Embraer Ties New Turboprop Aircraft to Boeing Deal -- Update
January 20 2020 - 7:32PM
Dow Jones News
By Benjamin Katz
Embraer SA will have to scrap plans to build the first all-new
turboprop aircraft in 30 years if its proposed joint venture with
Boeing Co. fails to secure regulatory approval, a potential
frustration for regional airlines hoping to modernize their
fleets.
The Brazilian manufacturer has been exploring designs for a new
propeller-powered aircraft for the past two years that could launch
by the middle of this decade. A final decision on whether to
proceed could be made by the beginning of next year.
However, Embraer Commercial Chief Executive John Slattery said
the project won't get the go-ahead unless the Boeing deal,
announced in 2018, is finalized to help finance hefty development
costs.
"The turboprop, as a stand-alone entity, is not something that
my board of directors would have an appetite for," Mr. Slattery
said in an interview Monday. "We would only really have appetite to
move forward with the turboprop in the environment of the joint
venture."
Embraer's tie-up with Boeing hinges on signoffs from European
and Brazilian competition officials.
Mr. Slattery expects Brazil could approve the deal this month,
while the European Commission's antitrust authority has pushed back
its decision to April 30.
Turboprops, which are smaller than jet-powered aircraft,
typically seat up to 80 passengers and are mostly used on short
regional hops. The market is dominated by France-based ATR -- owned
by Airbus SE and Italy's Leonardo SpA -- which accounted for more
than 80% of deliveries last year, according to data from IBA Group
Ltd, a U.K.-based aviation consulting firm. Canada's Longview
Aviation Capital Corp. delivered the rest under the "de Havilland"
brand.
Mr. Slattery said a new Embraer aircraft would offer more
efficient technology to airlines and likely spark ATR to respond
with a new model of its own. ATR couldn't be reached for
comment.
A new aircraft program would mark a welcome boost for regional
airlines, which have struggled relying predominantly on
low-population-density routes.
"You're dealing with platforms that are decades old. The
technology that's on board, the materials that are being used, the
noise and CO2 emissions reflect aircraft that are 30 and 40 years
old in their technology," Mr. Slattery said.
ATR forecasts demand for about 3,020 turboprops with between 40
and 80 seats in the 20 years from 2018, though Mr. Slattery expects
a more efficient Embraer aircraft to further boost demand.
Mr. Slattery's pitch comes during additional scrutiny of the
Embraer-Boeing deal.
Europe's competition regulator said in November that it had
paused its review, requesting additional information.
Embraer has submitted more than 1.5 million documents in total
for review, including of previous and ongoing sales campaigns,
compared with about 200,000 documents asked for by regulators in
the U.S., China and Japan, according to people familiar with the
matter.
The U.S., China and Japan have approved the deal.
Mr. Slattery said he is aware only of an objection to the deal
from Airbus. Airbus declined to comment.
Boeing agreed in 2018 to take an 80% stake in Embraer's
commercial-jetliner business a year after Bombardier Inc. handed a
controlling stake in its loss-making C Series program to Airbus, as
the world's two big plane makers jockey for position in the market
for smaller jets.
Mr. Slattery said regulatory delays have affected sales
campaigns with "multiple customers," who were holding off
finalizing deals until the Boeing JV is approved.
Embraer's new turboprop is two-thirds through a three-year
business case study, with a group of engineers assigned to the
project and wind-tunnel testing set to take place.
Write to Benjamin Katz at ben.katz@wsj.com
(END) Dow Jones Newswires
January 20, 2020 19:17 ET (00:17 GMT)
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