March 25, 2019, © Leeham News: Boeing last week announced the executive leadership for the joint venture with Embraer, the as-yet unnamed company that is generically called NewCo.
Separately, Embraer announced the departure at the end of next month of Embraer’s parent CEO, Paulo Cesar, a move that was expected.
Cesar was with Embraer for 22 years in various positions. We was president and CEO of EMB’s Commercial Aviation division and launched the E2 program in 2013.
Heading up NewCo will be Marc Allen, who is currently president of Boeing International. He was named SVP of The Boeing Co. and president of Embraer Partnership and Group Operations. He reports to Boeing CEO Dennis Muilenburg.
Sir Michael Arthur, currently president of Boeing Europe and managing director of Boeing UK-Ireland, succeeds Allen.
John Slattery, who is president and CEO of Embraer Commercial Aviation, was named president and CEO of NewCo, subject to ratification by the JV’s new board of directors after closing.
The JV was approved by the government of Brazil in January. It’s now going global for anti-trust approvals, which are expected by year end.
I don’t know Allen, but I’ve known Slattery approaching 20 years. Aside from holding him in high regard on a personal and professional level, I wrote shortly after the JV plans were announced that Boeing should name Slattery as president of the new company. Boeing really does not know the business in which the EJet plays. It also doesn’t know the commercial aviation services business that Embraer created to support the EJet. Slattery and his team do.
That said, Slattery has significant challenges ahead.
Sales of the E2 really haven’t taken off as well as would have been liked. Part of this is because fuel prices, which were high in 2013, are much lower now. The price hovered between $100-$110bbl in 2013. Eighteen months later, it was down to $45. A year later, it bottomed out at under $25. It’s around $57 today. The demand for this highly fuel efficient airplane dried up.
Another reason: the US market, with the crushing pilot Scope Clause contracts at the Big Three carriers, limits the weight of the airplanes regional partners can fly to 86,000 lbs MTOW. The E175-E2 comes in at just under 88,000 lbs. (So does the competing Mitsubishi MRJ90.) This restriction means Embraer can’t sell its E2 to US airlines. (The E175LR E1 does comply, but it has older engines.)
Finally, potential orders stalled while the industry waited on the outcome of the Boeing-Embraer JV approval. Although Brazil OKd it, global approval is still pending. As with the Airbus takeover of the majority interest in the Bombardier C Series, the market waited until all approvals were received. Then Airbus announced nearly 180 orders and options within days.
Slattery has said he expects a lot of E2 orders once the Boeing deal is closed. Since this isn’t expected until year end, this might mean missing some good PR at the Paris Air Show in June.
There’s little more Slattery enjoys than a good challenge. This means he’s got an exciting year ahead of him.