Boeing Exits Embraer Joint Venture: And Embraer Counters


The Embraer KC-390 is seen in the photo above (credited to Embraer) and is one of the reasons Boeing signed a joint venture with Embraer in the first place.

The joint venture embraced this airplane as a core part of the way ahead for the joint venture.

In an October 1, 2018 report by Reuters the way ahead for the joint venture was highlighted:

“U.S. planemaker Boeing and Brazil’s Embraer are in talks to set up an assembly line to build KC-390 military cargo jets in the United States, Brazilian newspaper Valor Economico reported on Monday.

“In July, the two planemakers announced a deal to give Boeing an 80 percent stake in Embraer’s commercial aircraft arm, marking the biggest realignment in the global aerospace market in decades.

“At the time, the companies also announced a deeper sales and services partnership on the new KC-390 military cargo jet through a separate defense venture that they said was likely to eventually receive a joint investment.”

But on April 25, 2020, Boeing announced termination of it Master Transaction Agreement with Embraer although maintaining its Master Teaming Agreement with regard to the KC-390.

Boeing announced today that it has terminated its Master Transaction Agreement (MTA) with Embraer, under which the two companies sought to establish a new level of strategic partnership. The parties had planned to create 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.

Under the MTA, April 24, 2020, was the initial termination date, subject to extension by either party if certain conditions were met. Boeing 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.” 

The planned partnership between Boeing and Embraer had received unconditional approval from all necessary regulatory authorities, with the exception of the European Commission. 

Boeing and Embraer will maintain their existing Master Teaming Agreement, originally signed in 2012 and expanded in 2016, to jointly market and support the C-390 Millennium military aircraft.

But we shall see.

Embraer has not reacted quietly.

In an article by Sandy Milne published today, the Brazilian company’s reaction was highlighted.

“Embraer maintains that Boeing is in breach of contract.

“In response to Boeing’s cancellation of the JV, Embraer quickly announced that it “will pursue all remedies against Boeing”.

“This is in addition to seeking payment of a $100 million breakup fee contained in the contract.”

Sound like a great basis for teaming on the KC-390.