Boeing plans alliance with Brazil's Embraer SA

China's C919 faces stiff competition as rivals Airbus, Boeing look to consolidation

Airbus and Boeing are teaming up with smaller regional rivals to boost sales at the lower end of their $100 billion-a-year commercial plane duopoly, posing stiff competition to China's efforts to grow its presence in the sector, said industry analysts.

US plane maker Boeing Co and Brazil's Embraer SA said on Thursday that they were discussing a "potential combination" widely assumed to focus on jetliners, confirming a report in The Wall Street Journal.

News of the talks comes just two months after Boeing's European arch rival Airbus agreed to buy a majority stake in Bombardier Inc's 110 to 130-seat C Series jets, the Canadian rival of Embraer's biggest E-Jets.

Lin Zhijie, an aviation industry analyst and columnist at Carnoc.com, one of China's largest civil aviation web portals, said: "The potential combination of Boeing and Embraer or the potential purchase of Embraer's narrow-body aircraft business is likely to pose a more severe challenge to China and hurt prospects for its C919 aircraft."

"Earlier, Commercial Aircraft Corp of China, Bombardier and Embraer were in competition for market share and would have competed with Boeing and Airbus for the same," Lin said.

"However, with Airbus acquiring the C Series of Bombardier and Boeing further improving its product portfolio, their advantages will get further strengthened," he added.

Both Embraer's E-Jets, which generally range between 70 and 130 seats, and to a greater extent Bombardier's C Series, overlap at the margins of the big-airplane portfolios of Airbus and Boeing, but the products are mainly seen as complementary. Boeing and Airbus' smaller planes start at around 125 seats.

Such commercial tie-ups allow plane makers to offer package deals and expand opportunities for generating revenue and profit, a person familiar with the C Series deal said.

Boeing now appears to be a convert to this approach after initially - at least in public - dismissing the deal between Airbus and Bombardier, analysts said on Thursday.

But the proposed alliances, neither of which is finalized, are not simply about tacking on revenue and cash flow, analysts and industry sources said.

First, they could quickly lead to technical overlap. "If Boeing begins to collaborate with Embraer, you could imagine them creating commonality in the Boeing cockpit," said consultant Jerrold Lundquist, managing director of The Lundquist Group.

Others see similar benefits at Airbus.

More importantly, they broaden the battlefront for the next round of developments in 2030 and beyond: one in which Western jet makers will be up against growing competition from China and Russia and could rely on their new partners to spread the risk.

China Daily - Agencies