Last week a multi billion dollar deal between Boeing, (American aerospace company) and Embraer (Brazilian Aerospace company) has been collapsed as Boeing abandoned to buy.
On February 2019 Boeing announced to purchase 80% stake in Embraer commercial aircraft division and the deal was expected to close on July 2020.
But in April 2020, Boeing scraps the deal due to impact of Coronavirus on the aviation and Boeing didn’t find this deal relevant now as the air travel demands dropped and they believe that the aviation market in upcoming years will be in the slow pace.
Embraer said that Boeing had engaged in “a systematic pattern of delay” and was unwilling to complete the transaction due to its stressed financial condition.
— Embraer (@embraer) April 27, 2020
The collapsed of deal left Embraer in the midstream. Now this brings up the perfect opportunity for India to buy an Aerospace company.
India has been pursuing a programme to manufacture a civil aircraft for almost three decades with limited success. With the downturn in aviation Embraer market capitalisation has dropped to about US $1.2 billion. This presents an unprecedented opportunity for Indian aviation to acquire a suitable stake in Embraer.
If we are able to purchased a suitable stake in Embraer than this can help in making strong Civil Aviation market in India.
Embraer makes single aisle state of the an E2 jet and the ERJ 145 series single aisle aircraft for seating capacities ranging from 30-110 Passengers jet. They also make aircraft for Maritime Patrol. Cargo jets, VVIP flights and as Executive jets. These aircraft are highly suitable for Regional Connectivity under the UDAN scheme.
India will require hundreds of new aircraft for civilian and defence purpose by next decades. These aircraft is already in use in India for civil and military aviation including DRDO AEW&C program.
Purchase of Embraer could also help in setting up aircraft manufacturing in India. There is also the potential to attract OEMs of aircraft engines, wheels and brakes. landing gears. avionics etc to set up manufacturing plant in India.
Although, there was very less possibility that we will seized this opportunity as the governmental process in these type of purchases was very slow. While other players like China act very quickly in these situation.
But if India wants to develop aerospace industry than we can actively considers acquiring at least 51% stake into Embraer either through a SPV created by equity participation by Hindustan Aeronautics Limited acting alone or in partnership with the private sector.
Though this deal may not be beneficial for India in short term as the market is in the lowest but the deal will profitable in long term.