Canada's pain Japan's gain, as Mitsubishi buys CRJ jet

By Tim Hepher and Allison Lampert PARIS/MONTREAL (Reuters) - Japan's Mitsubishi, which agreed on Tuesday to buy Bombardier's loss-making regional jet programme, plans to exploit the Canadian company's support network and global customer list to rejuvenate its delayed efforts to conquer the jet market. Japan's return to the aircraft market for the first time in 50 years had run into trouble as the Mitsubishi Regional Jet hit seven years of delays; but Bombardier's withdrawal from the cut-throat commercial aerospace sector gives Japan a second chance. The deal comes days after Mitsubishi announced a redesigned 65-88-seat regional jet at the Paris Airshow and gave the MRJ a facelift and new brand: Spacejet, promoting high cabins which it says will allow passengers to store rollerbags in overhead bins

Reuters June 26, 2019 00:07:55 IST
Canada's pain Japan's gain, as Mitsubishi buys CRJ jet

Canadas pain Japans gain as Mitsubishi buys CRJ jet

By Tim Hepher and Allison Lampert

PARIS/MONTREAL (Reuters) - Japan's Mitsubishi, which agreed on Tuesday to buy Bombardier's loss-making regional jet programme, plans to exploit the Canadian company's support network and global customer list to rejuvenate its delayed efforts to conquer the jet market.

Japan's return to the aircraft market for the first time in 50 years had run into trouble as the Mitsubishi Regional Jet hit seven years of delays; but Bombardier's withdrawal from the cut-throat commercial aerospace sector gives Japan a second chance.

The deal comes days after Mitsubishi announced a redesigned 65-88-seat regional jet at the Paris Airshow and gave the MRJ a facelift and new brand: Spacejet, promoting high cabins which it says will allow passengers to store rollerbags in overhead bins.

"One of the strongest barriers to entry is the ability to build the relationships with customers and the support network to keep those relationships moving," Alex Bellamy, chief development officer of Mitsubishi Aircraft, told Reuters.

"We know that (manufacturers) succeed or fail based on the support they give the product," the former Bombardier executive said in an interview at last week's show.

That's especially true in regional markets which rely on sweating assets as hard as possible, with planes flying up to 10 times a day.

Bristling with Japanese and Canadian designs, the Paris Airshow illustrated big industry bets succeeding or failing.

Japan and Canada each make up 3 percent of the $900 billion aerospace industry, says Mitsubishi, but Bombardier was forced out by the cost of its effort to enter the industry's main battleground between Airbus and Boeing.

Its 110-130-seat CSeries won plaudits for design but failed in the market until Airbus took it over for one dollar and starting pulling in hefty orders at last week's show.

Now Bombardier has completed its exit by selling its mature CRJ regional jet programme to Mitsubishi, whose own new development is billions of dollars over budget.

"The Japanese were able to play a longer game; Mitsubishi has more cash than Bombardier," a senior industry source said.

U.S. PILOT CLAUSES

Mitsubishi's assault on a segment of the market dominated by Canada's Bombardier and Brazil's Embraer dates back to 2003.

It developed two sizes for roughly 70-90 passengers. Like others, it hoped important pilot union agreements that cap at 76 seats the capacity of planes flown by regional airline contractors in the make-or-break U.S. market would be relaxed.

But the so-called scope agreements have stuck, meaning the larger model could only be offered outside the U.S. while the smaller 70-seater was too small to compete. Some of the agreements set the seating limit even lower at 65 seats.

Complicating matters, the U.S. regional deals ban aircraft weighing over 86,000 pounds, which is a particularly tough hurdle for jets with newer but larger engines like the Japanese regional line-up and the latest version of Embraer's E175.

Mitsubishi therefore went back to the drawing board with the MRJ 70 by stretching the cabin to allow 65-76 seats in three classes in the U.S. and up to 88 single-class seats in Europe.

The makeover is called the M100 Spacejet, even though it is smaller than the M90 now undergoing flight tests. Although bigger than before, it saves weight by using new materials.

"It will be a new and optimised aircraft," Bellamy said.

Mitsubishi is also looking at a larger model with just under 100 seats called the M200, competing with the Embraer 190.

Embraer declined to comment, but its executives have said it is tackling the U.S. market with planes that meet scope limits and is ready to offer the re-engined E175 if those rules ease.

(Reporting by Tim Hepher, Allison Lampert; editing by David Evans)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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