By the Leeham News staff
May 6, 2020, © Leeham News: Mitsubishi Heavy Industries announced May 7 (Tokyo time) that it will close the acquisition of the Bombardier CRJ program June 1.
Production of the CRJ was to end this summer. The COVID crisis effectively terminates the program now. But the CRJ itself wasn’t the reason MHI bought the program, for US$500m. The attraction was the built-in global product support system for the CRJ that will transition to the M100 SpaceJet. It also provides a new revenue/profit stream as MHI enters the global RJ market.
Along with it, as icing on the cake, is acquisition of Bombardier’s sales team, infrastructure and other assets.
It would take years for MHI and Mitsubishi Aircraft Corp. (MITAC) to establish its own product support system.
With the collapse of the Boeing-Embraer joint venture, MITAC can reinvigorate and strengthen its relationship with Boeing.
Embraer, which said it needed the Boeing JV to compete in the future with Airbus against the A220, increasingly faces higher risks as MITAC and MHI evolve the CRJ product support system and potentially strengthens the Boeing relationship.
MHI also announced that it will immediately write down the $500m acquisition by ¥50bn- ¥ 70bn ($470m-$656m).
Reverberations of Boeing jilting Embraer at the alter continue.
Despite Embraer’s brave face, few outside the company seem convinced it has a bright future in the years ahead.
Comments forthcoming demonstrate the problem.
“The passenger industry is dying and will be on life support with the real carnage starting in September/October.”—From a US industry official, speaking of the US market.
Embraer’s lifeblood in the US is the regional airline industry.
“The E2 was such a grave miscalculation on the part of Embraer, particularly in the U.S. market.”—from a US aviation journalist.
“Grave” is a strong adjective. At the time, given the information and competition, it was the correct decision. But Embraer, like Mitsubishi, guessed wrong that US Scope Clauses would be liberalized. The E175-E2 and MRJ90 turned out to be the wrong airplanes at the wrong time—neither meets Scope restrictions. Embraer is struck with selling the E175-E1, an aging platform. Mitsubishi redesigned the MRJ90 into the M100 SpaceJet.
The E190-E2 is too small to be attractive outside the US. The E195-E2 is the preferred choice.
The aircraft mile cost for the E195-E2 is 9% higher and seat mile 16% lower than the E190-E2, according to LNA’s analysis. The revenue potential of 20 or more seats is huge.
More airlines are blocking middle seats as part of social distancing to win back passengers.
The trouble is: this is cosmetic.
Social distancing requires six feet apart. The width of center seats, including arm rests, is about 20 inches. Ryanair CEO Michael O’Leary is right on this one.
Frontier Airlines offers passengers the option of paying $39 to be sure the center seat is vacant. It’s a clever way to gain revenue, but it has nothing to do with safe distancing.
And with load factors at 10%, what’s it matter whether the center seats are blocked or not?
Beginning Friday, LNA’s Bjorn Fehrm—an aerospace engineer by training—will begin a series based on science about flying safely in today’s COVID environment.