Business

Mitsubishi MRJ jet marketing push takes off in U.S.

by Keiichiro Otsuka

Kyodo

At an annual convention of the Regional Airline Association in Cleveland earlier this month, top Mitsubishi Aircraft Corp. officials were eager to promote its Mitsubishi Regional Jet ahead of its maiden flight in Japan this fall.

Hiromichi Morimoto, who assumed the post of president at Mitsubishi Aircraft in April, said at the convention held from May 12 to 15 that the event “will offer the best chance to show the MRJ to the world.”

“North America is an important market, home to three of the six airlines that have ordered the MRJ,” Executive Vice President Masao Yamagami said.

Its U.S. customers, Trans States Holdings Inc., Skywest Inc. and Eastern Air Lines Group Inc., account for 340 of the 407 units of the jet ordered so far.

“Since there are other companies that have shown interest, we would like to continue making sales pitches,” Yamagami said.

Yamagami unveiled a plan to test the MRJ, the first Japanese-built small passenger jet, in the United States from the second quarter of 2016 to the first quarter of 2017.

As part of a move to secure airworthiness certification for the MRJ from U.S. authorities, the company is also setting up an engineering center in a Seattle suburb in Washington state. With a plan to hire around 100 people experienced in the industry, the center is scheduled to start operating by the end of the year.

The MRJ, however, has experienced a series of delays in development, allowing competition to increase from rivals.

Although Yamagami downplayed the impact of postponing the first flight by several months on winning orders, the company may face turbulence before reaching cruising speed on the marketing front.

Small jets like the MRJ, which seats 70 to 90 passengers depending on its configuration, form an essential component in the U.S. aviation market, where regional cities are served by small aircraft to and from “hub” airports in metropolitan areas.

While the market for wide-body jets is dominated by Boeing Co. and France’s Airbus SAS, Mitsubishi Aircraft believes there is still room for it to be a player in the market for small passenger planes if it offers the right product.

According to the company, the MRJ is more than 20 percent more fuel-efficient than planes in the same category and offers added seat comfort.

The 407 MRJ units under order exceed the 400-unit threshold deemed necessary for the project to be profitable.

Besides U.S. customers, Japan’s two biggest airlines and a Myanmar carrier have decided to include the MRJ in their fleet, at 32 units for Japan Airlines Co., 25 units for All Nippon Airways Co. and 10 for Air Mandalay.

In Cleveland, Yamagami said in an interview that Mitsubishi Aircraft was also engaged in negotiations with airlines in Europe, where it has yet to establish a presence. “We want to do our best to sign up orders by the end of this year,” he said.

He added that the company was also looking to Latin America, where demand for aviation services remains strong.

The manufacturer, however, cannot remain content. Of the 407 units under order so far, 184, or roughly 45 percent, are on option and purchase rights, allowing airlines to pull out of deal within designated time frames.

“We won’t spare any efforts in signing up as many clients as possible,” Yamagami said.

The company has also faced a setback in scheduling deliveries. It planned to ship the first unit to ANA in 2013 but has postponed this to the second quarter of 2017.

While expressing confidence in Mitsubishi Aircraft for its product and technology, Trans States Holdings President Richard Leach said “these delays are unfortunate.”

This significant lag is a boon to competitors like Embraer SA of Brazil, which controlled around 60 percent of the global market for small jets with 70 to 130 seats in the year that ended March 31. Embraer has a new generation of fuel-efficient jets called the E2 in the pipeline and its orders have already reached 590 units, far outpacing the MRJ.

Rodrigo Silva e Souza, vice president in charge of marketing at Embraer, said in an interview, “I think we have the highest value aircraft nowadays, so we continue to have the biggest market share.” He added that with the E2, the company will have a greater market share than its competitors.

Besides Embraer, Mitsubishi Aircraft faces a potential threat from manufacturers in other emerging markets such as China and Russia.

China, for instance, has the 90-seat ARJ21, with orders so far totaling over 300 units, mostly from domestic airlines. While China has not been targeted by Mitsubishi Aircraft yet, the Chinese aircraft manufacturing industry “is eating into the potential market for the MRJ,” an official at the Nagoya-based company said.

If Chinese manufacturers get support from the government in Beijing in developing aircraft for overseas markets, they could also emerge as strong rivals by underselling the competition.

The global market for jets with 50 to 100 seats is expected to grow to 5,000 units in the next 20 years, according to one estimate. Mitsubishi Aircraft is aiming to grab half of that.

To achieve that goal, the company has to catch up with market leader Embraer, while at the same time outpacing rivals from emerging markets.

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