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Embraer seeks business partners but not a repeat of the Boeing deal

Marcelo Rochabrun
The Embraer logo is seen during the LABACE fair in Sao Paulo

By Marcelo Rochabrun

SAO PAULO (Reuters) - The world's No. 3 planemaker Embraer <EMBR3.SA> is open to new business partners after Boeing Co <BA.N> ditched a $4.2 billion deal that was years in the making, the Brazilian company's chief executive told Reuters.

But Francisco Gomes Neto said any new agreement would be smaller in scope than the failed venture with Boeing.

"We are not looking for a partnership of the size that the company had with Boeing," he said. "We think that it would be faster and more efficient to have partnerships by project."

To do so, Gomes Neto will undo the costly separation process that readied Embraer's profitable commercial jet division for Boeing's takeover and bring all of its employees back under the same corporate roof.

The two companies are now engaged in competing arbitration proceedings, having each filed claims against the other separately over whether the necessary conditions for the Embraer-Boeing deal were met.

When Boeing canceled the planned deal in April just as the coronavirus ravaged the travel industry, Embraer was left with no plan B.

Gomes Neto acknowledged Embraer is only now drafting a five-year business plan for the commercial jets division which Boeing would have run. Embraer drew up similar plans last year for its defense and executive jet units which were going to remain independent from Boeing.

The commercial unit makes mid-range jets of up to 150 passengers, which compete directly with the Airbus A220. That plane was initially developed by a smaller company, Canada's Bombardier, whose jet project was acquired by the European planemaker.

Gomes Neto, who took over after the Boeing deal was initially signed, is now remaking Embraer as a company focused on finding smaller, more targeted partnerships.

A new turboprop aircraft that Embraer wishes to develop but no longer has the cash to finance could potentially spawn one deal, he said.

"In these first few years coming out of the crisis we are going to have to prioritize many investments," Gomes Neto said. "We have reduced all investments, some of them are close to zero."

Reuters reported on Friday that China, India and Russia were evaluating potential partnerships with Embraer.

"We don't have any negotiations going on at the moment, but without a doubt they are potential partners," Gomes Neto said of those countries. "We are evaluating those markets in this moment ... but it's still in an embryonic stage."

Another potential partnership involves the KC-390 military cargo plane which Boeing was once going to help market. While Gomes Neto said China could be a partner for commercial jets, the calculus is more complex for a military plane that was going to be marketed to U.S. allies in partnership with Boeing.

"The military arena is a bit more delicate ... so for now we are going to focus on our original business plan for the KC-390," he said. "So a partnership would only be a second stage."


(Reporting by Marcelo Rochabrun; Editing by Lincoln Feast.)