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Boeing, Embraer in Arbitration Over JV Failure

June 3, 2020
The would-be partners are squaring off to settle the matter of their respective liabilities after the termination of their $4.2-billion joint-venture agreement.

Boeing Co and its former partner Embraer SA are engaged in arbitration over their respective liabilities for the $4.2-billion joint-venture deal that Boeing terminated in late April. Embraer reported the existence of the competing demands in a securities filing June 1. Boeing has not confirmed its role in the arbitration.

On April 24, Boeing Co. unexpectedly terminated the July 2018 agreement with Embraer S.A., under which the two companies were to form a joint-venture to produce 70- to 150-seat narrow-body jets for the commercial aviation "mid-market," meaning high-volume commuter and regional routes.

A second joint-venture would have promoted the Embraer C-390 Millennium medium-lift transport aircraft.

The two firms had a Master Transaction Agreement that set April 24, 2020, as the initial termination date. In calling off their planned ventures, Boeing said it exercised its rights to terminate after Embraer did not satisfy the necessary conditions of that MTA.

Under the MTA, Boeing was to acquire Embraer's commercial aircraft business and control 80% of a new company, Boeing Brasil-Commercial. Embraer was to hold the remaining 20%.

The second JV, Boeing Embraer-Defense would have seen Boeing hold 49% and Embraer 51%.

In a recent call with analysts, Embraer executives revealed the company is seeking a new partnership for its commercial aircraft interests, including businesses in China, India, and Russia. However, CEO Francisco Gomes Neto made it clear that Embraer is not currently negotiating with state-owned Commercial Aircraft Corporation of China (COMAC) or Russian aircraft builder JSC Irkut Corp.