Embraer to be known as Boeing Brazil
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I just don't understand this renaming. What will that achieve, other than irritate the people and politicians in an already overheated country? Brazilians are unbelievably patriotic and, unlike many other patriots, they put their money where their mouths are by buying locally produced goods.
And what I don't understand even more is why Boeing bought it in the first place? To show they can? With all due and sincere respect to Brazilians, they don't really have the lineup. E-jets of the second iteration are not on par with much larger A220 which really CAN replace A319 and B737-7. That said, Embraer did a few very good designs in the past. Is that what Boeing is hoping for, more leverage in the regional segment?
Airbus saved a shedload of money by "buying" the A220 programme. Boeing OTOH will need to invest a lot of money to make a new regional jet/737 replacement/addition. Why not invest that same money into their own engineers and make that aircraft by themselves? They actually have more expertise in what is needed most for the new RJ - the hard learned lessons about composites from the 787 programme. I just don't get it.
And what I don't understand even more is why Boeing bought it in the first place? To show they can? With all due and sincere respect to Brazilians, they don't really have the lineup. E-jets of the second iteration are not on par with much larger A220 which really CAN replace A319 and B737-7. That said, Embraer did a few very good designs in the past. Is that what Boeing is hoping for, more leverage in the regional segment?
Airbus saved a shedload of money by "buying" the A220 programme. Boeing OTOH will need to invest a lot of money to make a new regional jet/737 replacement/addition. Why not invest that same money into their own engineers and make that aircraft by themselves? They actually have more expertise in what is needed most for the new RJ - the hard learned lessons about composites from the 787 programme. I just don't get it.
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There was a "Boeing Dash 8" for some time, too. Didn't really stick....
I also think that the E2 is not suitable for much stretching, even though the 2+2 seating is nicer for the Pax than 2+3.
Don't know about the E2 but the classic E-Jets don't have spectacular runway performance either, don't think they can go everywhere a 737 can go.
I also think that the E2 is not suitable for much stretching, even though the 2+2 seating is nicer for the Pax than 2+3.
Don't know about the E2 but the classic E-Jets don't have spectacular runway performance either, don't think they can go everywhere a 737 can go.
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I just don't understand this renaming. What will that achieve, other than irritate the people and politicians in an already overheated country? Brazilians are unbelievably patriotic and, unlike many other patriots, they put their money where their mouths are by buying locally produced goods.
The E-jets were never very popular here until Azul came along, and that only happened because of a very favourable deal for Neeleman to take the Embraers.
This new JV is causing much less commotion than many seem to think. The military and executive divisions remain as Embraer, and are considered by those Brazilians who have an interest as the important parts. Embraer has been viewed as essentially foreign owned since privatisation, so renaming the JV as Boeing Brasil (with an S) doesn't cause much of a stir.
TTFN
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Brazilians are not especially patriotic, except when the football or volleyball teams are winning, and they will only buy locally produced goods when there is no alternative. Those with the necessary cash buy the imported real deal, those without buy the imported contraband fake deal, but very few will support local industry by buying a national product.
The E-jets were never very popular here until Azul came along, and that only happened because of a very favourable deal for Neeleman to take the Embraers.
This new JV is causing much less commotion than many seem to think. The military and executive divisions remain as Embraer, and are considered by those Brazilians who have an interest as the important parts. Embraer has been viewed as essentially foreign owned since privatisation, so renaming the JV as Boeing Brasil (with an S) doesn't cause much of a stir.
TTFN
The E-jets were never very popular here until Azul came along, and that only happened because of a very favourable deal for Neeleman to take the Embraers.
This new JV is causing much less commotion than many seem to think. The military and executive divisions remain as Embraer, and are considered by those Brazilians who have an interest as the important parts. Embraer has been viewed as essentially foreign owned since privatisation, so renaming the JV as Boeing Brasil (with an S) doesn't cause much of a stir.
TTFN
Thanks for the information. I'll adjust my brasiladar. :-)
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Hmm, looks like I had a very wrong view of both the country and the countrymen. I was thinking more along the lines of the cars and trucks that they make and buy locally, but then again, that's probably due to the high import duties? I also didn't know that Boeing didn't get the bizjet division! How is that going to work? They'll buy frames from Boeing Brasil (with an S!!!) and outfit them?
Thanks for the information. I'll adjust my brasiladar. :-)
Thanks for the information. I'll adjust my brasiladar. :-)
There are a lot of vehicles put together here, but there isn't a Brazilian motor industry any more. GM, FIAT, Ford, Scania, and Hyundai all assemble vehicles here, but we don't see much, if any of the profits. Few are assembled to international standards and most are older models, as well as prices that are beyond the reach of most buyers unless they resort to high interest credit.
I was back in the UK in January and showed photos of the Corsa I hired while I was there to one of my car mad techs, he didn't recognise it as a Corsa it was so many generations ahead, and with an equipment level the local market never sees. Imports with 80-120% duty, only for the rich and corrupt.
TTFN
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The biz jets are almost all based on the earlier rear engined ERJ family, so there is no cross over with the E-Jets line that is now Boeing Brasil, except in the case of the Lineage 1000 which is built around the E-190. I don't know how that one will work out, but I'm sure they will find a way.
There are a lot of vehicles put together here, but there isn't a Brazilian motor industry any more. GM, FIAT, Ford, Scania, and Hyundai all assemble vehicles here, but we don't see much, if any of the profits. Few are assembled to international standards and most are older models, as well as prices that are beyond the reach of most buyers unless they resort to high interest credit.
I was back in the UK in January and showed photos of the Corsa I hired while I was there to one of my car mad techs, he didn't recognise it as a Corsa it was so many generations ahead, and with an equipment level the local market never sees. Imports with 80-120% duty, only for the rich and corrupt.
TTFN
I was back in the UK in January and showed photos of the Corsa I hired while I was there to one of my car mad techs, he didn't recognise it as a Corsa it was so many generations ahead, and with an equipment level the local market never sees. Imports with 80-120% duty, only for the rich and corrupt.
TTFN
In the long run, Boeing saves development costs and future pricing pressure from a competitor, and prevents EMB moving up to compete in larger aircraft ranges. The Microsoft model.
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I'm not surprised Boeing was willing to pay that much to buy Embraer's commercial department. Those who have flown the Ejets both as operating crew as well as passengers love the aircraft. It's a lot more advanced than the 737NG, uses FBW technology and its systems are far more sophisticated than the 73 which was first designed in the 1960's. The price Boeing is willing to pay to buy Embraer's technology would probably be less than if they had to start from scratch and build something completely new that was capable of competing with Airbus's A220. Let's face it, Airbus FBW aircraft are generations ahead of the 737NG. I wouldn't be surprised if Boeing builds upon Embraer's E2 generation Ejets and comes up with a bigger version that can replace the 737 altogether.
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I just did a little "digging". Embraer posted roughly $400mln net profit lately. The development of E-jets cost $1.5bln. Boeing paid $4.2billion for a PART of that company. Actually, a part of a part. So, from where I'm sitting, Boeing spent an enormous amount of money for what they could've gotten in their own warehouse. How in the world did that deal get through the Board and through the shareholders meeting!? We should use Muillenburg as tank armor!!!
Unlike the Airbus CSeries deal, Boeing is buying a profitable business. That means it will partake in the profits from now until forever, so the present value of all those future profits has to be taken into account.
Assuming reasonable margins, a quick way to estimate fair valuation is to calculate it as a multiple of the company's EBITDA. For the aerospace industry this multiple is currently around 12-14x (see data from PWC).
Let's take your $400mm company-wide net profit as a base. The commercial business was Embraer's only profitable division recently, which implies that the commercial division's profit was more than $400mm but the other divisions dragged the company down. So the commercial division net profit might be closer to $440mm -- this is by definition after taxes, depreciation and amortization -- with an EBITDA of maybe around $600mm. That means at prevailing multiples the commercial division's value should be between $7.2 billion to $8.4 billion.
Since Boeing is buying 80% of the division, that means Boeing should expect to pay Embraer between $5.7 billion and $6.7 billion. But Boeing only paid $4.2 billion! That's around 10x EBITDA, which is relatively cheap for the industry.
Clearly some discounting is happening (maybe in part due to the E2 transition) but Boeing seems to have done well in this transaction assuming all the due diligence checks out. Embraer's shareholders probably saw the writing on the wall and decided to extract value while they still can.
For Boeing's board members, this deal would have been a no-brainer to approve at this price.
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Let's take your $400mm company-wide net profit as a base. The commercial business was Embraer's only profitable division recently, which implies that the commercial division's profit was more than $400mm but the other divisions dragged the company down.
Dont know, the E2 is just an update, and pretty far behind the 220 series.
Also dont really see a lot of sales for the 190/195 E2's...looks like the 175-E2 is dead.
The E2's would need composite wings to compete, and Boeing is not likely gonna spring for an E3 at this point, but who knows...
Last edited by Smythe; 31st May 2019 at 18:54.
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Pretty big leap of faith, given the way aircraft sales are reported these days. Looking at commercial aircraft delivery numbers might be a better way. They delivered 90 commercial aircraft in 2018, of which only 4 were the E2 series. Most were 175 which they still have a backlog of...
Dont know, the E2 is just an update, and pretty far behind the 220 series.
Also dont really see a lot of sales for the 190/195 E2's...looks like the 175-E2 is dead.
The E2's would need composite wings to compete, and Boeing is not likely gonna spring for an E3 at this point, but who knows...
Dont know, the E2 is just an update, and pretty far behind the 220 series.
Also dont really see a lot of sales for the 190/195 E2's...looks like the 175-E2 is dead.
The E2's would need composite wings to compete, and Boeing is not likely gonna spring for an E3 at this point, but who knows...
This is a brand new line, we're less than a week into production and EIS isn't even slated until 2021. Clearly the program is moving ahead.Let's see E2 orders vs A220 orders this year. E2: a measly 10 orders. A220: -1 orders. (Yes, negative orders year to date).
Do you think Boeing knows exactly how many E2 orders are pending before Le Bourget this year? You bet!
The bottom line is that one program made $440mm last year (Embraer) and another program lost at least $900mm last year (CSeries/A220). There's a reason why the former is being purchased for $4.2b and the latter was sold for $0.
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The E2 is too big (those GTF's are heavy) to be flown by U.S. Regionals and too small for mainline. Unless something gives it will be an orphan like the MRJ for U.S. markets.
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Towards what? EIS with whom? There are no orders for 175-E2. The only orders were from SkyWest and... Nordik something. Both have cancelled, they are no longer on Embraer's backlog.
Well, if you look at it like this, it is a bad year... for now. However, in 2018 alone A220 got the same number of orders as the entire E2 program since 2011.
How did you figure that? How did A220 lost $900 mil? And it wasn't E2 that made 440mln. The entire Embraer company made that, and that includes parts, services, military sales, etc., etc.
Yes, there is. Airbus moved quickly and acquired the C-Series Ltd. as soon as they had a chance, while Boeing first rejected Bombardier's offer to cooperate on C-series, and was then caught napping when the aircraft market "suddenly" shifted from under them.
Yes, there is. Airbus moved quickly and acquired the C-Series Ltd. as soon as they had a chance, while Boeing first rejected Bombardier's offer to cooperate on C-series, and was then caught napping when the aircraft market "suddenly" shifted from under them.
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They have no firm orders but that's different from no orders. Just a few days ago Embraer management forecasts that the 175-E2 will account for 1/3 or all E2s sold.
Obviously Boeing is very comfortable with the 175-E2s sales pipeline to green light the production start this week.
You're comparing a program that's in production vs. one that has yet to EIS. The E2 has roughly the same number of orders as the CSeries did at the same stage of the program (excluding "fake" CSeries orders which we knew would never get delivered but remained in the books, like the ones from Republic).
From Airbus and Bombardier financial statements. Bombardier alone took a $600mm hit just to finally close out the Airbus transaction.
Closely read what I wrote again. Only the commercial division made profit last year (~ $440mm). You know, the division Boeing purchased. 
Revisionist history there. Don't forget that Bombardier tried to sell the CSeries to Boeing first.
Ask yourself: if the CSeries was worth more than $0, why did Bombardier agreed to sell it to Airbus for $0?
On similar lines: in Canada, Bombardier's directors and executives have a legal fiduciary duty to protect shareholder value. So again, if the CSeries was worth more than $0, why did Bombardier shareholders not sue the directors for selling the program for $0?
The obvious truth is that the CSeries worth was negative. Both Airbus and Bombardier knew that even post acquisition they'd have to pump in another billion or two to make the program viable.
Embraer's commercial division, on the other hand, was and is a profitable ongoing business.
Obviously Boeing is very comfortable with the 175-E2s sales pipeline to green light the production start this week.
Well, if you look at it like this, it is a bad year... for now. However, in 2018 alone A220 got the same number of orders as the entire E2 program since 2011.
How did you figure that? How did A220 lost $900 mil?
And it wasn't E2 that made 440mln. The entire Embraer company made that, and that includes parts, services, military sales, etc., etc.
Yes, there is. Airbus moved quickly and acquired the C-Series Ltd. as soon as they had a chance, while Boeing first rejected Bombardier's offer to cooperate on C-series, and was then caught napping when the aircraft market "suddenly" shifted from under them.
Ask yourself: if the CSeries was worth more than $0, why did Bombardier agreed to sell it to Airbus for $0?
On similar lines: in Canada, Bombardier's directors and executives have a legal fiduciary duty to protect shareholder value. So again, if the CSeries was worth more than $0, why did Bombardier shareholders not sue the directors for selling the program for $0?
The obvious truth is that the CSeries worth was negative. Both Airbus and Bombardier knew that even post acquisition they'd have to pump in another billion or two to make the program viable.
Embraer's commercial division, on the other hand, was and is a profitable ongoing business.
