Here’s What Coronavirus Means For The Mitsubishi Spacejet

Hot on the heels of announcing its first operating loss in 20 years, Mitsubishi Heavy Industries has moved to halve the operating budget for its trouble-plagued SpaceJet program. The Japanese conglomerate blames the coronavirus epidemic for crunching its bottom line.

Mitsubishi has halved the budget for its SpaceJet program. Photo: Getty Images.

“The COVID-19 pandemic presents an unprecedented challenge for society as a whole, and there are parts of MHI Group’s business that are already facing significant impact, especially in industries like commercial aviation and automotive,” said Mitsubishi as it released its latest financial results.

Impairment charges and development costs contribute to the loss

The multi-billion-dollar business posted a loss of ¥29.5 billion ($276 million) for the year ending 31 March 2020 and pointed the finger squarely at the SpaceJet business for the loss. Reuters reports that a ¥263 billion ($2.46 billion) loss was incurred from impairment charges and development costs at the SpaceJet program.

Mitsubishi doesn’t think their airline business will improve anytime soon. They believe coronavirus will have a significant short term impact on commercial plane orders on the back of reduced passenger demand.

The business expects the SpaceJet program to lose another ¥120 billion ($1.12 billion) this financial year. Half of that loss will be due to impairment costs associated with Mitsubishi’s purchase of Bombardier’s regional jet program later in 2020. The remaining loss is expected to be due to M90 SpaceJet development costs.

Mitsubishi expects its SpaceJet program to lose further money this upcoming year. Photo: Mitsubishi Aircraft.

Cost overruns, problems, and delays

The M90 has been a work in progress. Originally due to fly in 2013, ANA is now the launch customer and is expected to send its first homegrown aircraft down the runway in 2022. The SpaceJet program, sold initially as a showpiece of Japanese manufacturing and design, has descended into a quagmire of cost overruns, problems, and delays.

While the loss-making program could be sustained in good times, the coronavirus fuelled downturn has seen Mitsubishi Heavy Industries take the fiscal knife to its aircraft program. The budget for the SpaceJet program will be halved to ¥60 billion ($561 million) this coming financial year.

ANA is due to start flying the M90 SpaceJet in 2022. Photo: Anna Zvereva via Wikimedia Commons.

The struggling aircraft manufacturer will also concentrate on its M90 and pivot away from its variant, the M100 aircraft.

“On the M90 program, our focus continues to be on achieving type certification, and our teams are evaluating the best way to continue the progress we have made,” a spokesman for Mitsubishi Aircraft told Reuters.

“Various studies on the M100 currently being conducted will be temporarily suspended.”

No space for the SpaceJet in the USA

The M90 regional jet seats less than 100 passengers, and the aircraft has struggled to sell. Woes deepened when complex union rules in the United States ruled the plane too big for regional routes there. That saw some US carriers cancel M90 orders.

The smaller M100 variant was designed to get around the restrictions in the USA. To date, there has been only a single tentative order for the M100. US regional carrier Mesa Airlines signed an MOU in September 2019 for up to 100 of the aircraft. In light of lackluster interest and a deteriorating economic environment, the M100 presented as low hanging fruit for Mitsubishi Heavy Industries. The program is suspended, and it is uncertain whether development work will ever recommence.