Mitsubishi Heavy Industries Ltd. said Wednesday it will provide ¥220 billion ($1.94 billion) to its struggling aircraft subsidiary to bolster its capital and help its long-delayed development of a regional passenger jet.
Mitsubishi Heavy said it will increase the capital of Mitsubishi Aircraft Corp. by ¥170 billion and also cancel ¥50 billion of the total debt owed by the subsidiary, as the aircraft company continued to have a negative net worth at the end of fiscal 2017.
With the financial support, Mitsubishi Aircraft aims to speed up the development of the Mitsubishi Regional Jet, the first commercial passenger jet developed in Japan, as delivery — initially scheduled for 2013 — has been delayed five times due to design modifications.
The subsidiary aims to deliver the first MRJ jet to All Nippon Airways Co. by the end of 2020.
The development costs for the MRJ have risen fourfold from the initial estimate to ¥600 billion, and could also balloon to ¥800 billion, according to company sources.
Mitsubishi Heavy holds a 64 percent stake in Mitsubishi Aircraft, with Mitsubishi Corp. and Toyota Motor Corp. each owning a 10 percent stake at the aircraft-maker's current level of capital. The state-owned Development Bank of Japan has a 1 percent stake.
The capital increase will raise Mitsubishi Heavy's holding stake to 86.7 percent.