The plot thickens as now Embraer is saying that Boeing “wrongfully terminated” its agreement with the Brazilian aircraft manufacturer and will seek damages. Comments came out in a statement to the press on April 25th. The deal would have seen Boeing and Embraer cooperating on the production and sale of jets in the 100-seat market.
Embraer claims Boeing wrongfully terminated the agreement
In the wake of Boeing’s announcement that it had terminated its Master Transaction Agreement (MTA) with Embraer, the Brazilian aircraft manufacturer released its own statement claiming that the termination was wrongful. Using strong language, Embraer claims that Boeing “manufactured false claims” in order to avoid paying the $4.2 billion purchase price.
That wasn’t all. Embraer went even further to claim that Boeing has “engaged in a systematic pattern of delay and repeated violations of the MTA.” And, to explain why Boeing had done this, Embraer claims it was because of the American manufacturer’s financial condition and 737 MAX woes.
As for Boeing, it claims that Embraer had not met certain conditions while declining to provide further details on the unfulfilled obligations, Embraer claims the opposite saying that it was in compliance with the deal and had fulfilled all requirements by the deadline of April 24th.
That was not all. Moving forward, Embraer plans to “pursue all remedies” for damages due to the termination of the MTA.
To boil the argument down, the two sides are at odds over whether or not the termination of the MTA requires Boeing to pay any damages to Embraer. While Boeing does not believe that any termination fee applies to this deal, Embraer says otherwise and is claiming that it has been wronged. It does not appear that either side is ready to return to the table and seal the deal.
Neither side offered further details as to the conditions that were or were not met. But, this does raise some questions about the end of this deal.
Boeing is trying to cut costs and conserve cash amid a global aviation downturn. In addition, costs from the MAX grounding are weighing heavily on the manufacturer.
However, Boeing is also engaged in a major battle with Airbus for global dominance. With the A220, Airbus has an opening into the 100-seat market, while Boeing’s 737 MAX is just a little too big. This deal with Embraer would have given the Chicago-based manufacturer the chance to get its foot in that market as well.
Terminating this deal would effectively mean that Boeing is pulling out of this market altogether. This would be a change in tune from the manufacturer, which is known for an aggressive team that mounts serious competition to Airbus.
This agreement first came about in 2018– months before the 737 MAX crisis started. At the time, the MAX was one of Boeing’s most profitable aircraft lines, the 787 was still selling quite well, and the company was looking to the future with the 777X and potential new airplane lines.
What will happen next?
It would be better for Boeing and Embraer to settle this matter out of court. However, if Embraer believes that it is owed a significant sum from Boeing in damages, then a protracted legal battle could be in the future.
But, a court case would have its drawbacks. Both sides would end up airing their dirty laundry, and it could negatively impact a manufacturer’s reputation– depending on which company gets a favorable outcome. These battles could also end up costing more than a settlement.
What do you think happened with this deal? Which side do you think was right? Let us know in the comments!