(Adds value of Embraer order)
By Tim Kelly
TOKYO Aug 28 Japan Airlines Co said on
Thursday it has agreed to buy 32 Mitsubishi Regional Jets worth
around $1.5 billion, giving Japan's first domestically
manufactured commercial passenger plane in half a century a
needed sales boost.
The carrier also signed a firm order for 15 regional E-Jets
from Brazil's Embraer for delivery from 2015. The
value of the firm order is estimated at $677 million, Embraer
said on Thursday, adding that the airline had agreed to options
on an additional twelve E-Jets.
Japan Airlines said it will start deploying the MRJs on
domestic routes in 2021.
The MRJ venture - 64 percent owned by Mitsubishi Heavy
Industries and one-tenth owned by Toyota Motor Corp
- has struggled to win orders amid production
delays and withering competition from the world's two leading
regional aircraft makers, Embraer and Bombardier Inc.
The venture, which has a $1.9 billion development budget,
risks repeating the commercial flop of its made-in-Japan
predecessor, the YS-11 in the 1960s, unless it can garner more
demand. With fewer than 200 confirmed orders, the 70- to 90-seat
jet is likely still far away from breaking even, analysts said.
Japan Airline's rival home carrier ANA Holdings Inc
has ordered 15 of the Mitsubishi aircraft with options for 10
more, and plans to fly the aircraft from 2017.
The aircraft maker says the jet will burn 20 percent less
fuel than comparable jets. That however is mostly the result of
fuel-efficient Pratt & Whitney PurePower engines rather
than innovations in the air frame design.
Dulling the fuel-saving sales pitch for the MRJ, both
Embraer and Bombardier have said they use the same engines for
their next generation of aircraft.
Delays in development also mean MRJ is losing its edge in
getting to market before the new versions from Embraer and
Bombardier take to the skies.
The MRJ's manufacturer remains bullish about potential
demand for regional jets, predicting sales of as many as 5,000
in the 70- to 90-seat class over the next two decades.
That forecast, however, is almost double the demand
predicted by Embraer and Bombardier. It also far exceeds the
market size estimated by the Japan Aircraft Development Corp, an
industry association which includes Mitsubishi Heavy.
The Japanese government is not however measuring the
projects success by commercial orders alone.
Like the YS-11, the MRJ is meant to help the aerospace
industry retain engineers and learn new skills that could help
it win new business from the likes of Boeing Co, which
already builds large portions of its planes in Japan, accounting
for about 22,000 jobs.
The orders for the MRJs, which have financial backing from
the Japanese government, comes in an increasingly politicised
atmosphere for Japan Airlines and rival ANA Holdings.
Since Japan Airlines' bankruptcy and bailout by a rival
administration, the former state-owned flag carrier has fallen
out of favour with Prime Minister Shinzo Abe's Liberal
Democratic Party, which returned to power at the end of 2012.
(Additional reporting by Asher Levine in Sao Paulo; Editing by
Ryan Woo and Jeffrey Benkoe)