Boeing, Embraer get boost as key Brazil official sees 'marriage'

[BRASILIA] Boeing and Embraer are likely to reach a deal after months of talks, Brazil's new defence chief said, opening the door to the second alliance between major planemakers in six months.

Negotiators "are getting closer" to an agreement, defence minister Joaquim Silva e Luna said in an interview Tuesday at a security trade show in Sao Paulo.

"I would say, in short, this will end in marriage," said Silva e Luna, who was appointed six weeks ago.

The comments marked a change of tone at the defence ministry, which has been cautious about a deal because of Embraer's role as a leading Brazilian innovator and a crucial supplier of military planes.

On the commercial side, a tie-up with Boeing would extend an industry shift that began in October when Airbus agreed to take control of Bombardier's C Series jet - a competitor to the Embraer E2 planes debuting this year.

Embraer rose 4.6 per cent to 21.96 reais at 12.05pm in Sao Paulo, jumping after Bloomberg News reported the minister's comments. Boeing climbed 3.6 per cent to US$334.14. The companies declined to comment.

Marital Arrangement

Mr Silva e Luna said he wasn't sure what form a transaction between Embraer and Chicago-based Boeing would take.

"Don't ask me which kind of marriage, if it is with total sharing of assets, with partial sharing of assets or with separation of assets," he said.

One option under discussion is a venture that would include commercial jets instead of an outright acquisition, Bloomberg reported in February. But a deal would potentially go beyond commercial planes, Mr Silva e Luna said, citing an opportunity for Brazil to get help from Boeing in selling Embraer's KC-390 military-transport aircraft.

"This is one of the 'wins' for Embraer," he said. "Boeing can facilitate the marketing of the KC-390. Boeing can offer that. So in these talks, this makes talks easier."

'Complex Operation'

The discussions are going "very well," Embraer chief executive officer Paulo Cesar de Souza e Silva told reporters on April 4, while delivering the first E190-E2 jet to Norwegian airline Wideroe in Sao Jose dos Campos, Brazil, where the company is based.

"It's a complex operation, and all the parts need to be comfortable," he said.

Mr Souza e Silva said he wasn't sure a deal could be reached in the first half of the year, as the companies previously expected.

BLOOMBERG