Boeing backs out of Embraer merger
Boeing has terminated a long-planned $4.2 billion deal with the Brazilian aerospace manufacturer Embraer after negotiations broke down shortly before a Friday night deadline, the company announced Saturday.
The move comes as a global air travel shutdown caused by the coronavirus pandemic has left Boeing's commercial aircraft division grasping for cash. And it shows how the economic crisis is already having long-term effects on the company's global competitiveness.
"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," Marc Allen, Boeing's president of Embraer partnership and group operations, said in a news release.
"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," Allen said.
An Embraer spokeswoman did not immediately respond to a request for comment.
The move by Boeing puts an end to years of careful negotiations and regulatory approvals in both countries. The deal would have given Boeing an 80 percent controlling stake in Embraer and allowed it to take control of the company's prized narrow-body commercial jetliners.
The deal was announced in 2018 at a time when Boeing's aerospace business was reaching historic financial peaks. The Embraer deal was an aggressive move to build out its commercial aircraft portfolio to compete with Airbus. Embraer competes directly with Bombardier, a Canadian jet manufacturer that merged with Airbus in 2017.
But 2019 and 2020 have brought a historic collapse in Boeing's commercial aviation business that few could have foreseen. Last year the company was forced to stop selling the 737 Max, its best-selling commercial jet, when flawed flight control systems were linked to two deadly plane crashes that killed hundreds of people.
More recently the shutdown in global air traffic caused by the coronavirus has thrown Boeing's customers into a state of disarray, leading several airlines and aircraft leasing companies to cancel orders. Most recently the aircraft leasing company Avalon canceled an order of 737 Max jets worth $8.4 billion. Analysts say more cancellations could soon follow.
The company's stock price has lost two thirds of its stock value over the past year.
