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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