The two multinationals will pool around 200 engineers to produce a feasible hybrid electric propulsion system by 2020.
"We believe that by 2030 passenger aircraft below 100 seats could be propelled by hybrid propulsion systems and we are determined to explore this possibility," Airbus Group CEO Tom Enders said in the statement.
The two companies will develop various power propulsion systems, ranging from several hundred kilowatts to 10 megawatts and more, for use in smaller aircraft that carry no more than 100 passengers, as well as in helicopters and UAVs.
This research will allow dramatic reductions in fuel costs, the main expense for air carriers. It will also reduce engine noise levels.
Last year, Airbus created a prototype of an electric two-seater plane that successfully crossed the English Channel. The plane was powered exclusively by batteries and took thirty minutes to complete the journey.