The Boeing-Embraer marriage is off, and it looks like a bad split
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Boeing has called off its plan to buy the majority of Embraer’s commercial aircraft division, a deal that would have strengthened its position in the smaller jet market adding the E-Jet-E2 to its portfolio.
Boeing and Embraer were unable to reach an agreement on “unsatisfied [master transaction agreement] conditions” and further negotiations would not resolve the issues, Chicago-based Boeing said on April 25.
However, in response, Embraer said Boeing “wrongfully terminated” the agreement, in its own statement on April 25. The Brazilian planemaker claimed that Boeing’s move stemmed from “its own financial condition and 737 MAX” grounding.
View this post on Instagram
A post shared by Jon Ostrower (@jonostrower) on
Industry observers appear to agree with Embraer’s view that Boeing canceled the deal due to the collapse in aircraft demand amid the coronavirus pandemic, reported The Seattle Times.
The Boeing-Embraer tie up, while unveiled in 2018, stems from the U.S. planemaker’s concerns with Bombardier. In 2017, Boeing filed a trade complaint with U.S. authorities over Bombardier’s sale of at least 75 CS100s — now the A220-100 — to Delta Air Lines claiming “damages” from Canadian subsidies to the aircraft program. That complaint, and the threat of possible tariffs, prompted Bombardier to sell the CSeries to Airbus and Boeing to seek a partnership with Embraer.
Boeing was to take control of 80% of Embraer’s commercial aircraft division, which is focused on producing and selling the E2. A separate joint venture on Embraer’s KC-390, a military transport jet, was also planned.
Apart from regulatory hurdles, progress on the Boeing-Embraer deal appeared to be moving forward even after the 737 MAX grounding in March 2019. The grounding hit Boeing hard prompting its first annual loss since 1997.
The U.S. planemaker has focused resources on getting the MAX, the cash cow of its commercial jet business, back in the air since the grounding.
During its 2019 earnings presentation, Boeing executives mentioned the MAX 39 times and the Embraer deal just once, according to Seeking Alpha.
A legal dispute between Boeing and Embraer appears set to occur next. The Brazilian planemaker said in its statement that it will seek “damages” from Boeing for canceling the deal.
However, the damage to Embraer could be lasting. The planemaker has landed few large new orders for the E2 in the past year, save KLM’s commitment for up to 35 E195-E2 jets that it finalized last November. Embraer has no orders for the re-engined E-Jet from U.S. carriers to date, whereas Airbus has sold the comparably sized A220 to Delta, JetBlue Airways and David Neeleman’s start-up Breeze Airways.
Featured image courtesy of Embraer.
Welcome to The Points Guy!
WELCOME OFFER: 80,000 Points
TPG'S BONUS VALUATION*: $1,650
CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
- Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
- With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
- Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.