The long, slow death of Mitsubishi’s SpaceJetBy Scott Hamilton
Feb. 9, 2023, © Leeham News: Mitsubishi Heavy Industry’s (MHI) announcement this week that it finally killed the SpaceJet program is hardly new. This was apparent as far back as January 2020 when all the Canadian and American leadership at Mitsubishi Aircraft Corp (MITAC) was unceremoniously booted out. Then, in May 2020, using the COVID pandemic as an excuse, all US operations were closed; so was the recently opened Canadian engineering center; the budget was reduced by 95%; and nearly all the engineers at the home office in Nagoya, Japan, were laid off or reassigned.
MHI refused to state the obvious. Instead, officials said repeatedly that the program was “paused.” This drip, drip, drip was all about saving face. Thus, the slide in MHI’s presentation about why the program was finally being killed was more candid than expected.
Ignores M100, focuses on MRJ90
MHI’s slide detailing why it terminated the SpaceJet program focused on the MRJ90 and ignored the redesigned, certifiable model, the M100 SpaceJet.
The references in the slide are accurate—as far as they go. The MRJ90 was uncertifiable as designed, due to inexperience by MITAC’s staff. They didn’t have the knowledge to undertake a full airplane program with all the integration, regulatory and certification requirements required. This led to the need to alter certain crucial designs of the MRJ90. Even so, the aircraft remained outside the US labor contract Scope Clause requirements related to weight; the MRJ90 was too heavy.
The insurmountable problems with MRJ90 led to repeated delays and billions of dollars in cost overruns. The Western team recruited to save the program came from Bombardier, Embraer and Boeing. They recognized the MRJ90 was unsavable and wanted to discontinue development of the MRJ90 in favor of redesigning the smaller MRJ70. This airplane had not only the same fundamental design shortcomings as the larger MRJ90. It also was designed to carry too few passengers, which made it uncompetitive with the Embraer E175-E2 and
the legacy E175-E1.
Redesigns of the MRJ70 added passengers, shaved weight and updated the interior. LNA’s
analysis of the redesign concluded that the airplane had a double-digit advantage vs the E1 and single-digit vs the E2.
Acquiring the CRJ program
One major consideration as the Western executives worked to save the program identified was the need for a global support system for their regional jet. Creating one from scratch would be an immense task. Talent, locations, infrastructure and not the least time and money were obstacles. So MITAC proposed to MHI that Bombardier’s entire CRJ program and its global support system be acquired. The CRJ itself was already a dead duck. Outclassed by the E-Jet and ignored by Bombardier as its focus shifted to the mainline C Series jet, there was a backlog of perhaps two dozen CRJs. Bombardier already planned to end production. MHI agreed to buy the CRJ global support system for eventual transition to the SpaceJet. The remaining orders for the CRJ came with it. The purchase price was about US$550m, with a targeted closing date of June 1, 2020.
Orders and MOUs
The MRJ90 had nearly 200 conditional orders from the USA’s Skywest Airlines and Republic Airways Holdings, plus low double-digit firm orders from Japan’s ANA and a US lessor. The Skywest and Republic orders were conditioned on US pilot contracts being relaxed to accept the heavier airplane. Skywest also had a similar conditional order for 100 E-175-E2s. Because pilot unions were clear they weren’t going to approve adjusting the Scope Clause, none of these conditional orders was firmed up.
But the M100 SpaceJet, as the redesigned MRJ70 was branded, met Scope. MITAC eventually obtained nearly 500 Memorandums of Understanding for the M100 from Mesa Airlines (which was announced) and (unannounced) from major US airlines and European carriers. But these were never firmed up because MHI’s ambivalence was already in the open for all to see.
More money needed
As 2019 came to a close, it was clear to MITAC executives that another US$3.5bn would be needed to finish certification of the M100. A prototype was completed. The executives wanted to discontinue work on the MRJ90 and redirect money, production and engineering resources to the M100. MHI refused to do so, preferring to complete certification of the MRJ90. Insiders said this was a face-saving way to avoid admitting mistakes associated with the MRJ90.
Development for the MRJ90 and now the M100 SpaceJet had cost about US$8.5bn. MHI’s other divisions were losing money for the first time in decades and the new MHI CEO vowed to stem losses.
By January 2020, the Western executives were on their way out. Nobody at MHI publicly acknowledged the true meaning but to outsiders knowledgeable of Japanese culture understood this was the beginning of the end of the SpaceJet program.
Then COVID became a global pandemic in March 2020. By May, MHI closed US operations and a Canadian engineering center opened in September 2019. The budget for the SpaceJet was reduced by 95% and MITAC engineers at the home office in Nagoya, Japan, were let go or reassigned within MHI. The program was dead—but MHI promulgated the fiction that it was merely paused.
MHI wanted to cancel the deal with Bombardier to purchase the CRJ assets, but it was too late. Closing was only weeks away and MHI ultimately went ahead. Upon closing, MHI wrote off the entire purchase price. This cleared the decks for MHI RJ, as the new company was called, to be a profit center supporting the CRJs for years to come. With an eye toward the day when CRJs eventually are retired, a new hangar was built in West Virginia capable of servicing mainline jets.
Stated Reasons to kill SpaceJet
MHI ignored the M100 SpaceJet in its entirety in the slide outlining why the program was discontinued. Nevertheless, the slide is surprisingly candid otherwise.
Setting aside the references to the MRJ90, which was going to be discontinued upon certification of the M100 (some omitted by MHI), all the other data in the slide rings true. Pratt & Whitney and Collins Aerospace, two key suppliers of the MRJ90, were especially reluctant to modify pricing for the M100.
Loss to the industry
The termination of the M100 program is a loss to the commercial aviation industry. It also kills MHI’s once-in-a-lifetime chance to become a global player in a duopoly with Embraer. Airlines like product competition. A larger M130 and a still larger derivate were in MITAC’s plans, eventually providing a family of airplanes. All this is gone.
By Scott Hamilton Feb. 9, 2023, © Leeham News: Mitsubishi Heavy Industry’s (MHI) announcement this week that it finally killed the SpaceJet program is hardly new. This was apparent as far back as January 2020 when all the... Read More