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Boeing, Bombardier Could Partner: Analyst

With Airbus parent EADs talking to Embraer about a 100-seat plane, Boeing should talk to Bombardier about the same topic.
Author:

SEATTLE (

TheStreet

) -- If

Airbus

parent

EADS

is talking with

Embraer

(ERJ) - Get Report

about the 100-seat aircraft market, might

Boeing

(BA) - Get Report

talk with

Bombardier

?

Davenport analyst Carter Leake touted the possibility in a March report, and the musing gained credence on Thursday when EADS CEO Louis Gallois said he's interested in working with Embraer.

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The French daily

Les Echos

reported Thursday that EADS has proposed that Embraer join with its subsidiary ATR to launch a new regional jet. "We have big respect for Embraer," said Gallois, according to

Aviation Week

. "We are eager to find ways of partnering."

In his report, Leake said it is unreasonable to assume that Boeing is going to sit back as the various potential competitors around the world scoop up the 100-seat market and then look to build even larger aircraft. The assumption is "naive," he said. "Investors should not count out such a simple solution as a joint venture with one of the better 100-seater platforms."

"A Boeing-Bombardier JV would be far more attractive to both parties than the lose-lose scenario that is likely to evolve with five regional jet

manufacturers, Boeing, and Airbus all fighting for the same narrow band of capacity," Leake wrote. "Similarly, we see an Airbus-Embraer JV as a nice cultural fit."

In the 1980s, Boeing briefly owned deHavilland Canada (now owned by Bombardier) and "got a very good look at small aircraft economics," Leake noted. The view was not inspiring. "Put simply, the smaller the plane, the thinner the margin."

Theoretically, a partnership with Boeing "would

likely preclude Bombardier from going above 150 seats," said analyst Scott Hamilton of Leeham Co. Additionally, Boeing could assist Bombardier in its sales effort for its C-Series 100-seaters, said Hamilton, who also suggested that a partnership might raise antitrust issues.

Boeing has been the Dow's

leading stock for most of the year. The company is currently

evaluating the future of the 737, which typically seats as many as 162 passengers.

On Thursday, workers at the Long Beach, Calif. plant -- where the C-17 military cargo jet is assembled -- returned to work after a month-long strike. The workers, members of the United Auto Workers, voted 823-544 to ratify a 58-month contract, which included a $4,000 lump-sum payment and 3% annual raises in future years. Shortly after midday, Boeing shares were trading up 88 cents at $62.59.

-- Written by Ted Reed in Charlotte, N.C.