Analysis - MRJ technical appraisal

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Last month's launch of the Mitsubishi Regional Jet, backed by a 25-aircraft order from All Nippon Airways, could signal a new era of airliner economics.

The 70-90-seat regional jet's Pratt & Whitney GTF geared turbofan powerplant promises "more than 12%" lower fuel burn, which, on the face of it, is an ample saving to threaten premature obsolescence to today's airliners. But the reality is that many unknowns surround both the new engine and the airframer building the aircraft, both of which are unproven and will face an uphill task to gain credibility in today's ever more conservative airline world.

 
 © Mitsubishi/Tim Bicheno-Brown

But if the GTF delivers on its promises and Mitsubishi can bring Japan's legendary success in the high-technology arena to bear in the civil aviation sector, then the incumbent airframers had better watch out.

Two MRJ versions are offered, the 90-seat MRJ90 (ordered by ANA) and the smaller 70-seat MRJ70. Mitsubishi's sales brochure claims the MRJ models will offer 30% lower operating costs than current versions. Beyond the engine, it has released little technical detail about the aircraft, but says: "The MRJ will be the first regional jet to adopt composite materials for its wings and vertical fins on a significant scale."

The aircraft is expected to cost ¥150 billion ($1.5 billion) to develop, with up to one-third of the funding provided by Japan's ministry of economy, trade and industry over the next four years as refundable launch aid. Mitsubishi is also seeking outside investors for the programme and is canvassing local banks and companies such as Toyota.

Mitsubishi is targeting a 20% share of 5,000 sales forecast in the 70-90-seat bracket over next 20 years. It has set up a new division - Mitsubishi Aircraft - which will oversee the MRJ design, certification, sales and customer support. Manufacture of prototypes and production aircraft, as well as flight-testing, has been allocated to Mitsubishi's Nagoya Aerospace Systems Works.

The MRJ enters an increasingly crowded sector of large regional jets that are shoehorned into the large regional jet market just below the smallest (100-seat) mainline jets built by Airbus and Boeing. As well as prime incumbents Bombardier and Embraer with their well-established CRJ and E-Jet families, there are two relative newcomers - China's AVIC I Commercial Aircraft and Russia's Sukhoi offering the ARJ21 and Superjet 100, respectively.

All these companies produce current technology twinjets, and - with the exception of the PowerJet SaM146-powered SSJ - are equipped with General Electric's ubiquitous CF34 engine. Significantly, the other new airliner that has adopted the GTF powerplant is Bombardier's CSeries, which is pitched above the sector in which the MRJ is battling because it is aimed at the bottom end of the mainline market.

Richard Aboulafia, vice-president analysis at Teal Group, is not yet convinced the GTF-powered MRJ has the potential to shake up the sector, but believes it is "definitely something Bombardier and Embraer want to watch".

He adds: "In the words of Star Trek's Mr Spock, the MRJ go-ahead 'was a launch, Jim, but not as we know it'. The launch was driven by political motives rather than by current airline demand, which just indicates that the private sector was not willing to risk its money."

With Mitsubishi's claims about the MRJ's advanced composite structure, Aboulafia is surprised the airframe does not show a better weight per passenger than that indicated by the preliminary data.

He also ponders whether it would be relatively straightforward to install the GTF on the existing CRJ and E-Jet airframes should Bombardier and Embraer want to respond with product refreshes.

P&W says it is "in conversations with all the aircraft manufacturers about the potential for powering their future aircraft with the GTF" and that the engine could be installed on the CRJ or E-Jet.

With GE being the incumbent engine supplier in the regional sector until now, its sister financing arm, GE Commercial Aviation Services, has supported all the programmes. However, with P&W usurping its rival, alternative finance means will be required.

"Regional aircraft depend on outside financing, and they may need to get ILFC on board because without GE they need a finance arm," says Aboulafia.

Mitsubishi says that to underwrite "expansion of overseas MRJ sales", it has "secured co-operation from entities including trading houses and Nippon Export and Investment Insurance (NEXI)". The company is also known to have courted International Lease Finance, which has traditionally steered clear of the regional sector.

 

 

Mitsubishi may project a demand for about 1,000 of its new regional jet family, but the reality is that it faces a tough sell in its own backyard, where there is a growing demand for narrowbodies and keen competition from other manufacturers.

Launch customer All Nippon Airways has committed to 15 MRJ90s, with options for 10 more. First delivery is likely to be by early 2014. However, the carrier will operate the aircraft from smaller cities such as Nagoya because the traffic out of Tokyo is heavy enough to support Boeing 737s.

Some believe Japanese carriers would be under pressure to order the aircraft, given that it is a national project and a source of international pride for the country. But ANA dismisses that idea, saying it was not strong-armed into buying the MRJ.

And that would explain rival Japan Airlines' ambivalence. JAL committed to 10 Embraer 170s last year, and it is unlikely to begin looking for further regional jets at least until 2012. Even then, it may decide that having two different regional jets may not be viable.

"We'll assess the MRJ when the time comes, but operating two types of regional aircraft would lead to additional costs," says JAL. "But we must take all options on board when we make the decision, and the options will include the MRJ."

Beyond the big two, other Japanese airlines do not appear keen on the MRJ. These carriers, which include JAL and ANA subsidiaries and some independent players, focus on the higher volume and revenue brought by aircraft such as the 737 or Airbus A320.

Typical of these is low-cost carrier Skynet Asia, which connects smaller cities in Japan. It has four Boeing 737-400s on order and is on the lookout for Boeing 737-800s, and says regional jets are not on the company's radar.

"An aircraft like the MRJ may not fit the business model of airlines like ours, which want to carry as many passengers as possible," says a company official. "The 737, with 150 or so passengers, is a lot more economical than the MRJ's maximum of 90 passenger."

MHI may then have no choice but to concentrate on non-Japanese airlines and leasing companies. "There might be interest from South Korea for the MRJ," says a Singapore-based analyst. "South-East Asia is also a market, given the growing demand for regional jets in places like the Philippines, Vietnam and Indonesia. Leasing companies in Japan and elsewhere could be keen, too, although their model is more suited for narrowbodies."

Vietnam Airlines could be the MRJ's first export customer with an order for up to 20 aircraft. It plans to use them on routes currently served by its 70-seat Fokker 70s and ATR 72s, in particular destinations with short runways or in highlands - both in abundance in South-East Asia.

But the competition is fierce. In Vietnam's neighbour Laos, China has a toehold, with Lao Airlines ordering 10 AVIC I Commercial Aircraft ARJ21s. Officials representing Russia's Sukhoi have been present in the region for the past year, constantly talking to potential customers about the SuperJet 1000. Incumbents Embraer and Bombardier have also stepped up marketing activities, signing up several regional airlines for their aircraft.

Mitsubishi could offer to shift some components manufacturing to potential customers, as it has done with Vietnam. It has also been suggested that Japanese banks, which have been returning to the aircraft lease financing business in recent years, could also help by pushing for the MRJ. Neither strategy guarantees business, however.

"Many countries may not want to manufacture the aircraft, and banks will lend money to whoever gives them business," says the analyst. "At the end of the day, MHI must go head-on against the competition and prove the MRJ is the best aircraft in the market. If it can't do that, it will die a natural death."