On Saturday April 25, Boeing confirmed that it had terminated its Master Transaction Agreement (MTA) with Embraer, under which the two companies had sought to establish a joint venture comprising Embraer's commercial aviation business and a second joint venture to develop new markets for the C-390 Millennium medium airlift and air mobility aircraft.
The MTA had an initial termination date of April 24, 2020. Boing stated that it had “exercised its rights to terminate after Embraer did not satisfy the necessary conditions”.
"Boeing has worked diligently over more than two years to finalize 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, 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."
Embraer, however, immediately refuted the allegations that it was responsible for the terminations of the MTA. Embraer stated that it “believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price. 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.”
Embraer further stated that it “believes it is in full compliance with its obligations under the MTA and that it has satisfied all conditions required to be accomplished by April 24, 2020”, adding that the company “will pursue all remedies against Boeing for the damages incurred by Embraer as a result of Boeing's wrongful termination and violation of the MTA”.
The planned partnership between Boeing and Embraer had received unconditional approval from all necessary regulatory authorities, with the exception of the European Commission.
Boeing stated that it will maintain the existing Master Teaming Agreement with Embraer, originally signed in 2012 and expanded in 2016, to jointly market and support the C-390 Millennium military aircraft.
Such an announcement is not unexpected considering the scale of losses Boeing is experiencing due to the ongoing grounding of the 737MAX as well as the continuing pressure of the COVID-19 pandemic on production and its airline customers, with more orders expected to be cancelled or deferred. Although the termination of the tie-up with Embraer allows Boeing to retain much-needed cash reserves in the short-term, the expected litigation action from the Brazilian manufacturer will drag on future profits, while also leaving a hole in Boeing’s commercial aircraft product line when compared to European rival, Airbus, which had been seeing some success with the A220.