Avianca Brasil Weighs Bombardier, Embraer for Small Jets

Avianca Brasil, the closely held airline that offers free food, is talking with planemakers from outside Brazil along with domestic manufacturer Embraer SA (EMBR3) about an order of as many 50 regional jets.

Models from Bombardier Inc. (BBD/B), Mitsubishi Aircraft Corp. and Sukhoi Co. are under study, said Chief Executive Officer Jose Efromovich, who previously disclosed discussions with Sao Jose dos Campos, Brazil-based Embraer. He said he’s looking at Embraer’s upgraded E2 jets due for delivery starting in 2018.

Avianca Brasil is poised to refresh its fleet as the government crafts incentives to spur more flights to remote cities across South America’s largest country. That creates an opening for planemakers, because the airline is considering new jets after relying on turboprops from Avions de Transport Regional for short-haul flying.

“We have to replace at least 15 ATRs, and may need as many as 50 new planes,” Efromovich said yesterday in an interview in Sao Paulo. “It will depend upon the government’s regional aviation program.”

Considering models from companies beyond Embraer would give Avianca Brasil more options in selecting short-haul aircraft. Japan’s Mitsubishi (7011) and Russia’s Sukhoi are recent entrants to a regional-jet market pioneered in the 1990s by Embraer and Montreal-based Bombardier.

Regional Options

Regulators hope to promote the creation of new airlines or regional units in existing companies to reach underserved areas, Civil Aviation Minister Wellington Moreira Franco said in a Jan. 29 interview. While Moreira Franco said that would be a “big stimulus” for Embraer, Avianca Brasil may benefit, too.

“We could start a regional subsidiary, or create a whole new company, or even do a deal with an existing airline for the regional program,” Efromovich said. “We are open to all options.”

Avianca Brasil has become known for offering meals, entertainment and roomier seating at no charge on its coach-only planes. It’s the fourth-largest airline in Brazil by market share, according to data compiled by Anac, as the country’s civil aviation regulator is known.

The carrier’s 2013 earnings margin before interest, taxes, depreciation and amortization was almost 5 percent, Efromovich said. He said that was the first positive Ebitda since a turnaround effort began in 2008 under the ownership of Synergy Group Corp., which is led by his brother, Brazilian investor German Efromovich.

Avianca Brasil should be profitable this year, barring any drastic economic events, Jose Efromovich said.

To contact the reporter on this story: Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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