The challenges facing Embraer

In recent decades, planemaker Embraer has been synonymous with the best engineering Brazil could produce. Set up by the military on August 19, 1969, Embraer has been supported by every administration ever since—becoming a source of national pride as well as one of the largest commercial plane makers in the world, with clients in over 100 countries. Now, a merger with American giant Boeing has cast doubts about the company’s future and the way it will deal with its Brazilian roots.

Since 2017, Embraer’s future has been hanging on the Boeing merger, principally after European planemaker Airbus took over Canada’s Bombardier, leaving few options for the Brazilian company: it either had to consolidate its business with a larger player, or risk getting left behind.

The Americans paid USD 4.2 billion for 80 percent of Embraer’s crown jewel, its commercial aviation division, evaluating this new business at USD 5.26 billion. Embraer may also sell its 20 percent stake in Boeing Brasil-Commercial (as the new business is called) in the future. With this injection of cash, Embraer will be able to start over with a clean slate, paying its debts, providing USD 1.6 billion in dividends for shareholders, and getting extra cash to innovate.

Now, Embraer’s future lies in three divisions: Defense—developed in the joint venture with Boeing—Services, and Engineering.

On its side, it has a large military cargo plane, KC-390, as well as new disruptive projects bred under the subsidiary EmbraerX. Among them, a new fully-electric plane and an eVTOL—also known as a flying cab to transport passengers—developed alongside...