December 21, 2023 | International, Aerospace
April 28, 2020 | International, Aerospace
Collapse of Boeing-Embraer deal could have major impact on C-390 Millennium’s future
By: Valerie Insinna
WASHINGTON — Boeing's termination of a $4.2 billion deal for a majority stake in Embraer's commercial aviation business could have widespread implications on the Brazilian firm's flagship military aircraft.
Boeing on Saturday announced that it would walk away from a joint venture that would give it an 80 percent stake in Embraer's commercial business, as well as a 49 percent stake in the company's C-390 Millennium cargo plane.
Although Boeing said that the company would maintain previous teaming agreements to support Embraer with marketing the C-390 internationally, analysts told Defense News that the vitriol between the two companies could portend a wider collapse of their collaboration in the military sphere.
“The future of the KC-390 without Boeing — or without a U.S. defense prime helping — isn't all that great,” said Richard Aboulafia, an aerospace analyst with the Teal Group. “It just seems like cooler heads should probably prevail.”
At Dubai Air Show last November, the companies announced the formation of a new entity known as Boeing-Embraer Defense set up specifically to proactively market the C-390 around the world — a step up from previous agreements that had Boeing in more of a hands-off role. The agreement gave Boeing a new plane that could compete head-to-head against Lockheed Martin's C-130, and gave Embraer the resources to match.
The big question now is whether Embraer seeks out partnerships elsewhere for either the KC-390 or its commercial business, said Byron Callan, an analyst with Capital Alpha Partners.
“I just wonder, is there something else or someone else that emerges in 2021 or 2022 that ties up with Embraer. Could that be Chinese? Indian? Another country, company or entity outside of the United States?” he said. “That would be a more interesting broader change for aerospace, that has military implications as well, too.”
It's even possible that Airbus could try to usurp Boeing's role as Embraer's partner on the C-390, said Callan, who noted that Airbus — like Boeing — does not offer a medium cargo transport aircraft that directly competes against the C-130.
A good relationship gone bad
On Monday morning, Embraer announced that it had filed arbitration proceedings against Boeing, capping off an angry back-and-forth between both companies that spanned the weekend.
When Boeing announced it was walking away from the deal on Saturday, the company claimed it had “worked diligently over more than two years” to finalize the transaction, but that Embraer left some conditions of the master transaction agreement, or MTA, unresolved.
"It is deeply disappointing,” said Marc Allen, Boeing's president of Embraer Partnership & Group Operations. “But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues."
Embraer, however, issued a scathing statement of its own, asserting that it had fulfilled all contractual obligations and blaming the failure of the deal on Boeing's continued financial problems and the fallout from two fatal 737 MAX crashes.
“Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price,” the company said.
“We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.”
Boeing's decision to break its agreement with Embraer makes sense from a financial standpoint, Cai Von Rumohr, a defense analyst with Cowen, wrote in an email to investors. Because of COVID-19's impact on the aerospace industry, $4.2 billion seems an inflated price for Boeing to pay to acquire a controlling stake in Embraer's commercial business, and terminating the deal may help to free up cash that Boeing needs in the near-term.
But while Von Rumohr said he believes Boeing and Embraer will continue to collaborate on the C-390, it will depend on whether the relationship can be salvaged.
“This issue is, how pissed off is Embraer now, and is this something they're likely to get over to continue with what was a teaming agreement that made a whole lot of sense for both parties?” Von Rumohr told Defense News.
Another major question is how the COVID-19 crisis effects worldwide defense spending, with implications for nations' domestic industries as well the international defense industrial base.
Callan noted that some countries who have ordered the aircraft such as Brazil or Portugal “are probably looking at different defense budget projections.
Aboulafia added that the dissolution of the partnership increases the likelihood that Embraer will need stimulus funds from the government of the Brazil to help fortify its commercial sector during the COVID-19 pandemic.
“That money could easily come out of defense spending, which would impact Embraer defense programs, particularly Gripen or C-390,” he said.
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March 2, 2023 | International, Aerospace
Leonardo: Toll Helicopters orders two more AW139s supporting the Australian Defence Force (ADF)
The helicopters will supplement a fleet of three AW139s currently supporting a range of activities including pilot and aircrew officer training, utility support to ADF exercises and emergency response and...
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September 28, 2018 | International, Aerospace
Russia plans to arm its most advanced fighter with new hypersonic air-to-air missiles meant to cripple the F-35 stealth fighter
Ryan Pickrell Russia's most advanced fighter jet, the Sukhoi Su-57, will reportedly carry the hypersonic R-37M long-range air-to-air missile, a new weapon with the ability to strike targets hundreds of miles away. The Chinese are developing similar systems for their fighter jets. These weapons, assuming US rivals can take them from testing to deployment, could pose a threat to rear support aircraft such as early warning and aerial refueling aircraft, key force multipliers for American jets like the F-35 Lightning II Joint Strike Fighter. Russia reportedly plans to arm its most advanced fighter jet with a powerful hypersonic air-to-air missile that can take aim at aircraft nearly two hundred miles away, making them a potential threat to critical US air assets. The Su-57 multipurpose fighter jet, a fifth-generation stealth fighter built for air superiority and complex attack operations that is still in development, will be armed with the new R-37M, an upgraded version of an older long-range air-to-air missile, Russia Today reported Thursday, citing defense officials. The Russian Ministry of Defense is reportedly close to completing testing for this weapon, the development of which began after the turn of the century. With a reported operational range of 186 to 248 miles and a top speed of Mach 6 (4,500 mph), the R-37M is designed to eliminate rear support aircraft, critical force multipliers such as early warning and aerial refueling aircraft. Russia asserts that the missile possesses an active-seeker homing system that allows it to target fighter jets during the terminal phase of flight. While Russia initially intended to see the weapon carried by the MiG-31 interceptors, these missiles are now expected to become the primary weapons of the fourth-generation Su-30s and Su-35s, as well as the next-generation Su-57s. The weapon's specifications were modified to meet these demands. The Russians are also apparently developing another very long-range air-to-air missile — the KS-172, a two-stage missile with a range said to be in excess of the R-37M's capabilities, although the latter is reportedly much closer to deployment. China, another US competitor, is also reportedly developing advanced long-range air-to-air missiles that could be carried by the reportedly fifth-generation J-20 stealth fighter. The China Dailyreported in January 2017 that photos of a J-11B from the Red Sword 2016 combat drills appeared to show a new beyond-visual-range air-to-air missile. "China has developed a new missile that can hit high-value targets such as early-warning planes and aerial refueling aircraft, which stay far from conflict zones," the state-run media outlet reported, citing Fu Qianshao, an equipment researcher with the People's Liberation Army Air Force. Slow, vulnerable rear-support aircraft improve the overall effectiveness of key front-line fighter units, such as America's F-35 Lightning II Joint Strike Fighter, which just conducted its first combat mission. The best strategy to deal with this kind of advanced system is to "send a super-maneuverable fighter jet with very-long-range missiles to destroy those high-value targets, which are 'eyes' of enemy jets," Fu told the China Daily, calling the suspected development of this type of weapon a "major breakthrough." The missiles being developed by US rivals reportedly have a greater range than the American AIM-120 Advanced Medium-Range Air-to-Air Missile (AMRAAM), giving them a potential edge over US military aircraft. The Russian Su-57 is expected to enter service in 2019, although the Russian military is currently investing more heavily in fourth-generation fighters like the MiG-29SMT Fulcrum and Su-35S Flanker E, which meet the country's air combat needs for the time being. Russia canceled plans for the mass production of the Su-57 in July after a string of development problems. There is some evidence the aircraft may have been active in Syria earlier this year, but the plane remains unready for combat at this time. Military analyst Michael Kofman previously told Business Insider that the Su-57 is "a poor man's stealth aircraft," adding that it doesn't quite stack up to the F-35 or F-22. https://www.businessinsider.com/russia-plans-to-arm-su-57-jets-with-new-hypersonic-air-to-air-missiles-2018-9