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Asian Aerospace Preparing for Takeoff

The question is not so much why Japan should enter the industry now but why it has not done so before.

Photo by AFP

One great achievement of postwar European economic cooperation (apart from the launch of the euro) has been the formation of Airbus Industrie as a successful challenger to former United States domination of the aerospace industry. Could a pan-Asian aerospace consortium prove equally successful in forging industrial cooperation in this part of the world and as a means to further regional economic development?

Seven years ago, the Governor of Tokyo, Shintaro Ishihara, sought to launch a Japanled Asian consortium that would produce medium-sized passenger jets initially and then go on to greater things later. The idea never got off the ground as such, but Japan has launched a national project in which a consortium led by Mitsubishi Heavy Industries (MHI) in Nagoya will build regional jets to compete in global aviation markets.

Meanwhile, the People’s Republic of China (PRC) has reached a somewhat more advanced stage than Japan with its version of a regional jet aircraft. Parallel development of aerospace technology in the two countries is likely to add to the region’s overall capabilities, through competition and eventual cooperation, to judge from the European experience. Moreover, the benefits of aerospace ventures in helping foster wider regional cooperation could be many.

For example, such projects represent the kind of long-term investments that Asia needs to make now as it is forced to shift its focus from supplying manufactured exports to North America and Europe toward domestically and regionally targeted capital goods. There is also the chance that more countries (such as the Republic of Korea, Indonesia, and others with an existing aerospace capability) could become involved as suppliers to the Japanese or Chinese regional jet ventures. In addition, the availability of regional jets able to link Asian countries more effectively across borders could help regional development indirectly.

The European Union and its predecessor, the European Economic Community, came into being as a result of similarly limited initiatives—the early iron and steel and then atomic energy communities, for example, as well as the Airbus project itself—rather than through an all-embracing economic and political union. In this sense, the Japanese and Chinese aerospace projects can be seen as a prospective catalyst for wider regional industrial and economic cooperation within Asia.

The debut of the Mitsubishi Regional Jet or MRJ—a “family” of 70–90 seat, shortto medium-range regional jet airliners—is scheduled to take place in 2013, at around the same time that the PRC’s own Asian Regional Jet or ARJ-21 (which already had its maiden test flight while the MRJ is still in the development stage) goes into production.

BUT WILL IT “FLY” AS an industry ? The People’s Republic of China’s first homemade passenger airliner, the mid-range ARJ-21, being unveiled at its assembly plant in a glitzy nationally televised ceremony in Shanghai, in December 2007.
Photo by AFP

The two will be competing for airline markets in and beyond Asia, and this may appear to fly against the idea of a pan-Asian aerospace consortium being formed, along the lines of Airbus Industrie. But for Asia to achieve an aerospace via separate national initiatives is not necessarily out of keeping with the idea of launching a regional consortium eventually.

Airbus was formed in 1970 as a consortium of France’s Aerospatiale and Deutsche Airbus, a group of leading German aircraft manufacturers. Shortly after, Spain’s Construcciones Aeronauticas SA (CASA) joined the consortium and in 1974 Airbus Industrie moved its headquarters from Paris to Toulouse. British Aerospace joined Airbus Industrie in 1979 but all the partners operated initially as national companies.

Only in 2001 did Airbus become a single, fully integrated company. The European Aeronautic Defence and Space Company, a merger of French, German, and Spanish interests, acquired 80% of the shares and BAE Systems, the successor to British Aerospace, 20%. In similar manner, Japanese and Chinese aerospace entities could form the core of an Asian consortium, with which the aerospace interests of other countries in the region could be joined in time.

So far, only one other Asian player—Aerospace Industrial Development Corporation of Taipei,China—has been brought into the Japanese venture as a “primary partner” but various countries in this region are developing their own capability. As aerospace is an industry with multiple spin-off benefits, by way of technological innovation and promoting manufacture of high-tech products, aerospace could become a potent way to advance Asian industrial development, say people like Ishihara.

The Republic of Korea, Indonesia (whose former president J.P. Habibie was trained as an aero engineer), and Taipei,China have various aerospace capabilities, and national initiatives have been announced in other Asian nations from Malaysia to Myanmar. Ishihara believes that if these countries combine their capabilities and persuade their national airlines to buy aircraft from a regional consortium, Asia could emerge as a global competitor in aerospace.

The Japan Aerospace Exploration Agency has already decided to set up an aerospace research and development facility at Nagoya airport. This will support development and production of the MRJ. The local business community and prefectural authorities in Is the MRJ in line with Ishihara’s vision of Asian aerospace cooperation? “The governor applauds the program,” says Toda. “It has parallels to what the governor has articulated. We believe it is in line with what he is trying to do.”

The PRC’s entry into the regional jet market, meanwhile, has taken many years—decades, in fact—to achieve. The PRC first priced the Shanghai Y-10 (closely modeled on the Boeing 707) in the late 1970s. After that, it got involved with McDonnell-Douglas in assembling MD-80 jets in Shanghai. By the time the ARJ-21 (for the 21st century) is in production, it will have taken some 35 years for the PRC to get airborne in civil aviation.

Japan and the PRC will not have the field to themselves in the global market for regional jet aircraft. Brazil’s Embraer ERJ planes are already carving out a sizable niche in the market—even Japan Airlines has begun using them on some domestic routes—while the CRJ series by Bombardier of Canada are plying short-haul routes in many parts of the world. Also, Russia’s Antonov, Tupolev, and Sukhoi are planning to enter the market.

The competition in this fastest-growing sector of the civil aviation market is “very strong,” says Nobuo Toda, president of MHI’s partly owned subsidiary Mitsubishi Aircraft Corporation (MAC). But for Japan, with its strong engineering traditions, and for Mitsubishi, in particular, which built the “zero fighter” of World War II fame, aerospace looks like a natural. The question is not so much why Japan should enter the industry now but why it has not done so before.

“The aircraft industry is very challenging,” says Toda. “To launch a project such as the MRJ, you have to have a certain level of technology, the manufacturing ability, and to be able to develop [an aircraft] at a cost and level of performance that is acceptable.”

“Another issue is whether you can secure a substantial amount of capital to make the initial investment possible,” he continued. “In Japan, this was one of the [factors] that was crucial to getting it started.”

The cost in the case of the MRJ family of regional jets (which could eventually be extended to 150-seaters and beyond if the venture succeeds) will be 150–180 billion yen and will be borne by a group of shareholders in MAC. These include parent company MHI, Toyota Motor Corporation, Mitsubishi Corporation, and two other trading houses, Sumitomo Corporation and Mitsui and Company.

These groups will provide a total of 67.5% of the initial capitalization of 70 billion yen for MAC. The Government of Japan will also be contributing part of the research and development costs.

Is MAC confident that the venture can succeed?” It is quite a challenge but this is not a business that we would go into if we were not confident that we could be successful,” the former aircraft engineer says. “We are confident, and the reason is that the regional jet that we will bring to market has a number of features that will make it very competitive and, hopefully, well received.”

The MRJ makes extensive use of composite materials such as carbon fibers—a technology in which Japan has long excelled—and is thus lighter than other similar-sized aircraft, as well as being more fuel-efficient. It is quiet and relatively wide-bodied to give extra passenger comfort and a futuristic but pleasing aerodynamic appearance.

What about sectors of the civilian aircraft market other than regional jets? “We have not made any decisions, but in the future we would like to make other aircraft,” says the MAC president.

Is the MRJ in line with Ishihara’s vision of Asian aerospace cooperation? “The governor applauds the program,” says Toda. “It has parallels to what the governor has articulated. We believe it is in line with what he is trying to do.” •