Boeing Engineering Plan Collapses...
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May 6, 2020 - by Dhierin Bechai for seekingalpha.com
- Boeing terminates Master Terms Agreement for a joint venture with Embraer.
- Boeing loses the prospect of access to cheaper engineering resources enhancing business case of challenging aircraft developments.
- Termination weakens single aisle product offering.
- This idea was discussed in more depth with members of my private investing community, The Aerospace Forum. Get started today »
The aerospace industry is currently an unprecedented crisis. Boeing (BA) was already feeling the heat of the Boeing 737 MAX crisis and the COVID-19 crisis adds a crisis to that is magnitudes larger than the problems Boeing faces on the Boeing 737 MAX program.
Looking at the lower side of Boeing's product portfolio, Boeing has been seeing fierce competition for decades with the introduction of the Airbus (OTCPK:EADSF) A320ceo and that competition increased with the introduction of the Airbus A320neo.
To that, the Bombardier (OTCQX:BDRAF) CSeries was added, which would have likely died a silent death if it weren't for Airbus to scoop up the program as Boeing filed a trade complaint against Bombardier. The result has been that Airbus has become even more dominant on the single aisle market and that triggered Boeing in tying up with Embraer (ERJ).
The problem I saw before Boeing terminated the agreement is that while the advantages are clear, the price no longer made sense.
Boeing remained committed to finalizing the deal, but I really had my doubts about the price the company would pay....
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