Stephen Harner

In two or three years, air passengers in Asia and the U.S.–I hope including me–will be flying in Japanese-made Mitsubishi Regional Jet (MRJ) aircraft. A year or two after that, I hope to fly in a Chinese-made C919.

On November 11, after seven years of development, and four years past its initial schedule, a MRJ aircraft took off on its maiden test flight from Nagoya Airport, climbed to 4500 meters, reached its maximum cruising speed of 280 kilometers, landing a hour later.

On November 2, in Shanghai, a completely assembled C919 was towed out of a hanger to the rapturous applause of an assemblage of national and local government officials, industry and companies executives, and media.

The arrival of made-in-Japan and made-in-China medium and large commercial aircraft is a cause for celebration for both countries and for Asia. It is of vital importance to the economic and technical development of both countries’ economies.

Needless to say, both the MRJ and C919 “projects”–by which I mean the broad commercial aviation sectors in both countries, especially at the supplier level–have been receiving, and will continue to receive, significant, if not massive, government financial and other support. The Sankei Shimbun reported on November 12 that many small corporations in Japan have been getting local government support in the form of interest subsidies and tax concessions and that the Abe government’s “International Strategic Zones” scheme is specifically aiming to nurture the aviation industry in central Japan. (Note here that Mitsubishi Aircraft Corporation is not receiving subsidies, according to the company.)

In my view objections to strategic industry support on free market (international division of labor, comparative advantage, etc.) grounds that such support is unfair or unjustified is to ignore the realities of strategic national interests and the responsibilities of government. The same realities and responsibilities explain and justify China’s providing “strategic infant industry” protection–inter alia blocking Google GOOGL +0.24%, Facebook FB -0.42%, Twitter TWTR -1.16%–of domestic internet search engines and social networking sites like Baidu .com, Weibo and Wechat.

The 70-90 seat MRJ will be a competitor to the medium range jets produced by Canada’s Bombardier and Brazil’s Embraer. The manufacturer/assembler, Mitsubishi Aircraft Corporation (MAC), a subsidiary of Mitsubishi Heavy Industries (Nasdaq: MHVYF) which holds 64% of equity, together with Mitsubishi Corporation (Nasdaq: MHBHY) 10%; and Toyota Motor Corporation (NYSE:TM) 10%, was officially established and capitalized in April 2008 with an initial capital of JPY 100 billion (USD 833 million).

A graphic on the MAC website shows ranges for the jet: From Paris, the plane can reach all major European capitals, as far as Moscow; from Denver, it can serve markets throughout the U.S., Canada and Mexico; from Singapore, it can serve all countries of Southeast Asia; from Tokyo, it can serve Japan, Korea, Greater China as far as Chengdu, and Guam.

MAC estimates that passenger traffic for medium range jets with capacities of 70-90 passengers will triple over the next 20 years and demand for new aircraft will total some 5000 units. The MRJ will compete on operating efficiency–fuel consumption 20% less than competitors–and other design and passenger comfort features. The plane will use Pratt & Whitney engines PW1215G/PW1217G “geared turbofan” engines.

Before its maiden flight MAC had booked some 223 firm orders and 184 option orders from All Nippon Airways and Japan Airlines in Japan and Easter Airlines, SkyWest Inc., and Trans State Holdings in the U.S. Substantial additional orders are now in prospect.

Delivery of the first MRJ aircraft, now scheduled for 2017, will follow some 2500 hours of additional testing and certifications. List price will be some $40 million per plane. MAC is constructing a new assembly factory for the MRJ, building on land purchased from the government, and produce some 10 planes a month.

Articles in the Nihon Keizai Shimbun highlight the significance of the MRJ project in developing a commercial aviation industry center (“Japan’s Seattle”) in the Nagoya-Aichi prefecture region of central Japan.

As in similar “all Japan” strategic industry development initiatives in the past, multiple levels of government–with the support and direction of central Tokyo ministries–are providing subsidies and other assistance to parts suppliers to ensure that Japan both succeeds and that its companies capture the maximum possible value and technological advantage.

China’s C919 is being produced by the Commercial Aircraft Corporation of China, Ltd. (COMAC). COMAC was established in Shanghai in May 2008 (that is, intriguingly, one month after MAC) and assigned the mission of developing China’s commercial aviation industry, and serving as its principal entity. Initial paid in capital of RMB 19 billion (USD 3 billion) was contributed 32% by the State Assets Commission directly under China’s State Council, and 26% by a entity of the Shanghai government, basically a holding company for state assets set up in 2007, Guosheng Group.

From the start the C919 was designated a “national project.” Embodying China’s aim of achieving parity with the world’s other leading industrial and high-tech powers, the 158-174 passenger capacity C919 will compete with the flagship aircraft of the world industry leaders–the Boeing 737 and the Airbus A320. Its standard range is 4075 kilometers, extendible to 5555 kilometers.

According to Chinese press reports, the C919, which has yet to complete a test flight (now scheduled for next year), much less full air-worthiness certification, already has orders from 21customers–mainly four big domestic carriers and state bank finance lease companies–for 517 aircraft. Given that aircraft procurement entails decades-long planning, the realistic time frame for the C919 to become a major component of global fleets is 2040-2050.

The C919 is intended to foster and nurture the development of a comprehensive aviation components supplier industry. Needless to say, the quality and reliability standards in this industry are far higher than in most of the rest of Chinese industry. COMAC’s strategy is apparently to concentrate resources and effort against a few domestic sources, particularly Aviation Industry Corporation of China (AVIC) based in Beijing.

The C919 will use the LEAP engine produced by CFM a joint venture between GE and France’s Safran.

By any reckoning, commercial aviation is one of the most vital and strategic of global industries. Japan and China are endeavoring to ensure that their local companies participate as makers–not just as buyers–in this critical industry. In doing so they are discharging the responsibilities of effective government to serve the interests of their citizens. I wish them success.