Boeing-Embraer Commercial Aircraft Joint Venture Collapse Due to "COVID-19 Impact"

by Jeong Hyunjin

Published 26 Apr.2020 06:43(KST)

[Image source=EPA Yonhap News]

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The establishment of a 'civil aircraft joint venture (JV)' between Boeing, an aircraft manufacturer from the United States, and Embraer from Brazil has fallen through, CNBC and other media reported on the 25th (local time). It is interpreted that the aviation industry is suffering setbacks such as the failure of existing contracts due to difficulties caused by the COVID-19 pandemic.

According to CNBC and others, Boeing stated in a press release on the day, "We have decided to terminate the agreement to establish a joint venture with Embraer," adding, "Embraer did not meet the necessary conditions, and Boeing exercised its right to terminate the contract."

Boeing and Embraer had been negotiating the acquisition of Embraer's commercial aircraft division since the end of 2018. Embraer is ranked as the world's 3rd to 4th largest aircraft manufacturer after Boeing and Airbus, and the plan to establish a civil aircraft joint venture between the two companies was a matter of interest in the aviation industry. However, they failed to reach a final agreement by the negotiation deadline the day before.

Embraer criticized, "Boeing unjustly terminated the partnership agreement announced in 2018," and accused, "Boeing is making false claims to avoid paying the capital of $4.2 billion, which accounts for 80% of the joint venture's shares." Embraer also claimed, "It appears that Boeing lacks the willingness to fulfill the contract due to poor financial conditions and issues related to the company's reputation, such as the 737 Max defects."

Embraer stated that it plans to use all remedies available regarding the damages incurred due to Boeing's decision.

Foreign media interpreted this as Boeing making such a decision to secure cash liquidity as the aviation industry struggles due to COVID-19. CNBC pointed out that the termination of the agreement between the two companies occurred amid the crisis in the aviation industry caused by COVID-19, noting that aircraft manufacturers are in unstable financial conditions due to decreased air travel demand.

Earlier, Brazilian media also reported that the negotiation schedule between the two companies was expected to be delayed due to COVID-19.