PARIS/SAO PAULO (Reuters) - A $4.2 billion deal for Boeing BA.N to buy the civil jetmaking arm of Brazil's Embraer EMBR3.SA has hit a roadblock over implementation, threatening its collapse barring a last-minute breakthrough on Friday, people familiar with the talks said.

FILE PHOTO: An Embraer E195-2 is seen on display, sporting a livery combining a lion's head with an integrated circuit design, during the 53rd International Paris Air Show at Le Bourget Airport near Paris, France, June 17 2019. REUTERS/Pascal Rossignol

The companies have been in discussions to assess whether various contractual conditions have been met for the tie-up, including the way a new venture 80%-owned by Boeing would be set up and funded, and have the rest of Friday to resolve the issue.

The deal also depends on delayed approval from the European Union which has said it needs until August to complete its anti-trust probe after the deal was cleared by other regulators, but this is not seen as the main stumbling block.

Neither company agreed to comment.

Under a provisional agreement signed early last year, Boeing BA.N and Embraer EMBR3.SA had until April 24 - or 15 months after the initial signing - to complete the deal and implement a number of covenants and conditions on both sides.

People familiar with the matter stressed that the deadline expires at midnight Sao Paulo time and that a deal could still be reached to resolve outstanding differences, though two sources said the talks were not progressing quickly.

Embraer said this week it was in talks with Boeing to extend the April 24 deadline for closing the deal and that there were no assurances about whether or when it would close.

At stake is a key plank of Boeing’s strategy for expanding its engineering and industrial base as it faces domestic talks over federal support for the U.S. aerospace industry.

Shares in Embraer fell 11% in line with a sell-off on the Brazil market .BVSP after the justice minister resigned accusing President Jair Bolsonaro of interference.

Shares in Boeing were down 5.9%.

Reuters reported last month that weak markets had raised urgent questions over the fate of the deal as aviation reels from the coronavirus crisis. A drop in Embraer shares and cash concerns at Boeing, driven by the impact of the epidemic on air travel, have undermined the deal’s economics.

One source familiar with the talks said Boeing remained committed to the deal and that it would be complex to reverse the carve-out of Embraer's commercial arm, which makes the E2 series of regional jets competing with the Airbus AIR.PA A220.

Analysts have not ruled out a second attempt to complete the strategic tie-up if the deal collapses, with Embraer looking increasingly isolated after Airbus bought its main Canadian rival and Boeing seeking a broader and cheaper engineering base.

The agreement has a termination fee of $75 million, rising to $100 million if it is for anti-trust reasons, according to a copy of the merger agreement filed to U.S. authorities.