Boeing, Embraer near deal on commercial air business: source

US aerospace giant Boeing and Brazil's Embraer are close to an agreement to combine their commercial air operations into a new company, a person familiar with the talks told AFP Tuesday.

The deal is designed to address the main roadblock to a merger between the two aerospace companies: Brazilian government opposition.

Boeing would hold 80 to 90 percent of the new company, which would be based in Chicago, while Embraer's military operations would not be affected by the transaction and would remain under Brazilian control, the source said.

The companies in December confirmed they were in talks on a possible combination, a move seen as part of Boeing's strategy to counter archrival Airbus' ambitions in the smaller commercial aircraft category with a venture with Canadian company Bombardier.

However, the talk of a merger drew immediate objections from the government in Brazil, which holds a so-called golden share with veto power over Embraer transactions.

Boeing presented this structure to the government, and the discussions "are moving in the right direction," the source said, noting the announcement of an agreement could be made in the coming weeks.

- 'Golden share' -

Brazil's Defense Ministry has referred to government control of Embraer as "a matter of national sovereignty." According to a report in Brazilian daily Valor Economico, the government would retain the "golden share" in Embraer.

Boeing declined to comment on the reports, but chief Dennis Muilenburg told investors last week that the combination with Embraer would be "a great strategic fit," and that the company was working to address the Brazilian government's concerns.

"These discussions are productive and we're continuing to have active dialogue with the key stakeholders," Muilenburg said.

The takeover of Embraer's commercial airliners would enable Boeing to complete its portfolio by adding aircraft with a capacity of up to 150 seats and to regain ground in the medium-haul against Airbus.

Airbus announced in mid-October a strategic partnership with Canadian Bombardier on CSeries aircraft in that size range, which was the subject of a bitter trade complaint brought by Boeing, which failed.

The world's third-largest aircraft manufacturer with nearly $6 billion in sales, Embraer was privatized in 1994 and is one of Brazil's success stories. It offers a range of civil and military aircraft as well as business jets.

In 2013, Embraer launched the E-Jets E2 family, a new generation of aircraft due to enter the market this year as a potential competitor of the CSeries.

Its defense branch includes models such as the A-29 Super Tucano for attack or training missions, and the KC-390 for military transport.

The reaction to the proposed deal was largely positive, given the potential to address the government's objections and put Boeing on surer footing in its battle with Airbus and Bombardier.

The agreement to keep Embraer's "military division in-house... would hopefully satisfy the Brazilian government," CFRA's Jim Corridore said in a research note.

"We think that Boeing would benefit, gaining entry into a plane size they are not currently in."

Canaccord Genuity aviation analyst Ken Herbert said he is "not convinced of the strategic long-term benefit for Boeing," but noted that the combination "does position Boeing as a leader from the mid-size business jet market through regional aircraft on up."

China's COMAC to deliver first plane in 2021
Singapore (AFP) Feb 6, 2018 - China's state-owned plane-maker said Tuesday it expects to deliver its first home-grown passenger jet to a customer in 2021 as the world's second largest economy seeks to challenge the dominance of Boeing and Airbus.

The Commercial Aircraft Corporation of China (COMAC) plans to first target the Chinese market, before moving on to Southeast Asia and Africa, said Lu Zheng, deputy general manager of sales and marketing.

The C919, a COMAC-built 168-seater passenger plane, will likely be cheaper than equivalent models by its closest competitors, Lu told reporters on the sidelines of the Singapore Airshow.

The company is hopeful that it will obtain Chinese airworthiness certification for the plane in three to four years.

"We hope to hand over the first C919 to China Eastern Airlines in 2021 and we will work hard for it," Lu said.

"Our main audience is the China market, but we are exploring opportunities overseas," he added.

The narrow-body jet represents nearly a decade of effort in a state-mandated drive to reduce dependence on European consortium Airbus and US aerospace giant Boeing.

The C919 has a range of 5,555 kilometres (3,444 miles).

The Airbus A320 at list price is $101 million with a range of 6,500 kilometres, and the Boeing 737 MAX 8 has a list price of $117.1 million and a range of 6,570 kilometres.

The maiden test flight of the first prototype C919 took place in May last year, and a second prototype completed its first flight in December. Test results have turned out well, Lu said.

COMAC has already received 785 orders for the C919, including 34 orders from overseas, including Germany and Thailand, he said.

China is a huge battleground for Boeing and Airbus, with Chinese travellers taking to the skies in ever-growing numbers.

The Chinese travel market is expected to surpass the United States by 2024, according to the International Air Transport Association.

But aviation analysts have said Shanghai-based COMAC has a long journey ahead before it can challenge the lock held on the market by Boeing and Airbus.

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