Mitsubishi taking Embraer and Bombardier head-on

Singapore
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Mitsubishi Aircraft's foray into the regional jet market is a challenging endeavour. Japan has not made a commercial aircraft since the NAMC YS-11 in the 1960s, and there is competition from another newcomer - China - as well as sector leaders Bombardier and Embraer.

But Mitsubishi Aircraft president Hideo Egawa points to several factors working uniquely in the MRJ's favour. These include rival Comac's focus on China's large domestic market and the fact that it is using its political connections to prod Chinese airlines to buy the 90-seat ARJ21-700 regional jet and 150-seat C919 passenger aircraft. China's political allies in the developing world are its export targets.

But Comac is not really a competitor, says Egawa: MRJ regional jets are being built mostly for export to Western markets, putting Mitsubishi in direct competition against Bombardier and Embraer. Egawa expects 40% of sales to come from North America, 30% from Europe, 20% from Asia Pacific and the remaining 10% from the rest of the world.

GAME CHANGER

The Embraer 170/190, Bombardier CRJ700/900 and ARJ21-700 are powered by General Electric CF34 engines, whereas the MRJ uses the in-development Pratt & Whitney PW1000G geared turbofan, which P&W and Mitsubishi are billing as a "game changer".

Mitsubishi is also hoping Bombardier and Embraer will lose focus on the 70- to 90-seat regional jet market and get too caught up with efforts to develop 110- to 130 seat aircraft. Bombardier is already committed to the 110-130-seat CSeries and Embraer is evaluating whether to enter this segment.

Mitsubishi is also playing on the fact that the MRJ is a newer platform than Bombardier's CRJs and Embraer's E-Jets. Other factors in its favour include Mitsubishi's ability to get aircraft certificated internationally.

Egawa predicts that the MRJ will receive US Federal Aviation Administration certification one or two months after it receives Japanese certification. He is basing his confidence on the Japan-USA relationship and the fact Japan is a signatory to a bilateral safety agreement.

But the fact that Japan has not made a commercial aircraft in decades means the US Federal Aviation Administration will have to perform a shadow certification to ensure that the Japan civil aviation bureau's processes are on par with FAA standards, says Egawa.

Mitsubishi Aircraft's majority owner, Mitsubishi Heavy Industries, also has decades of experience making large and complex parts for Airbus, Boeing and Bombardier.

In addition, Mitsubishi can draw on Japan's reputation for manufacturing prowess and the strong international recognition of the Mitsubishi brand, says Egawa: "In Japanese we have a term called 'monozukuri', which means 'making things'."

MHI started Mitsubishi Aircraft in 2008 and later that year brought in as equity partners Toyota Motor (10%), Mitsubishi Corporation (10%), Sumitomo (5%), Mitsui & Co (5%), Development Bank of Japan (1%) and others. MHI retains 64% equity.

Mitsubishi Aircraft is drawing on the global sales resources of these other large Japanese companies, including Mitsui for sales campaigns in North America and Sumitomo in Asia and Europe. On the finance side, Mitsubishi Group owns Japan's largest bank, Bank of Tokyo-Mitsubishi UFJ, and its trading partners own Sumitomo Mitsui Banking Corporation.

Egawa declines to be drawn on whether these institutions will help finance the sale of MRJs, but confirms the involvement of Japan's export credit agencies, Nippon Export and Investment Insurance and Japan Bank for International Cooperation.

A key issue Mitsubishi is working to address is customer support, which could prove to be the key to whether the MRJ is successful internationally. Mitsubishi Aircraft signed a memorandum of understanding with Saab in 2006 and disclosed that the two were working on a deal in which Saab's customer support network would support MRJs in Europe and North America.

A final deal was sealed last December, but it was a watered-down deal, says Egawa: "We've signed on Saab to develop technical publications and that's all. Not for customer support. MRJ will lead the customer support effort and have overall responsibility."

But building an international customer support network is a difficult, time-consuming and complex task. It has taken regional aircraft-makers such as ATR, Bombardier and Embraer decades to build up such networks.

The complexity of the task may explain why Egawa declines to be drawn on a timeframe, although he promises a comprehensive support network of MRJ-approved maintenance, repair and overhaul companies in the key markets.

Mitsubishi also plans to have spare parts warehouses around the world and have a 24h centre where people can call to get technical support from "customer liaison engineers", he adds.

So far the MRJ regional jet only has one firm customer, All Nippon Airways, with a firm order for 15 with options for 10 more.

Last October US regional airline group Trans States Holdings announced it plans to order up to 100 MRJs, but Egawa says it is still only a memorandum of understanding. He declines to say when the deal will be finalised.