Boeing’s (NYSE:BA) recent series of missteps and multitudes of troubles have potentially created an opening for new entrants to make inroads into the Boeing-Airbus (OTC:EADSY) duopoly in the skies. One such name doing the rounds this week has been Brazil’s Embraer (NYSE:ERJ) (DE:EMY). However, the company was quick to deny any such rumors.
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Developing a New Plane
The market chatter began after a Wall Street Journal report indicated that Embraer was looking at options to develop a new jet that could help it enter the narrow-body aircraft market. Reportedly, Embraer had scouted potential financial and industrial partners, including Saudi Arabia’s Public Investment Fund and manufacturers in Turkey, India, and South Korea.
However, Embraer has denied plans of developing a new jet that could take on Boeing’s 737 or Airbus’ A320. According to Simple Flying, Embraer noted that it does not plan to enter the 150+ seat plane market and is focusing on its current portfolio.
New Aircraft Programs Are Difficult to Launch
The task of developing and successfully bringing a new aircraft program to market is notoriously difficult. The effort costs tens of billions of dollars with no certainty of success (Embraer’s current market capitalization is around $4.77 billion). Last year, Japan’s Mitsubishi Heavy Industries (OTC:MHVYF) served as a poignant example, halting its SpaceJet aircraft project after nearly 15 years of arduous development efforts, vividly highlighting the challenges and uncertainties inherent in such endeavors.
The airplane was aimed at catering to domestic carriers such as ANA Holdings. Boeing itself had pulled back from acquiring Embraer’s commercial jet unit nearly four years ago.
At present, both Boeing and Airbus are years away from bringing new models to the market. Airbus plans to introduce a new narrow-body plane in the second half of the 2030s. Boeing is still uncertain as to when it will replace its 737 offerings.
But Not Impossible
This timeline, coupled with Boeing’s troubles, still leaves space for a new name to wade into the market. Japan is now bringing together multiple companies to develop a new energy aircraft. The country aims to introduce the new aircraft by 2035. Its latest attempt is pegged at $33 billion to produce an aircraft that will be powered by hydrogen or another alternative energy source.
Another name that is potentially in the race is China’s state-owned aircraft producer COMAC. The company has, in recent times, bagged multiple orders for its C919 plane. However, these orders have largely flowed from China’s domestic air carriers. Moreover, a key test for the plane would be to attract overseas interest.
Is BA Stock a Good Buy?
Over the past year, Embraer stock has handily outperformed both Boeing and Airbus, with a 71% price gain. However, the TipRanks Stock Comparison tool indicates the highest potential upside of 30.5% in Boeing shares over the coming periods.
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