With staff cuts and deals falling through, what's Boeing doing these days?

Boeing reportedly canceled its $4.2 billion deal to buy Embraer's commercial aircraft unit, drawing an angry response from the aircraft manufacturer and scuppering plans to build a U.S.-Brazilian alliance to build everything from regional jets to large aircraft.

The deal between Boeing and Embraer was originally announced in 2018, but the two sides failed to reach an agreement on how to implement the deal when the deadline expired at midnight on April 24, and Boeing announced the cancellation of the deal hours later. Boeing accused Embraer of failing to meet the conditions to complete the deal, but Embraer said Boeing's extensive financial difficulties due to the COVID-19 crisis and the grounding of the 737MAX caused it to scuttle the deal.

It is understood that Embraer issued a statement saying: "Embraer firmly believes that Boeing has wrongly terminated the agreement. We believe that Boeing's own financial difficulties, the grounding of the 737MAX and other business issues have led to its unwillingness to complete the transaction, repeated delays and violations of the agreement."

Boeing's decision was expected, and they believe that the real reason for Boeing's termination of the deal is the collapse of aircraft demand caused by the new crown epidemic and the urgent need to save cash as revenue sources dry up. Boeing's tone is more moderate than that of Embraer, but behind the scenes, both sides are preparing for months of disputes after the collapse of the deal.

“Over the past several months, we have engaged in productive, but ultimately unsuccessful negotiations,” Boeing Senior Vice President Marc Allen said in a statement. “We all hoped to resolve these issues prior to the original termination date, but were unable to do so.”

Industry sources said Boeing was interested in Embraer mainly for access to lower-cost engineers and new manufacturing options, but it is now considering cutting 10% of its workforce while seeking federal aid for the aviation industry.

The fallout from the deal also damaged the previously close relationship between Boeing and Embraer. “This kind of announcement is not common in the aviation industry,” said Richard Aboulafia, a consultant at Teal Group.

The deal requires a $100 million breakup fee, but Embraer is preparing to sue Boeing for a higher sum, saying the prolonged uncertainty has hurt sales of its E2 jet.

Embraer said it would try "all remedies" to claim compensation from Boeing, but it did not elaborate. Simple Flying, a professional civil aviation website, commented that the cancellation of the deal was a major blow to both Embraer and Boeing, both of which had hoped to use this partnership to expand business opportunities and compete for a larger market share. If the deal goes through, Boeing's large commercial division will be able to market and sell the E2 aircraft in a way that Embraer cannot.

In addition, the current volatility of the aircraft market cannot be ignored. Both Boeing and Embraer understand that it may take some time for aircraft orders to begin to recover. This may be one of the reasons for the cancellation of the transaction. Boeing could have negotiated with Embraer to extend the transaction deadline, but Boeing chose not to do so.