Boeing (US:BA) has announced that it is walking away from a $4.2bn (£3.4bn) deal to establish a joint venture with Embraer (US:ERJ). The aviation giant had been set to take an 80 per cent stake in the partnership, but says the Brazilian company “did not satisfy the necessary conditions” of their agreement. Embraer has hit back, claiming Boeing engaged in a “systematic pattern of delay... in light of its own financial condition”.
The tie-up was agreed back in July 2018, but completion had been delayed as the European Commission held out on giving it regulatory approval. It was a defensive move on Boeing’s part after rival Airbus (EPA:AIR) took a majority stake in Bombardier’s (TSE:BBD.D) regional jet programme.
The deal’s demise follows Woodward (US:WWD) and Hexcel (US:HXL) calling off their merger in early April, a combination that would have created one of the world’s largest aerospace and defence suppliers. It reflects the havoc Covid-19 is wreaking across the aviation industry – almost two-thirds of the global aircraft fleet is grounded, and cash-strapped airlines are set to shrink their fleet sizes.
Boeing was already battling to overcome the 737 Max scandal, the cost of which is expected to reach $18.6bn. It is now scaling back its commercial airplane production. It swung to a $1.4bn operating loss in the first quarter of 2020 with a $4.7bn free cash outflow.
