Embraer’s Slattery Sees Broad Benefits of Consolidation

 - September 18, 2019, 10:01 AM
Embraer Commercial Aircraft CEO John Slattery addresses reporters before the official handover of the first E195-E2 to Azul. (Photo: Embraer)

Not everyone has met the recent wave of consolidation in the aerospace industry with enthusiasm, but for Embraer Commercial Aircraft CEO John Slattery, the trend will prove beneficial in the long run as his customers come to appreciate the “accretive” value of Boeing’s acquisition of 80 percent of Embraer’s commercial business. Speaking with AIN recently from Embraer’s offices in São Jose dos Campos, Brazil, Slattery noted that talks between Embraer and Boeing began well before Airbus announced its intention to buy Bombardier’s C Series program, and that Embraer didn’t need any sort of external incentive to appreciate the need to move forward with the combination.

“The talks were meaningfully engaged before the C Series transaction was announced,” insisted Slattery. “And I compliment Airbus, because I had no idea that transaction was in the mix. But we didn’t know, and our transaction with Boeing was completely independent of that. That being said, being pragmatic, it does add a sense of urgency to want to move on now with the transaction.”

The sides expect the deal to close by the end of the year. Slattery, however, wouldn’t attempt to understate the large amount of work that still needs doing over the next three months before they can consummate the transaction. “The competition authorities around the world are very diligent at their work,” he said. “Each of the jurisdictions we have to go to—it’s 10 in total—have a voluminous number of questions. But when you look at the empirical evidence, it’s clear to everybody there’s no competition between the E-Jet, for example, and the 737.”

In fact, noted Slattery, Embraer’s biggest aircraft—the E195-E2—holds roughly 20 percent fewer passengers than Boeing’s smallest aircraft, whose range, in turn, extends some 50-percent beyond that of the Embraer jet. “So when you look at the sophistication of the airlines around the world, those are not metrics that they can confuse,” he explained.

Slattery added that future programs would not involve airplanes any larger than the E195-E2, but rather products such a large regional turboprop or hybrid-electric technology that would by necessity apply first to even smaller equipment.

Slattery’s assertion that the company to become known as Boeing Brasil-Commercial will not blur the lines between the current line of products offered by Embraer and Boeing seems to support his point that the wider trend toward consolidation does not necessarily portend an upset of the industry’s competitive balance.

“If the customers feel, as a result of this, there are increased efficiencies from the OEM and those efficiencies can be passed in a meaningful way directly to the customers, then the customers are the beneficiary,” he argued. “And if that path of goodness flows that way to the operator, to the customer, then it’s a good thing...My sense is as you talk to the big airline operators around the world, they see it as accretive to their ability to negotiate even better deals for themselves.”