The company leading Japan's attempt to enter the commercial jet market is getting a rescue package worth nearly $2 billion.
Engineering giant Mitsubishi Heavy Industries (MHVYF) said Wednesday that it's pumping 170 billion yen ($1.5 billion) into Mitsubishi Aircraft Corp. and also writing off 50 billion yen ($440 million) of loans.
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It's the latest stumble for the company that's building the 92-seater Mitsubishi Regional Jet (MRJ). It was meant to deliver its first plane five years ago but still hasn't done so.
Bailing out Mitsubishi Aircraft provides the funds needed to keep developing the passenger jet, Mitsubishi Heavy Industries said. As a result of the rescue, its stake in the aircraft company will increase from 64% to almost 87%.
Mitsubishi Aircraft aims to eventually compete with Canada's Bombardier (BDRAF) and Brazil's Embraer (ERJ), which dominate the market for passenger jets with fewer than 100 seats. Among the carriers that have signed up to buy the MRJ are regional US airlines operated by Delta (DAL), American (AAL) and United (UAL).
The project has suffered repeated delays. Last year, Mitsubishi said it doesn't expect to deliver the first jet until 2020, two years later than previously scheduled. The initial customer for the plane, Japan's All Nippon Airways (ALNPY), will receive its first delivery seven years later than originally planned.
Greg Waldron, Asia Managing Editor at aviation industry site Flight Global, said the MRJ was hit by a number of design issues, such as complying with aircraft weight restrictions in the United States.
The delays appear to have taken their toll on the project's finances. At the end of March, Mitsubishi Aircraft's liabilities exceeded its assets by 110 billion yen ($970 million). Its other prominent shareholders include Toyota (TM) and Japanese conglomerates Sumitomo (SSUMF) and Mitsui (MITSY), according to its website.
"Breaking into airliner manufacturing is probably the most challenging thing a company or country can do," Waldron said. "Given the amount invested in the program, it makes sense for Mitsubishi Heavy Industries to stick with it."