June 20, 2017 4:06 am JST

Mitsubishi Regional Jet unveiling subdued as interest flags

Rampant delays have diminished appeal, made buyers think twice

TOMOHIRO ICHIHARA and YOHEI HIROSE, Nikkei staff writers

Reporters tour the Mitsubishi Regional Jet at the International Paris Air Show on June 19.

LE BOURGET, France -- Japan's first home-grown jetliner faces murky skies even before takeoff, as repeated development and delivery delays have pushed potential buyers toward increasingly attractive alternatives.

Mitsubishi Aircraft, developer of the Mitsubishi Regional Jet, abandoned much of the usual fanfare when unveiling the completed plane Monday at the International Paris Air Show here. The aircraft is on display for the world's aviation industry insiders to see, and received a laudatory introduction from Shunichi Miyanaga, president of parent Mitsubishi Heavy Industries. But there has been no press conference to report new orders for the plane -- an event most manufacturers relish. Mitsubishi Aircraft itself held such an announcement at an industry show in the U.K. last year.

Hisakazu Mizutani, president of Mitsubishi Aircraft, ventured to say that pulling in orders would be "difficult." But on the whole, neither the aircraft developer nor its parent seem particularly anxious to elaborate, or indeed to get business flowing. At Mitsubishi Heavy, workers "have apparently been told it doesn't really matter if they bring in orders," according to a person close to the situation. If contracts allow for cancellation to guard against further delays, the thinking seems to be, why bother taking them seriously at all?

No longer new

The MRJ's delivery date has been pushed back five times so far, and is now set for mid-2020. The lower environmental impact, improved fuel efficiency and quick turnaround time that held such appeal nine years ago, when the decision to commercialize the aircraft was made official, are rapidly losing their shine.

Rival manufacturers such as Canada's Bombardier and Brazil's Embraer are set to adopt the same Pratt & Whitney engines largely responsible for the 10-20% boost in fuel efficiency the MRJ touted at the outset, significantly dulling the Japanese company's edge. Embraer plans to debut its competing small jetliner in 2021, giving the Japanese model a head start of only a year.

Japan's ANA Holdings, which will receive the first MRJ, has ordered 25 of the aircraft, though orders for some can be canceled. "We wish the MRJ success," Vice Chairman Osamu Shinobe has told reporters. But the All Nippon Airways parent has nevertheless hedged against further delays, striking a deal with Boeing of the U.S. for alternative passenger jets.

In all, Mitsubishi Aircraft has received firm orders for around 250 MRJs. Cancelable orders and purchase options bring the total to 450 aircraft or so. The manufacturer had targeted orders for 1,000 units, in order to lock down a significant market share. But the current total is unlikely to budge much, given would-be buyers' loss of trust in Mitsubishi Aircraft.

Time taking toll

Meanwhile, repeated delays are expected to push total development costs for the MRJ north of 300 billion yen ($2.69 billion) when all is said and done, well above the 200 billion yen initially projected. The aircraft maker's net worth is already negative.

Mitsubishi Heavy is racing to overhaul its burdensome subsidiary, placing it under the direct control of President Miyanaga. While the engineering and electronics firm is typically cautious about making forecasts public, it has pledged to bring the MRJ's delivery date forward by a year, to 2019.

The aircraft maker can only hope this is the case. Competition in the passenger jet market is growing more intense by the day, as both private-sector rivals and government-supported Chinese manufacturers jostle for takeoff position.

Mitsubishi Heavy Industries, Ltd.

Japan

Market(Ticker): TKS(7011)
Sector:
Industry:
Producer Manufacturing
Industrial Machinery
Market cap(USD): 13,229.9M
Shares: 3,373.65M

ANA HOLDINGS INC.

Japan

Market(Ticker): TKS(9202)
Sector:
Industry:
Transportation
Airlines
Market cap(USD): 13,026.1M
Shares: 3,516.43M

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