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Business deals

Why Mitsubishi jet turned to Bombardier for a shot in the arm

Dream of Japanese passenger plane hinges on Canadian group's expertise

Bombardier's CRJ regional jet is a well-established brand in the global market for smaller aircraft. (Photo courtesy of Bombardier)

TOKYO -- As setbacks plague Mitsubishi Heavy Industries' efforts to build its own aircraft, the Japanese company hopes that Bombardier's regional jet program could provide the missing piece to commercializing the long-stalled Mitsubishi Regional Jet.

Negotiations between Mitsubishi Heavy and Bombardier for the sale of the Canadian manufacturer's CRJ program were reported this week. Mitsubishi Heavy seems interested mainly in Bombardier's experience with similar-sized regional jets, as well as its extensive customer and maintenance network.

Bombardier and Brazil's Embraer dominate the global market for small jets. Acquiring Bombardier's CRJ, about 1,300 of which are currently in operation around the world, would put Mitsubishi Heavy in contact with a wide customer base and give it an opening to market its own jet as a replacement for the older CRJs.

An acquisition would also provide a shot in the arm for Mitsubishi's own jet project, which so far has postponed deliveries five times -- from 2013 to mid-2020 -- and cost the company over 600 billion yen ($5.5 billion). Cancellations have pushed standing orders down from 447 to just over 400. A further delay could put those in jeopardy as well.

"It's been 10 years since development began, and if we design our jets based on existing models, we'll end up with something outdated," said an executive from Mitsubishi Aircraft, the unit in charge of the MRJ.

Mitsubishi Heavy suppliers are also having trouble securing enough personnel to support mass production. An Aichi Prefecture-based assembler had planned to hire 100 new graduates this spring but ended up with about 30. Japan's shrinking population gives smaller companies a harder time securing workers over larger, better-known corporations.

The market has changed dramatically since the MRJ was announced in 2008. Embraer has launched a new model with fuel-efficient engines, which was supposed to be a key selling point for the MRJ. And Bombardier's C Series, designed as a larger regional jet, failed to take off and was essentially sold to Airbus in 2018.

The jet itself is not the only problem. As a new entrant in the market, Mitsubishi Heavy lacks an established global network for maintenance operations -- a key factor airlines consider when selecting planes.

Airlines want to maximize the operating rates of their jets to boost income, which means they want the planes on the ground as little as possible. When development began on the MRJ, an Embraer executive had said the Japanese jet would have a hard time catching up.

Mitsubishi Aircraft has a customer support contract with Boeing under which the U.S. company will provide assistance on procuring parts, planning inventory, and providing maintenance services on the ground. It hopes that by acquiring the CRJ and its customer support operations, it can start providing maintenance in-house and make itself more attractive to potential clients.

Amid mounting challenges for the MRJ, Mitsubishi Heavy has announced a revamp with a new 70-seat-class version called the Space Jet. It will consider foreign-made parts and U.S. production in order to cut costs, departing from the previous focus on building a homegrown jet.

Details of the Space Jet will be announced this month, and development is expected to kick into full gear by the end of the year. Mitsubishi Heavy will suggest that client airlines switch out existing orders for the MRJ to the Space Jet. The option will likely appeal to American carriers, as the 90-seat-class MRJ currently exceeds "scope clause" limits on the number of seats allowed on regional planes in the U.S.

But even with better capabilities and lower costs, the earliest the Space Jet can obtain the necessary type certificate is 2022, spelling further delays for airlines that originally wanted the MRJ. A longer timeline also means that it will take longer for Mitsubishi Heavy to start seeing returns on the business.

Mitsubishi Aircraft is taking part in the Paris Air Show starting June 17. The company is being closely watched for any explanations of its future strategy.

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