Photo/Illutration The SpaceJet on display at the 2019 Paris Air Show (Asahi Shimbun file photo)

The problem-plagued passenger jet program of Mitsubishi Heavy Industries Ltd. (MHI) faces another delay, ballooning expenses and losses expected to grow so large that they could wipe out profits in other divisions.

However, the major manufacturer may have no choice but to push ahead with the costly aircraft project under the current global business climate.

Company officials on Feb. 6 announced the sixth delay in the first delivery of what it now calls the SpaceJet, meaning that the medium-sized passenger aircraft will reach clients in fiscal 2021 at the earliest.

MHI also announced its financial earnings for the period between April and December 2019 and said the SpaceJet division recorded an operating loss of 175.3 billion yen ($1.6 billion).

This was the first time the company has actually written off losses from the passenger jet project, although MHI has already invested about 600 billion yen in developing the aircraft.

For the fiscal year that ends in March, the operating loss from the SpaceJet division is expected to expand to about 270 billion yen, effectively negating the operating profits of all other MHI divisions.

“Time was needed to deal with design revisions that were made necessary due to various technological issues that arose,” MHI President Seiji Izumisawa said about the latest delay in delivery at the Feb. 6 news conference.

He added that while every effort had been made to deliver the SpaceJet by mid-2020, which was the goal when the fifth delay was announced, quality issues had arisen, and company officials decided to place priority on safety and loosen the tight schedule that had been in place until then.

When the aircraft was known as the Mitsubishi Regional Jet, initial plans called for the first deliveries in 2013.

But problems arose in acquiring type certificates from the government that are needed to move ahead with aircraft production. The certificates are issued after safety issues with prototype jets are considered cleared.

Izumisawa on Feb. 6 said a more definitive target date for delivery would be announced in spring after other safety issues are resolved.

While the delays have piled up, so has the amount that MHI has invested in developing the aircraft. The initial investment was 180 billion yen. Now, it is 600 billion yen and counting.

To recover that investment over the next 20 to 30 years, MHI would have to sell about 1,500 SpaceJets over that period. But it currently has an order backlog of 307.

The SpaceJet is designed to have about 100 seats, which means MHI would not be a rival to manufacturers of much larger jets, such as Boeing and Airbus.

In addition, the other major divisions of MHI all show little prospects of rapid growth in the coming years.

Construction of coal-fired power plants had long been a major component of MHI’s portfolio. But the global move away from fossil fuels means there will likely not be many new orders for such plants.

Sales of distribution equipment and automobile parts for the Chinese market had also been strong for MHI. But the trade war between Washington and Beijing has slowed growth in the Chinese market.

MHI also manufactures other jets for the Self-Defense Forces. However, the difficult fiscal condition of the government could lead to a shrinking of public funding for such projects.

Under such circumstances, the medium-sized passenger aircraft program is considered a major potential growth field for MHI.

(This article was written by Taiki Koide and Sho Hatsumi.)

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