The European Commission has opened up an antitrust investigation into the planned joint venture between Boeing and Embraer.
Following concerns over competition, the investigation will assess the situation around the 100-150 seat aircraft market as both Boeing and Embraer manufacturer similar size aircraft.
Without appropriate competition between manufacturers, airlines around the world could see a drastic increase in prices and reduced development cycles.
Regarding competition in the 100-150 seat market Boeing’s smallest narrow-body product offering is the 737 MAX, which features upgraded engines and aerodynamics like Embraer’s E2 family.
The removal of Embraer from the already confined aviation market would leave Airbus and Boeing as the only large players, the European Commission doesn’t see Chinese, Japanese and Russian players filling the gaps due to the high barriers to entry.
At best, China’s COMAC, Japan’s Mitsubishi and Russia’s United Aircraft Corporation would have to battle 5-10 years before entering the global market in a substantial position.
Whilst Airbus has the A320 and the A220 they do not engage in head to head sales, which the European Commission states Boeing does with Embraer.
Also facing investigation is Boeing and Embraer’s combined marketing approach for the KC-390 military aircraft.
The proposed $4.2 billion would see Boeing take control of 80 percent of Embraer commercial and services operations. Defence and executive products would be the remaining Embraer branded product lines.
Under the partnership Embraer would be renamed to ‘Boeing Brasil – Commercial, which you can read about here:
Boeing and Embraer both say the partnership will increase value across the global aviation market, benefitting airlines and the flying public.
A number of regulatory approvals have been earned, however Boeing and Embraer have decided to hold off on the final transaction until early 2020.
Europe has until February 2020 to make a decision on the proceedings of the Boeing/Embraer partnership.
Boeing is already facing enough complications with the 737 MAX crisis, they are now also on the side that has enforced billions of dollars worth of tariffs on the European Union.
Airbus argues against this, not only for their company, but for the wider global economy, stating the tariffs would add insecurity and disruption to the aerospace industry and the global economy.
Discussions have been requested by Airbus to settle the trade dispute between the EU and the US.
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