboprop aircraft it offers for training, light attack and ISR missions.

Embraer is teamed with Sierra Nevada Corp. to offer the A-29 for U.S. Air Force light attack missions and the aircraft is in operation with the Afghan air force.

Embraer’s defense business, which represented about 16% of the company’s overall sales last year, also offers other aircraft for multi-mission purposes, command and control systems, tactical radio systems, and radar.

This story was originally published at Defense Daily.

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