Boeing, Embraer near deal on commercial air business

Boeing would hold 80 to 90 per cent of the new company, which would be based in Chicago.

Embraer's military operations would not be affected by the transaction and would remain under Brazilian control, the source told AFP.

That structure could address the main roadblock to the deal between the two aerospace companies: Brazilian government opposition.

The companies in December confirmed they were in talks on a possible combination, a move that was seen as part of Boeing's strategy to counter archrival Airbus' ambitions in the smaller commercial aircraft category with a venture with Canadian company Bombardier.

However, the talk of a deal drew immediate objections from the government in Brazil, which holds a so-called golden share with veto power over Embraer transactions.

Brazil's defence ministry has referred to that control of Embraer as "a matter of national sovereignty." According to the report in Brazilian daily Valor Economico, the government would retain the "golden share" in Embraer.

Boeing chief Dennis Muilenburg told investors last week that the combination with Embraer would be "a great strategic fit."

"These discussions are productive and we're continuing to have active dialogue with the key stakeholders," Muilenburg said.