Mitsubishi Heavy Industries Ltd. said Tuesday it will terminate its plan to develop Japan's first domestically manufactured passenger jet, pulling the plug on a public-private project that was repeatedly hampered by delays before being frozen more than two years ago.
The enterprise, which officially started in 2008 and cost about 1 trillion yen ($7.6 billion), was suspended in October 2020 after frequent technological problems, as well as a sharp fall in air travel demand caused by the coronavirus pandemic.
Mitsubishi Heavy initially expected to roll out its first plane by 2013, but a lack of know-how and technological snags caused the company to postpone its delivery date six times, leading to repeated design changes.
The single-aisle passenger jet with less than 100 seats, named SpaceJet, drew about 450 orders at one point, with customers that included ANA Holdings Inc. and Japan Airlines Co.
But the figure nosedived to about 270 as airlines started retracting orders. Mitsubishi Heavy said it will cancel all of the remaining orders.
"We cannot deny that we lacked the know-how (in developing passenger jets)," Mitsubishi Heavy President Seiji Izumisawa said at a press conference. "We are no longer sure of its business viability."
In addition to the around 1 trillion yen already spent on the project, the company said it would have to invest about 100 billion yen annually for the next several years to obtain a type certificate, which is a permit that attests to the airworthiness of an aircraft.
The project, supported by Japan's industry and transport ministries, initially raised hopes among many small and medium-sized aircraft parts suppliers across Japan, prompting them to increase capital spending in hopes of growing demand.
But as the company repeatedly failed to meet its delivery date, many suppliers and customers started to see the project as "a lost cause," industry insiders say.
Industry experts believe that the company's corporate culture of preferring in-house development rather than utilizing outside resources is partly responsible for the failure.
The experts say Mitsubishi Heavy was too confident in developing commercial jets, given its history in making military aircraft, including Zero fighters during World War II.
The company said it will liquidate its plane-making subsidiary Mitsubishi Aircraft Corp. and will transfer its staff to defense business-related departments, with an eye to developing next-generation fighter jets based on expertise acquired developing the SpaceJet.
"Our initial estimate for its development costs was too optimistic," Izumisawa said, adding, "We didn't have engineers with such know-how, and it was rather (hard to find) any in Japan."