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Boeing Shares Slide After Planemaker Scraps $4.2 Billion Aircraft Venture With Brazil's Embraer

As Boeing backs out of a long-planned JV with planemaker Embraer, Europe's Airbus warns it's 'bleeding cash' amid the coronavirus pandemic.

Boeing Co.  (BA) - Get Boeing Company Report shares traded lower Monday after the planemaker scrapped a planned $4.2 billion joint venture with Brazil's Embraer SA  (ERJ) - Get Embraer SA Report

The two-year old deal was cancelled late Saturday after a deadline designed to bridge gaps between Embraer's commercial aviation division and Boeing came and went without progress. Embraer, however, said Boeing's 737 MAX struggles, as well as its coronavirus difficulties, lead it to 'wrongfully' terminate the ill-fated agreement. 

"Boeing has worked diligently over more than two years to finalize its transaction with Embraer," said Boeing's Marc Allen, who headed the Embraer partnership & group operations. "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," Allen said. "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."

Boeing shares were marked 2.3% lower in early Monday trading to change hands at $126.00 while Embraer's U.S.-listed shares plunged 10.2% to $5.22 each

The move to cut ties with Embraer suggests Boeing's path towards what CEO David Calhoun has called the "new reality' in the global aerospace industry, where some 16,700 commercial planes -- more than two thirds of the global fleet -- remain grounded amid coronavirus-lead travel restrictions, continues apace.

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Airbus SE, Boeing's main European rival, told staff on Saturday that the world's biggest planemaker is "bleeding cash at an unprecedented speed" and warned that the its "survival is in question" if it doesn't act with job cuts and production pullbacks. 

Last week, Bloomberg reported that Boeing is ready to cut production if its 787 Dreamliner, while unveiling deeper staff layoffs and buyouts, heading into its third quarter earnings report on Wednesday. FactSet forecasts suggest it will post a loss of $1.35 a share on sales of $17.3 billion. 

Earlier this month, however, Boeing began the process of returning 27,000 employees to in its main assembly site in Washington as it continues to pursue its goal of a mid-2020 return-to-service for the grounded 737 MAX jet.

The decision to re-open the Seattle-area plant follows a deal between the U.S. Treasury Department and the nation's largest airlines to secure $25 billion in aid from the CARES Act, a move that CEO David Calhoun called "a step on the long road to recovery from the Covid-19 crisis."

"Our industry took a step on the long road to recovery from the COVID-19 crisis this week," Calhoun said. "The U.S. government and 10 airlines agreed on a $25 billion package of support that will help tide our customers over until passengers can begin to travel again."

Last month, Boeing said it needed a "minimum" of $60 billion in government aid in order to support the U.S. aerospace industry's 2.5 million jobs. The planemaker didn't indicate which portion of the aid it would need directly, but noted that it relies on at least 17,000 suppliers around the country and holds the position of the biggest U.S. exporter.