Flight of the Phoenix? The Future of the Spacejet M90 and Spacejet M100

Could the Japanese government’s choice for a military electronic intelligence platform lead to major changes in the commercial aircraft market? 

In 2018, Japan’s Ministry of Defense (JMoD) issued an RFI for a new intelligence and electronic warfare [ESM] aircraft intended to replace the Japanese Maritime Self-Defense Force’s ageing fleet of EP-3C platforms.

The RFI was publicly discussed as being specifically intended to use the Mitsubishi Heavy Industries’ [MHI] Spacejet as the platform; one variant for the navy and likely another for the air force. Extensive delays and the subsequent shutdown of the Spacejet program meant that this ESM initiative was put on hold.

Recently, however, JMoD has issued a new RFI for an ESM aircraft. The new RFI mirrors the 2018 RFI, without specifically mentioning Spacejet.

But there are indications that this modest JMoD program might soon involve resurrecting the MHI Spacejet, which in turn could have major implications for the US and global regional jet market.

In recent discussions with defense companies, the JMoD has seemed very intent on again exploring the use of Mitsubishi Heavy Industries’ yet to be certified Spacejet as the replacement platform for the EP-3 and the base platform for an air force program.

Concurrently, a separate government office focused on Japan’s industrial base, the Ministry of Economy, Trade, and Industry [METI], has been informally polling the aerospace community about how industry might view restarting the Spacejet line, and how the commercial viability of Spacejet might have changed since the program was suspended in October of 2020.

Taken together, these efforts reflect growing indications that the Government of Japan is intently considering funding the remaining costs of completion for the Spacejet M90 so that the aircraft can be used as Japan’s next generation ESM platform.

The Future for the Spacejet M90 & Next Gen ESM Platform

This idea makes sense in a couple of ways. First it would allow the Government to salvage a botched attempt to build a regional aircraft and save MHI from a nightmare that has already cost the company and its partners more than $10B. And it would do so while providing a legal defense against WTO charges of unlawful subsidies by claiming that the effort is part of a military aircraft program and not specifically intended to support the commercial restart of the Spacejet line.

It would also throw a lifeline to Japan’s foundering commercial aircraft sector whose future is now dependent on the if and when of winning a piece of Boeing’s next generation passenger aircraft. And it would relieve some of the domestic political pressure to procure more defense articles with Japanese content.

To be clear, this decision would not be focused on economic or financial calculations about the viability of the Spacejet program but rather a government effort to save skilled jobs by propping up a part of Japan’s commercial aircraft industrial base.

But if the Japanese government did fund the Spacejet M90 through certification, finish establishing a production line, and then procure a handful of aircraft for military use, how would that improve the viability of the non-scope compliant* M90?

How Does the SpaceJet M100 Fit Into the Plan?

Wouldn’t the Spacejet M90 just be back in competition with the Embraer 190 E2, fighting for meager orders from a fractured customer base? How could there ever be enough demand to justify continued M90 production?

All apt questions but they miss the most important effect of the Japanese government paying for the certification of the M90 – that it would subsidize and facilitate the certification of the scope clause-compliant Spacejet M100.

Certification of a variant is usually quicker and simpler than for the first of a type. And there is enough commonality with the M90 that standing up a production line and solidifying a common supply chain would reduce cost and risk for the Spacejet M100.

The final piece of the puzzle, MHI’s June 2020 purchase of the Bombardier CRJ program, would offer global maintenance, support, refurbishment, marketing, and a sales foundation for Spacejet, essentially completing the value chain.

Most importantly, M100 would be the only new-build offering of a scope-compliant aircraft for the US market. And since there is no indication that US pilot unions will give up the scope clause anytime soon, it would give MHI the chance to run the table in a strong and growing market.

Ultimately, the Spacejet M100 could come to dominate US, if not global, markets for regional aircraft with fewer than 90 seats.

What Does This Mean for the US Market?

How big could the scope clause compliant US market be? Avascent has already laid out how unpredictable forecasting the regional jet will be but estimating replacement is easier.

Today, the three largest US regional brands have more than 1,300 scope compliant regional jets that will eventually need replacing, many sooner rather than later. And while the Spacejet M100 does give up some range to get to scope compliance it likely could still cover more than 90 percent of the US routes that are flown by 76-seaters today.

With a current US fleet of roughly 1300 scope compliant aircraft, then something like 1300-1500 aircraft is a reasonable replacement/growth base sales projection for the M100, more than enough for MHI to commit to production, especially if the Spacejet M90 were subsidized.

What about competition from next generation turboprops? Embraer is predicting a global market of more than 2200 over the next 20 years, some large part of that presumably in the US.

While there may be circumstances where turboprops will fit into routes where cost will overcome passenger preference, US public aversion to turboprops will generally favor jet-branded regional fleets. And if a GTF powered M100 gets within 5-10% of turboprop economics on most routes then the turboprop advantage shrinks further.

So, what would the knock-on effects be for Embraer? The Spacejet M100 could come to market at least four years earlier than a new Embraer turboprop in the 70-90 seat range, with development costs already written down, and with operational economics that would disrupt most of Embraer’s rosy market share predictions for a future turboprop. And in the near term, M100 would quickly crush the aging E175’s order book.

Based on our discussions with Japanese officials and others, we believe that odds strongly favor the Japanese government deciding within the next year to move forward with the Spacejet M90 as its new military ESM platform, and agreeing to pay for completion of development, certification, and initial production.

Having the government assume the cost and risk of finishing the M90 should, in turn, make it an easy decision for MHI to resurrect the M100 program as well.

If so, by the strangest of turns, the Spacejet M100 may yet rise from the ashes, and grow to dominate both US and global regional aircraft markets.

*Scope clause is an element of a contract between major US airlines and pilot’s unions that limits the number and size of aircraft that may be flown by the airline’s regional airline affiliate. For most US major airlines this is defined by aircraft characteristics: a maximum seat limit (76) and the Maximum Take-Off Weight (MTOW) limit (86,000lb).

Image Source: CHIYODA I