in Air Transport / Business & Finance

Boeing pulls out of Embraer partnership deal

Posted 25 April 2020 · Add Comment

Boeing has pulled out of its $4.2 partnership deal with Embraer which was planned to give the American manufacturer a bigger stake in the narrowbody regional jet market and develop new markets for the C-390 Millennium medium airlift and air mobility aircraft.

 

Image: Flightglobal

The joint-venture agreement has been discussion for two years but in a statement today, Boeing said it had exercised its rights to terminate after Brazilian company had not satisfied the necessary conditions.
Embraer is furious with the decision. The Brazilian manufacturer said Boeing had “manufactured false claims as a pretext to seek to avoid its commitments to close the transaction. It is understood that the company is seeking legal advice and expects to take action against Boeing for damages. Boeing would have owned 80% of Embraer’s regional jet business under the agreement.
“We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA (master transaction agreement), because of its unwillingness to complete the transaction in light of its own financial condition and 737 Max and other business and reputational problems,” Embraer said in a statement
Boeing in denying that. "Boeing has worked diligently over more than two years to finalise its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn't happen," said Marc Allen, Boeing’s president of Embraer Partnership & Group Operations. "It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues."
Boeing is suffering from a cash crisis, following growing liabilities and costs following the grounding of the its fastest-selling plane, the 737 Max, after two deadly crashes last year that led to intense investigation into the company’s processes and procedures. The collapse of the aviation market because of the deflated demand for flights due to the Covid-19 pandemic, reduced the company’s cash and has already led to a reduction of at least 10% of its commercial aircraft workforce.
This could also be seen as a political move as since the pandemic broke the company had appealed for government support and the $4billion commitment could be seen as unattractive by Washington.
The move to take 80% of Embraer’s regional jet business with its new efficient E2 jets impressing global markets before the Covid-19 crisis, has been seen as a good one for Boeing allowing it to compete in this market with Airbus which has last year bought the CSeries jet from Bombardier which is now successfully marketing as the Airbus A220.
The planned partnership between Boeing and Embraer had received unconditional approval from all necessary regulatory authorities, with the exception of the European Commission.
Boeing and Embraer will maintain their existing Master Teaming Agreement, originally signed in 2012 and expanded in 2016, to jointly market and support the C-390 Millennium military aircraft, Boeing said. In this agreement Embraer retains 51% control.

 

 

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