Mitsubishi in negotiations with Bombardier to acquire the CRJ program (Updated)

By Bjorn Fehrm

June 5, 2019, © Leeham News.: The Air Current broke the news earlier today Mitsubishi Heavy Industries (MHI) is negotiating with Bombardier to buy the CRJ program.

BBC has got comments from both companies confirming the discussions, with cautions nothing is settled and it can still result in a no deal. Should it happen it would make a lot of sense for both parties.

UPDATE: Bombardier has issued a statement confirming the discussions, see below.

Benefits to Mitsubishi from acquiring the CRJ Program

The immediate benefit to Mitsubishi would be its regional jet enterprise, Mitsubishi Aircraft Corporation (MITAC), would go to a 45% market share in the all-important US market in one go, Figure 1.

Figure 1. In service E-Jets and CRJ700/900 in the US market. Source: Ascend

We excluded the smaller CRJ100/200 and ERJ135/140/145 from the count in Figure 1. Those included, the market shares stay the same with 45% for all CRJs and 55% for the ERJs/E-Jets.

Worldwide the picture would be 37% in-service CRJs (1385 CRJs) versus 63% ERJs/E-Jets (2320 jets).

This brings MHI and MITAC from an outsider competitor to one of two major players with 1300 operator’s world-wide, operating a worldwide fleet of 1385 aircraft.

One would assume the complete organization around the CRJs would be part of the deal. This would bring MITAC and the MRJ or SpaceJet as the new name is rumored to be:

  • A 37% Worldwide market share of 1,385 aircraft with 1,385 operators with a US share of 45%. All these operators would need new aircraft over the next 20 years. The SpaceJet would be ideally placed to compete for this business, not as an outsider but as the incumbent supplier.
  • The CRJs and SpaceJets would benefit from an established Worldwide support network with over 30 CRJ offices/partners.
  • The Bombardier CRJ team is the most experienced Regional jet team in the market, from sales through to production and aftermarket support. MITAC and their customers would benefit from this experience and the CRJ team would get a new future-oriented product to sell and support.

We will see if the transaction will close. If it does it makes a lot of sense for MITAC and for the people inside Bombardier who today work with the CRJ.

The rumor says the SpaceJet will be the only Scope clause compliant jet with the Pratt & Whitney GTF engine and a three-class 76 seat cabin. This catapults the Mitsubishi Regional Jet program from a questionable competitor to the only alternative with new generation engines. Paired with the CRJ it would bring the jet market below 100 seats to two able competitors instead of just Embraer/Boeing Brazil.

UPDATE:
Bombardier Statement on CRJ Program
June 5, 2019 Montréal
Bombardier Inc., Other News
Bombardier has recently stated it would explore strategic options for the CRJ Program. From time to time, this may lead to discussions with potential counterparties. While Bombardier does not generally comment publicly on market speculation or rumors, in light of recent media reports, Bombardier believes it is prudent to advise stakeholders that it is in discussions with Mitsubishi Heavy Industries, Ltd. with respect to its CRJ Program. We will not further comment on the nature of the discussions. Before any agreement can be reached further review and analysis by Bombardier management and approval by Bombardier’s Board of Directors are required, and Mitsubishi Heavy Industries, Ltd. must complete its due diligence review and own analysis and approval process, which are outside of Bombardier’s control. There can be no assurance that any such discussions will ultimately lead to an agreement.

20 Comments on “Mitsubishi in negotiations with Bombardier to acquire the CRJ program (Updated)

  1. There were rumors in the past, that the structure configuration of the CRJ series presented some serous challenges to accept a geared new generation turbine. Would like to have your comments on that, Bjorn. Tks

    • MRJ won’t put the GTF on the CRJ

      Its going to pick up the Infrastructure and support the CRJ has, the new sales with the the MRJ-76 that is scope complaint with its GTF.

  2. “One would assume the complete organization around the CRJs would be part of the deal.”
    One major manpower challenge is that Bombardier Commercial Aircraft is now being split into three separate companies managed by Airbus (C Series), Viking/DHC (Q400) and possibly Mitsubishi (CRJ)

  3. This year Paris Airshow will be very interesting. I am interested to know how Embraer will react to all these negative news: loss of Spirit, Space Jet and now CRJ bought by MITAC. Seems like the approval of the Boeing Brasil – Commercial by regulatory authorities must happen ASAP, since clearly Embraer alone cannot compete in a fair leveraged game any longer.

    • The merger has nothing to do with the fact that Boeing has bought a pretty non viable product line.

      Unless they revamp the 175E2 to scope specs, they have a non viable product line for the biggest market (what 60%+?)

      Boeing gets a lot of engineering talent and maybe that is worth it for what they want to pay employees.

      I don’t see the KC390 selling big numbers.

      • To put the 175E2 under scope the range penalty would be huge. If you remove the additional seats it barely beats the 175 Plus. This new engine weights too much, and at least for this 56″ fan size, is not giving that much of a fuel burn save. That’s why I am really interested to know which magic MITAC is doing with MRJ70.

        • MRJ 70 was designed in scope.

          E2 Series was not (nor was the MRJ90)

          What it might take to get the 175E2 into scope is ?????

  4. Saw that, it would be a great pickup for them.

    Not the program but the channels of service, personnel and contacts for it across the world focused on the US (not sure ow many CRJ sold outside the US)

  5. I had commented previously that the MRJ has a huge advantage with the GTF as no one has that in the scope complaint category.

    I had thought MRJ was pretty much dead but like the C Series, looks to spring from the ashes and become a knock out hit.

    Boeing should have bought them out not Embraer with its sadly out of scope products.

    The GTF is due for a major PIP and its already exceeding by at least 1.5% of its specifications in service. That shoudl bring it up to 5% or a bit more increase.

  6. I wonder what the CRJ program is worth to Mitsubishi? Is it worth 2 Billion?

    • Most likely CRJ program is losing money and the losses will accelerate. So Bombardier is pretty smart selling now and putting the money into biz jets and trains. Who else would buy? Maybe GKN/Fokker and do a reenegine/upgrade to the PW800 or Passport engine, Hondajet with GE money to block a P&W reengine or the Chinese?

  7. Will Mitsubishi accept all the liability associated to CRJ program like residual value guarantees?

  8. Glad to see the reduction to 2 strong players from 4 will likely be short lived. I do wonder though whether there could be some closer alignment between MHI and Airbus in the future.

  9. 2 bn? Given the fact that 51% of the brand new C series were sold for 1 US$, I am not so sure if you can get so much more than that for a loss making old line.

    A closer alignment between Airbus and Mitsubishi seems natural. For the time being, however, I have the impression, MHI wants to try their chances for themselves. Airbus is used to getting brand new competing lines for 1 US$. So, it will rather happen in 5-10 years, when MRJ is flying and the financial implications can be assessed better by both sides.

    • That sounds reasonable. The loss making Q400 which has much less annual sales sold for between 300 to 400 Million, so one would think the established “Blue Sky” of the CRJ program is worth considerably more like 1.5 to 2 Billion. But time will tell. It’s amazing, I live under the glide path to MSP and it seems like every third plane that goes over head is a CRJ. You think Bombardier could have stashed away a little more money and be more of a viable concern today, but that is not the case.

        • Hard to compete with the E series with a dated design. Probably could never mount a GTF in the back.

          Engine under wing is better for a variety of reasons.

          BBD choose to go big with the C series and did a marvelous job but not the resources to make it work like Airbus can.

          Small market as well when you consider 737 and A320 have 8,000 aircraft backlog?

          4 years they will produce more than all regional s combined.

      • Answering my own question. Under a headline alluding to the possibility of: Bombardier Warning MHI of Cherry Picking the CRJ Program, it came up that they are referring to the program as worth a few hundred Million. Seems MHI might just want maintenance facilities. You think they’d want Engineering to get their darn plane available to customers. The Bomber wants to sell Production et all en mass. Boeing, Airbus, MHI – all these companies strike me as having little vision or faith in the future. Could they all be run by Disciples of Jack Welsh??? I’ll answer that question myself, too. YES

  10. Chinese would be a natural to snap up CRJ.

    All that government money backing them and they need the network if they are going to be successful.

    You have to guess the CRJ enterprise is work around a billion. Not in product but the staffing of sales, engineer, logistics and support.

    Mitsubishi though can afford to be pretty free, they have sunk a lot into the MRJ and likely never see a return on it.

  11. “The Bombardier CRJ team is the most experienced Regional jet team in the market, from sales through to production and aftermarket support.”

    < How so and says who? Please elaborate.

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