The joint venture between Embraer and Boeing, announced in July 2018, would have been terminated due to the withdrawal of the U.S. manufacturer. The information was revealed by the Brazilian magazine Veja on Friday, but was not confirmed by the two companies.
According to the publication, the crisis caused by the coronavirus and political pressure from the U.S. government would have made it impossible to ratify the agreement, which predicted that Boeing would take over 80% of Embraer’s commercial aircraft division, in a $ 4.2 billion deal.
As was speculated, the need for a billionaire contribution from the American government to continue operating would have prevented Boeing from continuing with the partnership. At the same time, the Brazilian company has lost a lot of market value and the terms of the initial agreement have completely lost their meaning.
The two companies had until April 24 to complete the agreement, but the lack of perspective motivated Embraer to try to postpone the date. One of the reasons was the fact that the European Commission, the European Union anti-trust agency, again extended the analysis of the case to August.
Back to square one
If confirmed next week, the end of the agreement promises to create several problems for Embraer. The Brazilian planemaker was devoting time and money to prepare for the separation of the commercial division from the company’s other businesses.
In January, a provisional company, Yabora Industria Aeronautica, was created to manage the line of commercial jets until Boeing Brasil Commercial, the name of the joint venture, was approved.
In the 2019 results, Embraer revealed to have accumulated a loss of R$ 485.5 million ($ 87 million) with “separation costs related to the strategic partnership”, the company said.
In theory, all this effort will have to be reversed to reincorporate the division into the company’s business. More than that, the likely end of the deal should mean that dealings with possible customers for its planes are reviewed without the expectation that Boeing would be involved in the new company.
Another joint venture, which involves the military transport C-390 Millennium, also seems doomed to fail. In this negotiation, Boeing would own 49% of the aircraft’s program and support Embraer in proposals for governments around the world.
With the adverse scenario in the commercial aircraft market caused by the pandemic and with a stronger rival, the Airbus A220, the outlook for Embraer without Boeing is unknown.