Mitsubishi discloses full impairment on SpaceJet

Mitsubishi Heavy Industries (MHI) has fully impaired costs and assets related to the SpaceJet regional jet program, making it ever more unlikely that the project will ever re-start again. The impairment of ¥80.599 billion ($573 million) is mentioned in MHI’s financial statements for FY21 that ended in March and that was presented only this week. Mitsubishi discloses full impairment on SpaceJet. The impairment on SpaceJet includes ¥29.443 billion in intangible assets, ¥2.133 billion in property, plant, and equipment (PPE), and ¥590 million in rights-of-use assets. ¥480 million in impairment on other, non-recurrent assets. ¥47.950 billion is related to goodwill. Mitsubishi said in May 2020 that it had paused the development and certification of the SpaceJet M90 90-seater, which was launched as the MRJ90 in 2007. The development of the smaller M100 70-76 seater was also suspended, even though this model was seen to have the potential to break into the important US market if the Japanese company would comply with the scope clause weight limit for regional aircraft. In May 2021, MHI said it would reassess a possible restart of the SpaceJet before the end of its financial year 2021, which ended in March 2022. Mitsubishi was seeing a strong recovery of the regional market during the first two phases of the Covid crisis, which bode well for the chances of the regional jet that is powered by the Pratt & Whitney Geared Turbofan. In April, Mitsubishi told AirInsight that the program was "still under evaluation" without adding further details and despite moving the workforce to other projects. "Cash flows can't be measured reliably" The FY21 financial statements share some more light on the program’s status: “As for SpaceJet project which belongs to Aircraft, Defense & Space, MHI postponed the delivery schedule of first SpaceJet in February 2020, and announced the slowdown of SpaceJet development activities in October 2020. The Group measures the recoverable amount of the assets related to SpaceJet project by value in use. However, as shown in the series of these announcements, it is difficult to predict the timing of the first delivery of SpaceJet. As a result, MHI determined that future cash flows from SpaceJet project cannot be measured reliably, fully impaired the assets related to SpaceJet project.” It continues: “In the fiscal year ended March 31, 2021, the Group recognized impairment losses by ¥80,599 million on newly acquired PPE, intangible assets, right-of-use assets, and others. The impairment losses stated above included the impairment loss of goodwill of ¥47,950 million which was recognized by the acquisition of CRJ program from Bombardier in Canada and allocated to the SpaceJet project. In the fiscal year ended on March 31, 2022, no material impairment losses are recognized.” In the chapter “contingent liabilities” of the financial statements, Mitsubishi warns of further costs: “Given the destabilization of the civil aviation market, which has been impacted by the global outbreak of COVID-19 pandemic, MHI announced the slowdown of SpaceJet development activities in October 2020. Therefore, it is difficult to predict the timing for the delivery of the first SpaceJet, and it is possible that additional burdens will arise depending on the results of discussions with customers and other parties concerned, and this could impact the future financial position and operating results.” In FY20, Mitsubishi already took ¥41.109 billion in costs related to the slowdown of the program and goodwill costs that were allocated to SpaceJet project from the acquisition of the CRJ program.

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