AA transformation is under way at Kawasaki Heavy Industries as the Japanese conglomerate's aerospace division attempts to reduce its reliance on military sales and increase its revenues from commercial aviation.
Falling defence budgets mean that Japanese aerospace companies have no choice but to widen their scope. Chikashi Motoyama, president of KHI's aerospace division, says that this presents a unique opportunity for companies like his: "Airlines are locked in a fierce competition, as are the airframe manufacturers. Despite that, passenger traffic is growing everywhere in the world. People talk about the problems ahead for the aerospace industry, but we must also look at the opportunities. The companies that can offer good value products will succeed, and we believe that Kawasaki is one of those."
© Seiji Hirokawa
The firstXP-1maritime patrol aircraft was delivered to the Japanese in August
Defence still dominates KHI's aerospace division, Japan's second largest aerospace company after Mitsubishi Heavy Industries. Its origins can be traced back to the Kawasaki Aircraft Industries that supplied fighters to the Imperial Japanese Army during the Second World War. It became a KHI division in 1969 and has been a successful defence contractor in Japan ever since.
Much of its work has involved licence production of the Lockheed P-2 and Lockheed Martin P-3C maritime patrol aircraft, and helicopters such as the Bell 47 (KH-4), BoeingVertol 107 II (KV107), MD Helicopters 500D, Hughes Helicopters OH-6DA and Boeing CH-47 Chinook for the Japanese military. It is also collaborating with Eurocopter to produce the BK-117 helicopter.
"These products show that we are capable of producing successful aircraft at our facilities," says Motoyama. "We also want to improve on them and pursue derivatives of existing models. The plans include a bigger payload for the BK-117 and the OH-1, but a lot of that will also depend on the Japanese defence ministry's requirements.
"The helicopter industry, in particular, is very important to us and will continue to be so. We are the biggest manufacturer of helicopters in Japan and the civil helicopter market is promising, especially in the emergency medical services sector. The BK-117 can be a suitable helicopter for that segment, but we will do more studies and decide if we want to work on other models as well."
KHI has also had success with indigenous aircraft. Its first major product after the war was the C-1, a twin turbofan military transport that first flew in 1970.
The company produced 31 for the Japanese air force and the C-1 is still in use today. Subsequently, KHI developed theT-4 intermediate jet trainer and manufactured about 200 it was also the prime contractor for the development of the less successful OH-1 armed-scout helicopter.
With the T-4 line about to end KHI hopes to begin a study on a possible successor. Once again this will depend on the defence ministry's requirements.
"We have been looking at what trainers will be suitable, and if there is a requirement for an advanced or intermediate trainer. That is a project we plan to pursue in the future," says Motoyama.
The focus is on its two indigenous military programmes: the C-X airlifter to replace theC-1, and the XP-1 maritime patrol aircraft to replace the P-3C. Simultaneous development began in 2001 with a projected development cost of ¥350 billion ($3.3 billion), but the programme has had mixed success.
The delay-plagued C-X airlifter may have to be redesigned
The first XP-1 flew in September 2007 and was delivered in August of this year following an initial 11-month testing phase.
Powered by the Ishikawajima-Harima Heavy Industries XF-7 turbofan, the XP-1 will now begin flight tests and evaluation by the defence ministry's Technical Research and Development Institute and by the Japanese navy at its Atsugi air base. This process is expected to continue until the end of the 2015 fiscal year.
The second XP-1 is on track for delivery by the end of October with the remaining two following by the end of the current fiscal year on 31 March 2009. KHI expects the ministry to order about 70 aircraft.
"We believe that there will be funding for additional aircraft in the next financial year and we hope to begin commercial production in 2009," says Motoyama.
However, delays have plagued the C-X programme. Its initial roll-out was pushed back due to a problem with rivets bought in the USA - the aircraft finally made its first appearance alongside the XP-1 in July 2007.
Like the XP-1, first flight was set for September 2007, but structural problems have led to further delays. Last year tests revealed a problem with the C-X's horizontal stabiliser and cracks were found around the main landing gear and fuselage.
It has been difficult to rectify this problem and KHI may have to go back to the drawing board with the design, say industry sources.
Motoyama says the defence ministry is conducting static tests on the aircraft before scheduling its first flight. He expects this to take place by the end of 2008 but the sources cite mid-2009 as a likelier target.
A court case involving the purchase of five General Electric CF6-80C2 engines for the C-X has also brought the programme into the spotlight, with prosecutors alleging bribery was involved.
"If the defence ministry is seen to be accepting an aircraft with defects it could lead to another investigation, and that's something the government does not want right now," says one industry source.
Meanwhile the defence business is becoming less lucrative. In the year to 31 March sales at KHI's aerospace segment amounted to ¥237.3 billion ($2.2 billion), down 14% from the previous year. Orders received amounted to ¥202.5 billion, down 20%. KHI's order backlog fell from ¥286.7 billion to 248.3 billion during the same period.
Investment in the C-X and XP-1 programmes will continue to affect the company's bottom line for years. "Up-front capital expenditure and development expenses are expected to run ahead of revenue streams," says KHI.
It predicts that this will have a positive return in the future but to make up for the shortfall the company plans to increase its revenue streams from the civil segment. It already manufactures components for Boeing's 787, 777 and 767 series, and for Embraer's 170, 175, 190 and 195.
Its focus is now on the 787, for which it produces the forward section of the composite fuselage. In anticipation of an increase in the production rate and orders for this aircraft KHI is building a second dedicated facility to manufacture 787 components in Nagoya.
"International collaboration is becoming more important for aircraft programmes and we are very proud of the fact that we are a Tier 1 supplier for Boeing," says Motoyama.
KHI also plans to increase the amount of business it gets from Airbus, which is outsourcing an increasing proportion of its manufacturing to countries like China. "It will not be on the Airbus A350, as that is too close to the 787. But we can explore some collaboration on other Airbus programmes," says Motoyama.
Commercial versions of the C-X and XP-1 would diversify the company's revenue streams. KHI also wants to develop a high-speed commercial airlifter based on the C-X. It hopes to begin a study on this by the end of the decade.
Dubbed the YC-X, this project would increase the aircraft's payload from the 26t planned for the military version to 37t, and KHI says it would have a high-speed/high-altitude capability that is compatible with commercial routes.
"We have to talk to the defence ministry about the technologies that can be transferred to the YC-X, but we believe that this programme could be feasible with a little modification to the military version's airframe," says Motoyama.
Plans are also under way to develop theYP-X, a 120-150 seat passenger aircraft derived from the XP-1. This aircraft could compete with future Boeing's and Airbus narrowbodies, as well as Bombardier's CSeries.
It would complete a Japanese-made series of passenger jets, complementing Mitsubishi Aircraft's 70-90 seat Mitsubishi Regional Jet and a 100-120 seater that Mitsubishi might collaborate on with Boeing. However, plans are still at an early stage.
"We are now only studying the possibility for the YP-X," says Motoyama. "The business environment is changing day by day and we don't know what will be needed in the future. This is a longer-term project for the company."
Further down the line the company might also sell some of the aircraft it develops for the military outside Japan, but this would need a change in the country's post-war constitution.
A relaxation of these rules would help companies like KHI, bringing extra revenues and allowing them to become truly competitive global aerospace players. It could even help the Japanese government by lowering the unit cost of the aircraft that it purchases.
"We think that the rules could be more flexible. We don't want to export weapons, but the CX is a transport aircraft, not something that can be used to kill people. This requires further discussion, but it is an idea that is worth exploring."