Could Boeing Deal with Embraer Lead to Joint Aircraft Development?

CHICAGO ( TheStreet) -- Boeing ( BA) and Embraer signed a deal to work together on Monday, and experts believe the deal could lead eventually to joint development of a new single-aisle jet.

The two aircraft makers signed a mutual cooperation pact during Brazil President Dilma Rousseff's visit to the United States. The announcement of the pact also followed the annual meeting of the U.S.-Brazil CEO Forum, which brings together business leaders from the two countries.

Also Monday, the two countries said they had signed an agreement to expand and deepen cooperation in civil aviation. This development could be meaningful to US Airways ( LCC), which has waited for years to begin flying between Charlotte and Sao Paulo.

In a statement issued late Monday, Boeing and Embraer said they have agreed to cooperate on commercial aircraft features that enhance safety and efficiency, research and technology, and aviation biofuels, and to "look for other areas to work together to bring mutual benefit and value to customers."

Jim Albaugh, CEO of Boeing Commercial Airplanes said "this significant agreement between two proven aerospace leaders provides real opportunities to reduce customers' operational costs and enhance fleet efficiency," and noted "We look forward to working with Embraer to grow our industry and build a productive relationship that will benefit our companies and our countries."

The statement "doesn't say anything about developing new products, but one would be naïve to think those kinds of conversations won't take place as an offshoot of this announcement," said aerospace analyst Scott Hamilton, president of Leeham Co.

Embraer is a leading regional jet manufacturer with aircraft in the 70-seat to 90-seat sector as well as aircraft that seat 100 to 122 passengers. Boeing doesn't make regional jets. The Boeing 737-700, when flown as a single class airplane, seats 137 passengers, while other 737 versions are slightly larger.

"Embraer has two airplanes smaller than the 737-700 and the 737 MAX, and it has decided not to produce new airplanes in the 100 to 149 seat segment, where it would compete against Boeing," Hamilton says. "It would be a logical progression from today's announcement that they might discuss how to produce complimentary airplanes in that segment."

In the past, some have speculated that Embraer could team up with Airbus. Airbus, Boeing and Embraer already are working together on development of jet biofuels.

"Embraer has a clear commitment towards innovation lato sensu as well as aviation safety and efficiency," said Embraer CEO Frederico Curado. "I am certain that the collaboration with Boeing in some leading-edge matters will be beneficial for the industry and strengthen the ties between Brazil and the United States."

As for US Airways, its 2010 application to the Brazilian government to serve Charlotte-Sao Paulo has been approved, but the flight remains in limbo. While space at Sao Paulo's Guarulhos International Airport is constrained, it is also true that the Brazilian government has appeared to be disinterested in enabling the new service.

"If this agreement strengthens our aviation relationship with an important partner like Brazil, thats good for all of us," said US Airways spokeswoman Michelle Mohr. "We look forward to working with the Brazilian and U.S. governments to get our service strated as soon as we can."

-- Written by Ted Reed in Charlotte

>To contact the writer of this article, click here: Ted Reed

>To follow the writer on Twitter, go to http://twitter.com/tedreednc.

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