Abu Dhabi, UAESaturday 7 December 2019

Boeing faces deeper EU probe into Embraer deal

European Union concerned planned purchase of majority stake in commercial plane maker will reduce competition

Boeing's planned purchase of an 80 per cent stake in Embraer's commercial plane making business is to face an in-depth investigation from EU regulators. AFP
Boeing's planned purchase of an 80 per cent stake in Embraer's commercial plane making business is to face an in-depth investigation from EU regulators. AFP

Boeing’s ventures with Embraer face a deeper antitrust probe from the European Union as regulators said the transaction threatens to knock out an important rival to the world’s biggest plane makers.

The European Commission has until February 20 to issue a ruling on the deal after opening an “in-depth investigation,” according to a statement issued on Friday. Boeing and Embraer, which had already shifted their target for completing the transaction to early 2020 from this year, have said they expected additional scrutiny once the EU’s initial inquiry ended on October 4.

A so-called “Phase II” investigation from the EU, one of the world’s toughest merger regulators, often raises risks that companies must sell part of their business to eliminate antitrust concerns. The EU said it was worried the deal would “remove Embraer as the third-largest global competitor” to both Boeing and Airbus, which “may therefore result in higher prices and less choice”.

The heightened scrutiny puts new pressure on Boeing’s plan to take an 80 per cent stake in a venture controlling Embraer’s commercial airplane and services businesses. The move, which would broaden Boeing’s reach into the regional jet market by giving it access to Embraer’s E-Jet family, is intended to position the two companies to better compete with Airbus, which last year took control of Bombardier’s C Series aircraft — now known as the A220.

A Boeing representative referred to an October 3 statement saying the companies “look forward to assisting with” an EU review. An Embraer representative didn’t immediately respond to a request for comment.

Regulators said they didn’t see any potential rivals from China, Japan or Russia that would be able to replicate Embraer’s competition with Airbus and Boeing within the next five or 10 years. They also flagged concerns that the American aircraft maker and Embraer compete head-to-head for 100-150 seat aircraft, with the Brazilian company a “small but important competitive force” for bigger 100-225 seat aircraft.

“Despite Embraer’s comparatively small-market share it also seems to exert some price constraint on the market leaders Boeing and Airbus even beyond the boundaries of the lower 100-150 seats segment,” the EU said.

Boeing and Embraer are also starting a venture to market the KC-390 military aircraft.

Updated: October 6, 2019 08:42 PM

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