With Boeing facing another crisis, Embraer, one of its smaller rivals, is exploring options for a new model to challenge the duopoly for large jets that has dominated the industry for almost three decades.
According to individuals familiar with the company’s strategy and planning, internal assessments conducted by Embraer have concluded that the Brazilian company has the technological expertise and manufacturing capability to develop a next-generation narrow-body aircraft, its first in that market segment. Embraer, valued at approximately $5 billion, specializes in regional and business jets. The proposed aircraft would compete directly with the successors to Boeing’s 737 MAX and Airbus’s A320, in a category crucial for both manufacturers. However, deciding on the project would also represent a potentially make-or-break bet: New aircraft programs typically require tens of billions of dollars to develop, can take over a decade from conception to entry into service, and often fail to reach the market.
Although the plans are in the early stages and a final decision has not been made, the company has been laying the groundwork, including assessing potential payload and range requirements. According to sources, Embraer has also approached potential financial and industrial partners it would need, including Saudi Arabia’s Public Investment Fund and manufacturing firms in Turkey, India, and South Korea. A spokesperson for Embraer stated that while the company “certainly has the capability to develop a new narrow-body aircraft,” it currently has no plans for a sizable new project and is focused on selling its existing models.
Embraer’s aspirations have solidified in recent months, particularly with Boeing in turmoil after an incident involving a 737 MAX jet operated by Alaska Airlines. The incident prompted U.S. air-safety agencies to impose restrictions on Boeing’s manufacturing facilities and led to an executive shake-up, including the resignation of Chief Executive David Calhoun by the end of the year. Boeing’s troubles since the grounding of its 737 MAX in 2019 have already caused it to lose market share to rival Airbus at a time when airlines worldwide are spending heavily post-pandemic. Boeing executives had previously planned to try to regain some of those losses by beating Airbus to the market with a next-generation aircraft, according to people familiar with Boeing’s planning.
Boeing currently does not have a firm plan for replacing its decades-old 737 line. The company has suggested that it could launch a new aircraft in the middle of the next decade, similar to Airbus’s current timeline, but Calhoun has since stated that a decision will fall to a future Boeing CEO. Developing a new aircraft program requires long lead times to develop, prepare supply chains, and obtain regulatory approval. Calhoun has stated that the company would need about $50 billion to develop a successor to the 737 MAX, a sum that the debt-laden manufacturer currently does not have. Boeing, which announced last week that it had burned through nearly $4 billion in its most recent quarter, ended 2023 with a net debt of $52.3 billion. A new model would also be a satisfying comeback for Embraer after Boeing unilaterally withdrew from a $4 billion deal to acquire the Brazilian company’s commercial jet business four years ago. Embraer is still awaiting findings from an arbitration it filed at the International Chamber of Commerce after Boeing abandoned the deal.
American Airlines CEO Robert Isom, one of Embraer’s biggest customers, expressed frustration with Boeing's issues, stating, “I’ve talked to everyone at Boeing that I can possibly address, and the message is the same: Get your act together.” He later praised Embraer for its consistent delivery throughout the pandemic despite supply chain concerns, suggesting that other manufacturers “can learn a lot from them.”
While many new aircraft programs do not succeed, Embraer could potentially use aspects of the design and technology from its E2 model as the basis for the new aircraft, helping to offset some of the development costs if it proceeds with an all-new design.
Despite its smaller size compared to Boeing and Airbus, Embraer delivered 181 aircraft last year, while Boeing delivered 528 and Airbus delivered 735 jets to customers
Airbus has announced that it is making progress toward bringing its own new narrow-body to the market in the second half of the 2030s. The European plane maker, the world’s largest, has been exploring various options for upgrades that could increase fuel efficiency by 20% to 25% compared with the current A320neo model, including new engine and wing designs. The company has also long considered developing a stretched version of its A220, the renamed C Series aircraft it acquired from Bombardier in 2017.