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.

https://www.defensenews.com/air/2020/04/27/collapse-of-boeing-embraer-deal-could-have-major-impact-on-c-390-millenniums-future

On the same subject

September 21, 2018 | International, Aerospace

‘I’ll be their angel investor’: Air Force vice chief wants to crowdsource airmen’s ideas
By: Kyle Rempfer As the U.S. military turns its attention to the threats posed by near-peer adversaries, Air Force leadership is shifting its focus to great power approaches to combat, like multi-domain operations and expeditionary warfare. A culture of innovation among airmen will be pivotal in preparing for such a conflict, and the effort to foster that independence and creativity is already underway. In the coming weeks, the Air Force will be rolling out a new initiative to crowdsource solutions from airmen around the service. Across all specialty codes, the service is calling on airmen to design apps, develop algorithms and create new approaches to the problems that plague their career fields or help the Air Force carry out its missions. The program — dubbed the Vice Chief's Challenge — will be spearheaded by Air Force Vice Chief of Staff Gen. Stephen Wilson. “We want to take the ideas our airmen have to see around corners, anticipate what's next and solve these really complex national security challenges,” Wilson told Air Force Times. Those challenges range from fusing open-source social media information into actionable intelligence with new software, to upgrading legacy aircraft with gadgets to help airmen stay in the fight longer. “Navigation apps like Waze change the way we travel across town by giving us an intuitive display that integrates traffic, hazards, and route recommendations in real time. Companies like Uber and Amazon have transformed our view of logistics," according to a copy of the Vice Chief's Challenge provided to Air Force Times. "They are not the only ones leaning forward. I am sure each of you have seen opportunities to enhance [multi-domain operations]. I want to hear your best ideas.” The initiative is designed to deliver capabilities to the Air Force in months, rather than the usual years, Wilson said. And it's going to become routine, always running against the backdrop of the service's other acquisition initiatives. “It's this cultural change and this shift that happens ... and today, I think it's clear in this great power competition, we need this urgently," Wilson said. “I need to remove barriers to innovation." The Vice Chief's Challenge will consist of three phases. First, ideas will be solicited from across the service in a broad announcement. Then, workshops will be set up in which subject matter experts help refine the most promising proposals and draft development plans for the budding ideas. The final phase will involve developing and demonstrating prototypes for the chosen concepts. “We'll start small by gathering ideas from individual airmen, rapidly evolve concepts with national thought leaders, and scale fast by working with industry to build and demonstrate prototypes in the next year,” Wilson said. Each phase will be led by a different organization, but the Air Force Research Lab and the Office of the Vice Chief of Staff will serve as executive agents to ensure smooth transition between phases. The initiative is similar to last year's first-ever Spark Tank innovation proposals. “Each of the [major commands] went out to their different wings and solicited ideas, picked their best ones and came to us," Wilson said. "There were a dozen ideas, of which we picked six of them and presented them at the [Warfighter's Edge] conference.” The idea chosen for development ended up being that of a boom operator on the KC-135 Stratotanker. He proposed a plan to re-engineer the boom operator platform instructor position for the entire KC-135 fleet at a projected cost of $1.5 million. The proposed innovation aims to both reduce back and neck injuries and save the Air Force $132 million each year in this critical aircrew specialty, according to Air Mobility Command. “It was across the fleet, easy to implement, and that's what we're using now,” Wilson said. Other innovative ideas that Wilson has already seen, and clearly wants more of, involve software development that connects sensors, platforms and nodes to share information across the force. “We had an airman and second lieutenant who briefed me on software development they had done that was unbelievable — the capability they were bringing me and the speed at which they were doing it,” Wilson said. The duo took SIPRNet information and found a way to fuse it together using complex computer coding for targeting purposes. The result was a tool dreamed up in-house that directly solved a pressing issue. Much of that is simply owed to the fact that those airmen knew what they needed to do, how to do it and already worked in a position to provide the service. “The CEO of Pivotal [Software Inc.] pulled me aside and said ‘I work with all the Fortune 500 companies across the world, and I would put these two people against any company, anywhere,'” Wilson said. That's the sort of innovation the Vice Chief's Challenge is looking to tap into. Wilson doesn't know yet how many ideas will be taken to completion, but by this time next year, he's hoping that the Vice Chief's Challenge will be handing out some awards. “I can't compensate them like industry can, but I can offer them purpose," he said. https://www.airforcetimes.com/news/your-air-force/2018/09/20/ill-be-their-angel-investor-air-force-vice-chief-wants-to-crowdsource-airmens-ideas
June 17, 2022 | International, Aerospace

Argentina chooses to buy US-made Chinook over Russian Mi-26
Argentina has kicked-started the process for procuring four Boeing-made CH-47 Chinook heavy helicopters from the U.S., military sources in Buenos Aires have told Defense News.
August 22, 2023 | International, Aerospace

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Collapse of Boeing-Embraer deal could have major impact on C-390 Millennium’s future

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Argentina chooses to buy US-made Chinook over Russian Mi-26 Argentina has kicked-started the process for procuring four Boeing-made CH-47 Chinook heavy helicopters from the U.S., military sources in Buenos Aires have told Defense News.

Error code: 404

Argentina chooses to buy US-made Chinook over Russian Mi-26
Argentina has kicked-started the process for procuring four Boeing-made CH-47 Chinook heavy helicopters from the U.S., military sources in Buenos Aires have told Defense News.