Wednesday, October 15, 2014

Coming Soon: Japan’s First Airliner in 50 Years • Mitsubishi to Show Off New Regional Jet on Saturday, After a Series of Delays

The Wall Street Journal
Eric Pfanner

Oct. 15, 2014 3:33 p.m. ET

NAGOYA, Japan—In a building where designers once worked on the World War II-era Zero fighter, engineers are toiling away on a new project: Japan’s first commercial airliner in half a century.

Mitsubishi Aircraft Corp. is set to show off the new aircraft for the first time on Saturday, after a series of delays. The company has invited government ministers and business partners to Nagoya for a rollout of the Mitsubishi Regional Jet, demonstrating its status as a quasi-national project for Japan.

“Many people have been asking, ‘When is your aircraft going to be ready?’” said the company’s president, Teruaki Kawai, in an interview Wednesday. “Now we finally have made the aircraft almost ready to fly.”

The first test flight of the jet, which will be offered initially in versions seating 76 or 88 passengers, is scheduled for the second quarter of next year, with deliveries expected to begin in 2017. But the project, which has generated a modest 375 orders and options, faces growing international competition even before it takes to the runway.

Mr. Kawai says the company, whose controlling shareholder is Mitsubishi Heavy Industries Ltd. , aims within the next two decades to grab a 50% share of the global market for regional jets—which are used for short-haul flights and typically seat 70 to 100 passengers. The company predicts that more than 5,000 such aircraft will be delivered world-wide during that stretch.

Rob Morris, head of consultancy at Ascend Flightglobal Consultancy in London, predicted that despite the slow start, Mitsubishi would garner 22%, or $28 billion, of about 4,000 regional jet deliveries world-wide through 2033. That would place Mitsubishi second behind Embraer SA of Brazil, which Ascend forecasts will deliver 61% of jets in the category during that period.

The regional-jet business has long been dominated by Embraer and Bombardier Inc. of Canada, mirroring the duopoly in the market for bigger jets, which is shared by Boeing Co. and Airbus Group NV. Bombardier has been losing ground in regional jets as it invests in development of a new, larger aircraft that would go up against the Boeing 737 and the Airbus A319.

The Mitsubishi jet isn’t the only new entrant. Sukhoi Co. of Russia makes a regional jet and Commercial Aircraft Corp. of China is developing one. But the Sukhoi Super Jet 100 suffered a setback when a demonstration flight crashed in Indonesia two years ago, while the Chinese ARJ21 has yet to be certified by China’s aviation authorities despite having a maiden flight in 2008.

Mitsubishi is promoting its jet as cleaner, quieter and more comfortable than existing regional jets, thanks in part to new engines from United Technologies Corp. ’s Pratt & Whitney, which Mitsubishi says will cut fuel consumption by 20% compared with similar airliners. Mitsubishi says its design, which places the baggage compartment at the rear of the fuselage rather than below the seats, will permit greater headroom than in other regional jets, which require tall passengers to duck.

Mr. Morris said the extra space and fuel efficiency, combined with the new design of the jet, could give Mitsubishi an edge. “There is a real market opportunity here,” he said.

Embraer and Bombardier are countering with upgrades of their existing regional jets, which they say will also cut fuel consumption and operating costs. Embraer plans to use the same Pratt & Whitney engines in new versions of its E-Jet series.

“In this segment, it’s all about the economics—along with, of course, reliability and service,” said Andy Solem, vice president for sales in China and the Asian-Pacific region in Bombardier’s commercial aircraft division. Embraer said in a statement that its long experience in serving regional airlines would give it an advantage over the Japanese newcomer, and it cited its “strength in customer support.”

The Mitsubishi planes are priced at between $40 million and $50 million, comparable to competing aircraft, analysts say. Customers who have made firm commitments include All Nippon Airways, Trans States Holdings and SkyWest Inc. of the U.S. as well as Air Mandalay Ltd. of Myanmar. The revived Eastern Air Lines Group Inc. of the U.S. has also placed orders. In August, Japan Airlines Co. signed a letter of intent to buy up to 32 of the jets.

“We hope to support the birth of a Japanese passenger jet which we can boast about to the world,” said Jian Yang, a JAL spokesman.

On the same day in August, however, JAL also said it would order more regional jets from Embraer. Embraer says it already has 590 orders for its next-generation regional jets, even though they aren’t expected to enter service until 2018.

The lag in orders is “a normal situation,” Mr. Kawai said, “because our airplane hasn’t even flown yet.”

The last Japanese commercial airliner was the propeller-driven YS-11, which had its first flight in 1962. Honda Motor Co. is developing a four- to six-passenger business jet for sale next year.

Mitsubishi Aircraft has invested about $1.8 billion in development of the jet. Shareholders include Toyota Motor Corp. and the Development Bank of Japan, while the government has provided research and testing support but no direct financial aid, Mr. Kawai said.

“We feel that success in the endeavor has significant meaning for Japanese industrialization,” Toyota said in a statement.

Mr. Kawai agreed. “For a long time, Japan has been successful in industries such as automobiles,” he said. “It should last, but we need to find new industries. Aircraft manufacturing can be one of them.”

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