Embraer SA will upgrade its E-170 and E-190 jets with new engines and wings by 2018 rather than build a larger, all-new model to take on Boeing Co., Airbus SAS and Bombardier Inc.

Developing "second-generation E-Jets" will cost about US$2 billion, cheaper than the US$3 billion-plus for a new plane, and may include stretching them to seat as many as 132 people, 10 more than the biggest current aircraft, Paulo Cesar de Souza e Silva, Embraer's commercial-jet chief, said yesterday.

Embraer's decision leaves only Bombardier's CSeries and the C919 from Commercial Aircraft Corp. of China to compete with the smallest versions of Airbus's A320neo and Boeing's 737 MAX. The two biggest planemakers have amassed more than 1,600 orders and commitments for the overhauled jets since December, while Bombardier has won 133 contracts in three years.

'"Looking at the difficulties the CSeries is facing to penetrate the narrow-body segment, it becomes even more clear that Airbus and Boeing are defending the narrow-body segment very, very, very strongly," Silva said in an interview. "It's much more challenging to convince the airlines that are already operating Boeing or Airbus to switch to a new model."

That removes a "good business case" for Embraer to build a plane bigger than its existing regional jets, he said. The Sao Jose dos Campos, Brazil-based company has the capability to develop a larger aircraft and will reassess if there is "a window of opportunity," Silva said.

Bigger Category

Embraer had been studying the market for planes with 130 to 160 seats, the category most widely flown by airlines and a step up from the Brazilian company's 70- to 120-seat lineup.

Silva had said he wanted to wait to decide until after Boeing settled on its narrow-body strategy. The U.S. company did that in July when it included the smallest 737 model among the variants from that aircraft family that would get new engines.

Rising demand for the current E-Jets also helped sway Embraer, Silva said. Deliveries total 830 over seven years and sales exceed 1,000 to 60 airlines in 40 countries, he said. Embraer's market share among regional jets is 43 percent, he said.

General Electric Co.'s jet-leasing arm, CIT Group Inc. and Air Lease Corp. are among the lessors that have placed speculative orders for E-Jets, sales that Silva said provide a "tremendous endorsement."

E-Jet Performance

New landing gear will be among the enhancements to the upgraded E-Jets, Silva said. The planes would enter service after the Airbus neo, due in 2015, and Boeing's 737 MAX, due in 2017. Silva said the company is working with engine makers to ensure that the new E-Jets' performance will be comparable to those of their larger new competitors.

Improvements to the current planes will run in tandem with the second-generation program, Silva said.

GE, the world's largest jet-engine maker, is the "natural incumbent" to equip the new planes because the CF34 model is the only one used on Embraer's existing regional jets, and the supplier is developing a more-efficient power plant, Silva said.

Embraer also is considering a geared turbofan engine from United Technologies Corp.'s Pratt & Whitney unit, he said.