A big question mark already hung over the future of the Mitsubishi SpaceJet on May 11 but its future has become even more doubtful since Mitsubishi Aircraft Corporation (MAC) has announced how it will reduce costs. On May 22, the Japanese airframer said it will close all its offices outside Japan and halt plans for mass production of the M90. That looks very much like a way out for the program which was launched in 2007.
Flashback to May 11: parent Mitsubishi Heavy Industries (MHI) announced its FY2019 results. On the SpaceJet it booked Yen 122.4 billion in impairment costs of previously capitalized assets as well as Yen 140.9 billion in development costs. MHI said it intended to reduce the SpaceJet budget by half and stop the development of the 76-seater M100.
“Since the announcement on May 11, company leadership has been assessing the financial impact on the company and its entire global operations. As a result, the company has had to make difficult decisions that will significantly reduce its global activities and will have a major impact on its organization”, Mitsubishi spokesperson Jeff Dronen tells Airinsight. “Due to budget directives, Mitsubishi Aircraft will close its overseas locations and consolidate activities at its headquarters in Nagoya, Japan. Unfortunately, this includes our offices and locations in the US as well as Montreal, and impacts employees at each location.”
Flight Test Vehicles 1, 2, and 3 seen at Moses Lake in 2017. Number 4 had yet to arrive then. All four M90s will be stored there. (Mitsubishi Aircraft Corporation)
MAC has three offices in the US. It opened its US-headquarters in Renton (Washington) on June 7, 2019, where staff concentrates on engineering, sales and marketing, and customer support.
Three hours East in Washington State, Mitsubishi has had a major presence since 2016 at Moses Lake airport, initially in partnership with AeroTEC. From the remote airport, MAC has done most of the flight testing with four MRJ90s (rebranded M90s since).
Mitsubishi opted for Moses Lake because of its excellent facilities, good weather, and – most importantly – the availability of plenty of airspace that allowed for undisturbed testing. The four test aircraft will go into storage now and maintained by a small group of MAX-staff.
Its third US-office was only a small one in Plano (Texas).
Announced in September 2019, Mitsubishi immediately started recruitment for its Montreal office. This has been created after MAC announced the purchase of Bombardier’s CRJ regional jet-program, which is set to be completed by June 1. Many Bombardier employees had hoped to find a job here, but their future is on limbo again since the latest announcements.
Mitsubishi hasn’t communicated exact job numbers at its overseas offices, but if its LinkedIn page is a source to rely on we count 259 employees in the US (including 194 in Washington State, 10 in Texas, 7 in California) plus 67 in Canada. Earlier, MAC communicated it had employed some 100 staff in Montreal and intended to grow this to 250.
Flight Test Vehicle number 7 was seen in Nagoya on May 20. (@ranranblue)
Job reductions don’t stop here. Nikkei Asian Review reported on May 22 that MAC will half its 1.500 workforces in Nagoya and has stopped plans to start mass production of the M90. An internal memo to staff seen by the news agency partly blamed the decision on a shortage of parts as suppliers struggle to deliver during the current Covid-19 crisis. Japan has been in a state of emergency for a number of weeks which severely impacted industrial production.
However, Nikkei Asian Review also says that staff will be redeployed elsewhere within MHI. This is a clear indication that there is more to it than just a Covid-effect. If Mitsubishi takes out half of its specialized staff this is a clear message that their priorities have shifted.
Take into account too that Mitsubishi has an airplane that despite hundreds of flight hours still hasn’t been certified by the Japanese JCAB and US FAA. The four aircraft in Moses Lake are Flight Test Vehicles built to an older specification. They have been useful in determining the flight characteristics of the MRJ90/M90 but final certification needs to be done with aircraft FTV10 and FTV7. They have the redesigned electric wiring and avionics bays on which the team led by Alex Bellamy decided back in 2017 after a design flaw was discovered.
FTV10 made its first flight on March 18 from Nagoya and is was planned she was to join her sisters at Moses Lake, but Mitsubishi has decided to continue all flight testing in Japan to save costs. FTV7 was seen entering the paint shop in Nagoya on May 20 and should be ready soon to join the test program. How certification testing will continue and within what time frame is unclear.
Launch customer ANA has been waiting for the MRJ since 2013. Test aircraft 3 had the ANA-livery since 2017. (Mitsubishi Aircraft Corporation)
The additional delays mean the delivery of the first M90 to ANA has slipped again until further notice. MAC had said earlier that first delivery was due FY21 (March 2021) or later. Until now, ANA has always continued to support the program and accepted delay after delay for seven years but it makes you wonder just how long the airline is willing to hold onto this line. With 15 M90s on firm order plus 10 options, the Mitsubishi will have a limited presence within ANA’s domestic network. The same applies to Japan Airlines, which has 32 on firm order and no options. US-based SkyWest Airlines is the biggest customer with 100 firm plus 100 options but has been waiting for the aircraft for some time too. AeroLease Aviation and Swedish Rockton both plan to purchase 10 M90s. With the M100 delayed indefinitely, the value of Mesa Airlines 50 firm and 50 options must be put in doubt as well.
The postponement of the M100, the reduction in budget by half, the closure of all non-Japanese offices, the reduction of staff numbers in Nagoya: they all add up to a clear indication that Mitsubishi Heavy Industries has lost its patience with the SpaceJet. Maybe the program will just go on the backburner and MHI will buy time to restart it when market conditions improve, but this will always be a very costly solution. So is killing the program and writing off all the investments that have been done since the Mitsubishi Regional Jet was conceived around 2005. For now, it seems MHI management board has opted for the former scenario but the latter isn’t far way off.