Boeing bails on $4.2bn JV with Brazil’s Embraer

Boeing has walked away from a $4.2 billion deal planned with Brazilian aircraft manufacturer Embraer.

The agreement would have formed Boeing Embraer – Defense, a joint venture largely aimed at promoting Embraer’s commercial and defence aircraft outside of the South American nation.

In a statement released by Boeing over the weekend, the company announced that it would be discontinuing talks with the São Paulo-based corporation.

The joint venture was awaiting final European Commission approval but was already operating under a preliminary agreement known as a “Master Transaction Agreement” (MTA).

According to sources including Reuters, Boeing alleges that Embraer failed to meet unspecified requirements within that MTA by midnight 24 April.

“Boeing has worked diligently over more than two years to finalise its transaction with Embraer,” said Marc Allen, Boeing’s president of partnership and group operations.

“In 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.

“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.”

While Allen’s comments struck a conciliatory note, Embraer maintains that Boeing is in breach of contract.

In response to Boeing’s cancellation of the JV, Embraer quickly announced that it “will pursue all remedies against Boeing”. This is in addition to seeking payment of a $100 million breakup fee contained in the contract.

#Embraer says that Boeing wrongfully terminated the Master Transaction Agreement. Learn more: https://t.co/qMz5Y6t3Rw #EmbraerStories pic.twitter.com/lcLoxefBTH

— Embraer (@embraer) April 25, 2020

In its response, the Brazilian company suggest that Boeing’s financial woes are to blame for its reluctance. In a release posted Saturday, Embraer referred to the 737 MAX grounding and the COVID-19 outbreak, both of which have cost Boeing billions.

The release also labelled the suggestion that Embraer had not met necessary conditions a “false claim”.

Under the terms of the venture, Boeing would have owned 80 per cent of Embraer’s commercial operations.

A separate agreement, to support and market Embraer’s C-390 Millennium transport craft outside of Brazil, is planned to continue.

The company has delivered two C-390 Millennium (or KC-390) to the Brazilian Air Force since September, and has outstanding orders for a further 25. According to Cirium fleet data, orders for the model have also been commissioned from Portugal, Argentina, Chile, Colombia and the Czech Republic.