By Scott Hamilton
May 12, 2020, © Leeham News: Mitsubishi Heavy Industries (MHI) yesterday said it cut development money for the M100 SpaceJet. M100 R&D is suspended indefinitely while it continues for the M90 on half rations.
MHI will continue certification of the M90.
MHI also said it will reevaluate demand for the M100 because of COVID-19 impacts.
This immediately raised questions whether MHI may kill the M100 program.
To do so will squander MHI’s once-in-a-lifetime chance to become a real global power in commercial aviation. If this happens, “Japan Inc.” also loses a chance to be part of this.
Entry-into-service of the M100 is planned for 2024. EIS for the M90 is planned for 2021.
The M90, previously known as the MRJ90, EIS has been delayed six or seven times as development encountered typical new-design challenges. But inexperience in designing an entire civil airplane (as opposed to components) and civil air regulations compliance required significant redesign of the MRJ90. This added substantially to the EIS timeline.
The MRJ90 was also too heavy to comply with US pilot contract Scope Clause limits, a miscalculation. MHI and its subsidiary, Mitsubishi Aircraft Corp. (MITAC), was not alone. Embraer miscalculated as well with the competing E175-E2. This is also too heavy for current Scope. Embraer and MITAC believed Scope would be relaxed this year.
Scope is unlikely to be relaxed for years to come.
MITAC developed the M100, a smaller version based on the MRJ90, that complies with Scope. Design changes in the M100 were applied to the MRJ90, creating what MITAC called a “certifiable” airplane. This was named the M90. There were 900 design changes.
Mitsubishi is a Tier 1 commercial airplane supplier and has been for decades. Its partnership with Boeing runs deep. MHI is a major industrial partner on the 787. While not without difficulties, this partnership provided valuable experience.
MHI’s foray into commercial airplane development goes back decades. When regional jets were 40-50 seat versions, the company surveyed airlines about what they wanted in RJs.
As RJs grew, so did MHI’s concept—into the MRJ90 and smaller MRJ70.
But being a Tier 1 designer and producer is far different than becoming a full-fledged airplane designer. Although MHI produced military aircraft (pretty much as a licensee), civil air regulations are an entirely different arena. In addition to miscalculating about Scope, inexperience caused MITAC to miss critical redundancy requirements and misplace critical components or systems that subjected them to critical failures.
The MRJ90 was not an airplane that could be certified by authorities. Furthermore, Japan’s regulator hadn’t certified a home-grown commercial airliner since the YS-11 in the early 1960s. Meticulous in the ways of Japanese culture, certification process was excruciating slow and detailed.
The international kerfuffle over the certification of the Boeing 737 MAX also gave the Japanese authorities pause. They did not want to repeat the shortcomings of the Federal Aviation Administration even by accident.
These factors and the redesigns added to the delays that today are 7-8 years long.
Redesigning the MRJ into a Scope-compliant, certifiable airplane was a bold step and costly step. It was necessary to continue the commercial aviation program.
The M100 is fully compliant with Scope as it now exists and is likely to exist for the better part of this decade. The cabin was redesigned for maximum flexibility to meet any configuration requirements by airlines. Economics were improved over the MRJ90 by double-digits. According to LNA’s analysis, the M100 has competitive economics with the E175-E2 and a significant economic advantage compared with the E175-E1.
Airlines and lessors like the redesign. MITAC has MOUs for 495 M100s, nearly double the peak orders for the MRJ90. Several hundred more orders were expected this year before COVID upended everything. A formal program launch was needed from MHI to convert these MOUs into firm orders.
MHI’s decision to halve R&D spending is in line with moves by Airbus, Boeing and Embraer to cut costs.
Suspending development on the M100 also mirrors the other OEMs. New airplane development at all three companies is suspended. Boeing continues spending on design and production R&D, but the amount is unknown outside the company.
MHI’s decision to continue M90 certification progress makes sense. MITAC and the Japanese regulators need to finish its agonizingly slow process. Doing so will position both for a speedier certification of the M100, assuming MHI eventually greenlights the program.
Demand will recover. It’s a matter of when. The developing consensus is that it will take 3-5 years to return to 2019 traffic levels.
Regional jet demand will be slower to recover than mainline jets. Legacy airlines worldwide are likely to use their own jets with their own pilots and flight attendants to resume service before tapping regional partners. In the US, the Scope restrictions also include a ratio of regional jets and partners to mainline service.
Geographies with vast expanses and poor alternatives require regional jet service. Unlike Europe, Japan and areas of China where bullet trains exist, there are few alternatives other than driving in the US, Canada, Australia, Latin America and Africa. Nor are there alternatives in island-prevalent regions in Asia-Pacific.
MHI faces a once-in-a-lifetime opportunity to become a global player in commercial aviation. With the withdrawal of Bombardier from the scene, MHI and Embraer are the only Western suppliers of regional aircraft. China and Russia currently have home-grown solutions, none of which are commercially viable elsewhere.
China’s ambition to become a global player is well known. And it can do so, given time. Japan Inc., led by MHI, can meet this challenge. Or it can squander this challenge.
Embraer’s weakened for the moment by the failure of the Boeing joint venture. Its product line is not as strong as its public relations suggests. The E175-E2 is a US-designed airplane with no orders. The E175-E1 design will be 25 years old in 2024—and its engine dates to 1982, ancient technology. The M100 beats it on every metric.
MHI should not suspend M100 development. Slowing it while simultaneously reassessing demand and timing makes sense. The MITAC leadership that conceived SpaceJet should be encouraged to bring it to life.
The Bombardier CJR program was purchased to give SpaceJet an instant global product support network. Killing the SpaceJet really makes the purchase superfluous. The deal is to close June 1. MHI already announced it will write off the entire $550m purchase price. Essentially, this “zero-based” budget maneuver means profits can be reported right away. But the CRJ will be a thing of the past in 20 years. Without the SpaceJet, what new business opportunities does MHI see?
Developing an M200 95-seater and potentially an M300 110-seater in 2030 can lay the foundation to become a major global player.
Or MHI and Japan Inc. can be resolved to being a supplier to Airbus, Boeing, Embraer and China (politics notwithstanding).
It all depends on how visionary MHI, the leader, wants to be.