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Aerospace & Defense

Mitsubishi Aircraft faces more turbulence as it loses 100-jet order

Size restrictions continue to hamper SpaceJet in US market

U.S. size restrictions have led to the cancellation of an of order of up to 100 SpaceJets by Trans States Holdings. 

TOKYO -- Mitsubishi Aircraft has lost a contract with an American company for up to 100 of its SpaceJet regional passenger planes, the Japanese company said Thursday, as seat limits in the U.S., its largest market, continue to hinder its plans for the long-delayed project.

Trans States Holdings, a holding company for three regional carriers, had ordered 50 of the 90-seat SpaceJet M90s, with an option for 50 more. This was Mitsubishi Aircraft's second-largest order, and its termination cuts the company's M90 orders, including options, by a quarter to 307.

This marks yet another setback for the trouble-plagued project, now running six years behind schedule, and makes it that much harder for Mitsubishi Heavy Industries to quickly recoup the more than 600 billion yen ($5.5 billion) it has already invested in its ambition to build Japan's first homegrown passenger jet.

The M90 "does not meet the requirements of the United States market," Mitsubishi Aircraft said Thursday. In the U.S., contracts between carriers and pilots limit the number of seats on planes flying regional routes to 76 at most.

Mitsubishi Heavy began developing the 90-seat jet in 2008 under the assumption that these so-called scope clauses would be relaxed, but this has yet to happen. This issue also factored into U.S.-based Eastern Air Lines canceling an order for up to 40 jets in January 2018.

Mitsubishi Aircraft began pivoting to a smaller 70-seat-class model this year. Future discussions with Trans States will focus on this variant, the company said.

Repeated delivery delays have also hurt the project. Mitsubishi Aircraft initially planned to start getting the jets to customers in 2013, but the target has been pushed back five times. The company is now working on obtaining the type certification it needs to put the SpaceJet into commercial service, but development setbacks have slowed the process.

The current delivery time frame is mid-2020, but Mitsubishi Aircraft is now looking at a sixth postponement. Outside experts are reviewing its plans to set a new date.

"We are reviewing the schedule because of delays in prototype development," Mitsubishi Heavy President Seiji Izumisawa said in an earnings briefing.

Mitsubishi Aircraft had planned to finish the final prototype in June, but issues including wiring problems have bogged down development. Izumisawa said it will be completed early next year.

Mitsubishi Heavy's group net profit rose 8% on the year to 29.2 billion yen for the six months through September, with lower development expenses for the SpaceJet easing pressure on margins.

Revenue edged up 0.3% to 1.88 trillion yen. Lackluster sales of auto turbo chargers and a dearth of projects for nuclear plant restarts were balanced out by brisk demand for aircraft parts for such manufacturers as Boeing and thermal power generation equipment.

Mitsubishi Heavy revised its three-year management plan Thursday, cutting its fiscal 2020 operating profit target by 40 billion yen to 300 billion yen, which would represent a 36% jump from its projection for this year.

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