Mitsubishi’s jet set for push into Middle East

Japan’s Mitsubishi is the company behind the country’s first new passenger aircraft in a generation. With short-haul demand set to soar in the Middle East and China, the MRJ should have a big opportunity.

Mitsubishi Aircraft Company, a subsidiary of Mitsubishi Heavy Industries, is offering two versions of its new aircraft – the 88-seat MRJ90, above, and the 76-seat MRJ70. EPA
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Tokyo // A new Japanese passenger plane called the Mitsubishi Regional Jet (MRJ) could soon be plying short-haul routes at home and abroad, especially in this region.

The plane is squarely pitched at the customers of the two main players in the 60-to-99 seat sector, Bombardier and Embraer.

“Over the next 20 years, China and the Middle East will be the fastest-growing markets with an average annual RPK [revenue passenger kilometres] growth rate of around 7 per cent, followed by the emerging regions of Latin America with 5.9 per cent and Africa with 5.4 per cent,” says Brazil’s Embraer in its Market Outlook 2015-2034 report. Embraer foresees world demand for 6,350 new jets in the 70 to 130-seat segment over the next 20 years, representing a total market value of US$300 billion.

The plane maker’s Canadian rival Bombardier sets the bar slightly lower in its Market Forecast 2014-2033 report: “The market will see substantial growth over the forecast period with delivery demand for 5,600 aircraft worth $185bn. Large regional jets and turboprops will become an increasingly important tool for network connectivity between major, secondary and tertiary airports.”

Either way, the new Japanese competitor is likely to have a huge target to aim at.

The twin-engine aircraft with a maximum range of about 2,000km for its standard model is manufactured by the Mitsubishi Aircraft Company (Mac), a subsidiary of Tokyo’s Mitsubishi Heavy Industries. It still needs to pass an almost year-long series of flight tests in the US and gain certification there before starting commercial flights.

Mac is offering two versions of the aircraft, the MRJ90 and the smaller MRJ70. The MRJ is the first aircraft fully developed in Japan since the 64-seat propeller plane YS-11, produced at a loss between 1962 and 1974, with only 182 planes sold at home and abroad.

Mac has already received 427 orders for the new aircraft to date. MRJ90s are slated to be delivered to the US regional airline operators SkyWest and Trans States Holdings next year. SkyWest and Trans States hold 150 of 233 firm MRJ orders, says the Mac spokeswoman Miho Takahashi. The remaining 224 are options.

Edward Bourlet, a senior analyst for CLSA Japan, the Tokyo office of the Hong Kong brokerage agency, says the YS-11 builders suffered a lack of civilian plane experience leading to mismanagement, substandard engineering and rising costs meant it was a short-lived project.

Japan’s strategy to supply components since then, often for projects financially backed by its government, helped the accumulation of knowledge that eventually drove sufficient confidence to have another go, Mr Bourlet says. “Japanese aerospace tech is clearly world class now … as was the Zero [fighter plane] in the Second World War, but that was not a civilian plane,” he says.

Ms Takahashi says despite the limited number of regional jets presently servicing the Middle East, her company foresees a growing market there. For example, a large country such as Saudi Arabia has considerable demand for regional jets in its domestic market, where such planes are already in use now, Ms Takahashi says.

“Also, we think that the MRJ’s size and range will match with the routes in the Middle East where expansion of air transport demand is expected,” she says.

During Mac’s marketing activities for the Middle East, the company attended the Dubai Airshow last year and the Istanbul Airshow this month.

Vinay Bhaskara, a senior business analyst at the Miami-based Airways News, says at some point, as the Middle East continues to develop economically, its countries will need regional jet aircraft to fly routes to secondary and tertiary airports. “For example, you probably can’t fill a 300-seat wide body or even a 180-seat A320/737 flying from Tehran to Al Ain, but you probably could fill the MRJ90,” Mr Bhaskara says.

These kinds of routes will only get more important to Middle East airlines as their regional markets continue to grow and mature, and other opportunities fall off.

Markets that may be strong for the MRJ also include Turkey “once that economy recovers, along with Saudi Arabia”, Mr Bhaskara says.

Cited among the MRJ’s advantages over similar planes is increased headroom – 2.03 metres compared with the 88-seat Embraer E175’s 2 metres and the 1.89 metres for the 90-seat Bombardier CRJ900.

Mac also points to the jet’s US Pratt & Whitney next-generation engines, cutting-edge aerodynamics, tail assembly composite material, passenger comfort and an ergonomically designed flight deck, as well as lower fuel burn, noise and emissions than rivals.

Most often mentioned is the 20 per cent fuel efficiency compared with Embraer/Bombardier alternatives, Mr Bourlet says. “Otherwise, it is design and comfort [wider seats],” he says.

The MRJ’s biggest advantages are definitely its operating costs, helped by fuel-efficient engines and its low-operating weight, Mr Bhaskara says. “In fact, the MRJ90 is the most efficient aircraft in the sub-90 seat aircraft segment, including both current generation and next-generation aircraft such as the Embraer E175-E2,” he says.

The other big advantage to the MRJ is its capital costs, Mr Bhaskara says. “Because [at $47.3 million list price], Mitsubishi is pricing the MRJ90 at the lowest rate in the market. The MRJ90 has an overall operating cost advantage over its peers and is easier for smaller and start-up airlines to acquire,” he says.

For its part, the MRJ70’s list price is $46.3m.

Now, as the MRJ undergoes intensive final testing, Mitsubishi’s hopes are set to take wing.

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