Embraer ERJ-195 E2 'Profit Hunter' at Dublin International Airport
Boeing announced that they are officially terminating their Master Transaction Agreement (MTA) with the Brazilian aircraft manufacturer, Embraer. This is under which the two aircraft companies sought to establish a new level of strategic partnership. The company's official termination date with the 24th of April. However, this was subject to an extension by either party if the conditions weren't met. Boeing decided to terminate even though Embraer did not satisfy the necessary conditions. Now, Embraer are stating that Boeing 'wrongfully' terminated the agreement and is going to seek damages.
Comments that came out in the press yesterday state that the two companies were going to work together on the production and sale of aircraft in the 100-seat market. However, following Boeing's termination of their agreement, Embraer claims that Boeing 'manufactured false claims' so they could avoid paying $4.2 billion in purchase price. They also announced that Boeing 'engaged in a systematic pattern of delay and repeated violations of the MTA.' The Brazilian manufacturer claimed that the reasoning behind this was because Boeing was struggling financially from this pandemic and the situation with the Boeing 737 MAX.
Boeing replied that Embraer didn't meet certain conditions while refusing to provide further details on unfulfilled obligations. However, Embraer claimed that this was false stating that it was in compliance with the deal and they had fulfilled all requirements by the deadline. Now, Embraer wants to do whatever they can for the damages done due to the termination of the MTA. As a result, Boeing believes that they should not have to pay any termination fee as it doesn't apply to this deal. Embraer claims that it has been wronged. Neither of the companies have given further details about any conditions met.
Boeing have recently been trying to cut down on costs due to the Coronavirus pandemic. Due to the grounding of their Boeing 737 MAX aircraft on March 13th 2019, it has been adding to their financial strain. Ever since Airbus began opening the 100 seat market with their Airbus A220 aircraft, they have been trying to enter the market using the Embraer aircraft. With the termination of this deal, it would mean that they would be out of the market completely. This would be a big change for Airbus who is usually an aggressive competitor with Boeing.
The agreement began in 2018 before the Boeing 737 MAX crisis. The company was thriving with the MAX being insanely popular, the Boeing 787s selling well and a bright future with their Boeing 777X aircraft. However, the MAX has been grounded and many airlines are either deferring their Boeing 777X orders or cancelling them altogether! Other have been converting their orders to Boeing 787 aircraft instead to try save money during this pandemic.
Since Embraer believes that they are owed a large amount of money from Boeing in damages it is unclear what option they will take to get it. They could take a prolonged legal battle or they could take it to court. The problem with taking it to court is that they could end up negatively damaging a manufacturer's reputation depending on the outcome. It is uncertain how this whole situation will unfold but we will be keeping a close eye out on either manufacturer's next steps.
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