Boeing abruptly cancelled its partnership with Embraer—a joint venture that was expected to shake up the aviation industry.
The $4.2 billion deal would have given Boeing a major foothold in the market for smaller jets and was seen by analysts as a response to Airbus purchasing the C-Series line of jets from Bombardier.
The deal fell apart when the two companies could not resolve some of the details by the April 24, 2020, deadline set out in their Master Transaction Agreement (MTA). Boeing claims that Embraer didn’t satisfy the necessary conditions of the deal. “It is deeply disappointing,” said Marc Allen, Boeing’s president of Embraer Partnership & Group Operations. “We have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”
Embraer has accused Boeing of false claims and will be seeking remedies for damages it has incurred. “We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems,” said Embraer.
The failure to complete the deal represents another setback for Boeing, which is already reeling from the global grounding of its 737 MAX aircraft and the reduced demand for aircraft triggered by the COVID-19 pandemic.
“It’s a liquidity question,” said Bank of America analyst Ron Epstein. “Is Boeing in a position to spend $4 billion on an acquisition given what’s going on in the broader commercial aviation market?”
The failed deal may present an opportunity … for China.
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