World News

Embraer studies turboprop to be developed through Boeing venture

By Tim Hepher

DUBLIN (Reuters) – Brazilian planemaker Embraer <EMBR3.SA> is in the advanced stages of studying the launch of a new turboprop aircraft to be developed through a venture it is planning with Boeing, subject to necessary approvals, a top executive said on Monday.

The aircraft would be in the same size range or even larger than the 70-seat ATR-72, a Franco-Italian aircraft that currently dominates the market, Embraer Commercial Aviation Chief Executive John Slattery told Reuters.

“It sits in our target market, which we have always been clear is below 150 seats, and will have natural adjacency to the E2 offering,” he said, referring to Embraer’s family of 80-120-seat regional jets. “The business case is going well.”

Analysts say such a move could shake up a market dominated by ATR, which controls four-fifths of global sales in competition with the Q400 turboprop, sold by Bombardier last year to Longview Aviation of Canada and renamed the De Havilland Canada DHC-8.

China is also targeting the market with its Xian MA700. Analysts say turboprops are more efficient than jetliners over short distances, especially when oil prices are high.

Speaking as the aviation industry poured into Dublin for annual Airline Economics and Airfinance Journal conferences, Slattery said he believed a move by Embraer into turboprops would force a response from ATR and boost choice for airlines.

He said ATR had a “de facto monopoly” because of recent marketing challenges facing its smaller Canadian rival.

ATR did not immediately respond to a request for comment.


ATR claims to be the world’s most profitable aircraft manufacturer with double-digit margins, though it does not publish financial data separately from its co-shareholders, Europe’s Airbus <AIR.PA> and Italy’s Leonardo <LDOF.MI>.

It predicts demand for 2,390 deliveries of turboprop passenger aircraft with 61-80 seats over 20 year to 2037.

Embraer is also in “meaningful” discussions with engine makers General Electric <GE.N>, Rolls-Royce <RR.L> and Pratt & Whitney Canada <UTX.N> about an engine for the new plane, Slattery said. Pratt is currently the sole turboprop supplier.

Any launch decision would need to be backed by Boeing.

Embraer is studying the plan as it tries to complete a 2018 agreement to fold its commercial aircraft activities into a venture to be controlled by Boeing <BA.N>.

The deal has won approval from several regulators but the European Union has launched a detailed competition review.

Slattery said Embraer would not go ahead with the project on a standalone basis because of the cost – estimated at billions of dollars – and other priorities.

But he stressed there was no connection between the turboprop study and talks with regulators over the rest of Embraer’s commercial airplane activities.

“The amount of balance sheet required for a new state-of-the-art commercial aircraft is of an order of magnitude that we simply don’t have the appetite for, outside of the joint-venture environment,” Slattery said, adding, “no JV, no TP”.

He added he did not expect any such hurdle to arise because Embraer remains confident the Boeing deal will be approved on its merits, citing the support of several purchasing airlines.

European Union regulators investigating the $4.2 billion tie-up have asked for more than 1.5 million pages of information and data on over 20 years of sales campaigns, two sources familiar with the matter told Reuters last month.

(Reporting by Tim Hepher; Editing by Mark Potter and Jan Harvey)