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By Scott Hamilton
Part 2 of 2. Part 1 appeared here.
June 1, 2021, © Leeham News: It’s been one year today since Mitsubishi Heavy Industries (MHI) closed the acquisition of Bombardier’s CRJ program and global aftermarket support system.
In that year, MHI “suspended” development of the M90/M100 SpaceJet regional airliner, reduced funding by 99% and all but shuttered its business. The entire airline and aerospace supply chain industry believes MHI won’t restart the program.
But the Bombardier aftermarket business, renamed MHIRJ Aviation Group, appears to be thriving. MHIRJ expanded, opening a consulting business.
MHI also invested $20m in the expansion of its West Virginia and Arizona CRJ MRO lines. The company celebrates the expansions next month.
A small amount to be sure, but it nevertheless reversed the lack of monies by the nearly bankrupt Bombardier.
“We have the biggest regional MRO network in the world out of Bridgeport, West Virginia, and Tucson, Arizona,” said Ismail Mokabel, Senior Vice President, Head of Aftermarket. At both sites, MHIRJ can run about 30 simultaneous aircraft or equal lines of maintenance at any given time, he said.
MHIRJ is adding another 100,000 square feet of space, expanding two new hangars that will be up and running within the next 12 to 18 months. The contract was signed May 27.
The $20m investment in the hangar expansion “would have been very tough for us to do in a cash-constrained environment with Bombardier where a lot of the money was being allocated for the C series program at the time,” Mokabel said.
“We’re also investing quite a bit and I did not mention IT infrastructure. That’s another tailwind we get under the Mitsubishi ownership. The best state-of-the-art tools for our people and our customers, new customer portals, new ERP systems, new shop floor control software, a lot of that capital investment. The millions of dollars as well would have not been viable in our previous ownership cycle, but now with the ownership of Mitsubishi, we get some of that tailwind, that helps us as well deliver these services with the state-of-the-art capability for many years to come to our customers.
“If you look at the regional market, it stands today about $5bn in 2020 of maintenance consumption,” Mokabel said. “That was close to $8bn in 2019, pre-COVID. As a result of COVID, [revenues fell] in the tune of 35%-40%. We see that like a pretty massive jump back.”
This year, Mokabel said industry revenues will be about $7bn. “We’re very close to where we were pre-COVID. The P&Ls are already at pre-COVID levels in 2021, and we see that grow again in between now and 2023, I think, reaching close to $8bn as a total market for the regionals.” Mokabel sees an even faster profile for MHIRJ for market share and penetration.
During the years Bombardier was developing the C Series, a new Learjet, and a new Global corporate jet, the Canadian OEM was hard-pressed to invest in the aging CRJ (or Q400) programs. While new interiors were designed, performance improvement package (PIPs) development improving economics were few and far between.
And, with the growing emphasis on “greening” airplanes for lower environmental impacts, Bombardier had little to invest beyond the C Series in its commercial aviation line.
MHIRJ is looking at what it can do in both areas. Many of the engineers assigned to the CRJ and its aftermarket programs continued with MHIRJ. Their work emphasis is on the aftermarket, but Mokabel said PIPs and eco-aviation are on the worklist, too.
“We’re looking into all sorts of technology roadmaps right now to see what’s the future and how we can continue keeping the fleet flying with our core engineering teams,” he said. “MHI acquired the whole core engineering organization that supports the fleet, but [we] also have a lot of design capability. Today, it is an active part of what we sell, what we call our modifications business, and that is helping either enhancement in the interior, some service bulletins that definitely help performance as well, or reduce DMCT (direct minimal checks) for our customer.”
Mokabel said the engineering team and advanced engineering team are looking into specific technologies of fuel and the green wave.
“We have anything right now that is coded shovel ready to be able to support the field with,” he said. But MHIRJ is working in sync with the customer needs.
“The green wave is coming,” Mokabel said. “There is a discussion we’re having with our technical engineering team to understand what type of technology would be best suited for us to continue reducing the footprint or the carbon footprint of the CRJ helping our customers reach some of these goals. Frankly, as we speak, it’s not kind of a burning platform with the customers for requirements, but nonetheless, our engineering team is engaged with projects as well, but more of a longer range horizon, as we speak.”
“We’re prioritizing where we put our money, investment, and infrastructure depending on where the customer needs us to,” Mokabel said. “There’s a lot of investment we’re doing under Mitsubishi in support of the customer base and that’s very synced with what the regional airlines are asking of us. We have increased our component repair capability, leaning on our engineering team to create more component repair and a post-production environment.”
MHIRJ doubled that type of business grown its manufacturing capability inside the MRO business. MHIRJ was certified in the last year to ASA 9100 standards, so it now can manufacture its own parts.
“There’s a lot more focus now on the aftermarket than it was before,” said Ross Mitchell, Vice-president, Corporate Shared Services. “Some of that was down due to Bombardier not having the money to invest. The focus really in the past was on the ongoing programs, selling airplanes, delivering airplanes. Now, the real focus of this entity is supporting the airplanes that are in service.
“A lot of what Ismail talked about there is relatively new, and it’s upgrades to the service that we’ve been providing. Our company is very much pivoted from being an OEM, delivering airplanes, selling airplanes to an OEM now that supports the airplanes and service, which is a different proposition going forward. I think the customers will benefit because we are now way more focused on that aftermarket that was under the previous ownership.”
Eventually, Mokabel said MHIRJ may branch out to service aircraft other than the CRJ.
“Originally, we were dabbling in that strategy a bit earlier, but frankly, we’re sold out, we’re fully booked now. I have every slot in my infrastructure inclusive of the investment that is spoken for all the way till 2023,” Mokabel said. “By then, we should be in a position to accept other platforms. I have customers coming in my way that I cannot support as a result of a lack of capacity now. That delayed a little bit of our ambition for diversification. I say, post-2023.”