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Boeing Does The Samba


Image source: Miglena Pencheva / Shutterstock.com

What's going on?

It’s a bird, it’s a plane… it’s a joint venture between US aircraft manufacturer Boeing and its Brazilian counterpart Embraer (tweet this) – valued at a heady $5 billion.

What does this mean?

Boeing will own 80% of the newly-formed company, while Embraer gets 20%. It’ll focus on making and selling smaller aircraft that fly shorter, local routes – Embraer’s specialty, but now bolstered by Boeing’s manufacturing and engineering expertise.

The partnership will also help the US giant to compete with its European rival Airbus, which got into the smaller plane business through a similar deal with Canada’s Bombardier last year. Previously, battles in the sky between Boeing and Airbus were largely confined to big jets like the 747 jumbo.

Why should I care?

The bigger picture: Weak emerging market currencies in 2018 helped Boeing land a cheaper deal.

In 2018, currencies of emerging market countries have become less valuable compared to the US dollar, thanks to weaker-than-expected economies, political tension (in some cases), and investors favoring a booming US as a home for their cash. Brazil’s no exception – its currency has fallen roughly 20% versus the dollar. The weaker Brazilian real makes the country’s assets appear cheaper to foreign buyers, like Boeing (since its cash now buys more reals than it did before).

For markets: Stocks had a mixed response.

Shares of Embraer fell by more than 10% on Thursday – investors probably weren’t surprised to see a deal announced as discussions had been going on for years, and over the last year, the stock had risen over 40%. Boeing’s stock didn’t move much, though investors may fancy the new partnership’s chances to make headway in winning customers who’d otherwise buy small jets from Airbus.

Originally posted as part of the Finimize daily email.

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