Money spinner or money burner?

HIRING a team of Taiko traditional drummers to pound away in a cavernous hanger is one way to create a loud noise. But Mitsubishi Aircraft, an aerospace firm, already had the world’s attention long before it unveiled the Mitsubishi Regional Jet (MRJ), Japan’s first domestically-built airliner in 50 years, last week. With a sleek design, the new plane at least looks good. Yet the launch has left many analysts scratching their heads wondering whether the MRJ will ever make any money.

Mitsubishi has already received 230 orders for the new aircraft. But analysts say the firm may need to sell another 500 of the jets to break even on the project. That may prove to be harder than it first appears. The regional-jet market is dominated by Embraer of Brazil and Bombardier of Canada, both of whom are loath to concede market share to their new competitor. And both Russian and Chinese firms are also developing their own regional planes, which may be cheaper than the $40m Mitsubishi hopes to charge for the MRJ.

Mitsubishi has long built parts for Boeing and assembled American military aircraft under contract. But some analysts have questioned Mitsubishi Aircraft's ability to design and build a whole plane by itself. Much has been made of the fact that it once made the legendary Zero wartime fighter, but that was over seven decades ago. Japan was banned from having anything to do with aviation after the second world war and took until 1962 to develop the NAMC YS-11 regional airliner, a project that eventually failed due to spiralling costs.

The second attempt to build a Japanese airliner has come at a time when lumbering conglomerates like Mitsubishi struggle to find new growth markets. Mitsubishi has shed loss-making divisions and has focused on more profitable areas such as building turbines for power plants. It reckons its airliner project will start to turn a profit by the early 2020s.

That is possible. Unlike the messy consortium of independent-minded firms that built the last attempt, a single company is responsible for the MRJ project. And a great deal of national prestige has been invested in it. The government has contributed several billion yen toward the plane's research and development, Toyota is a partner and All Nippon Airlines was first to order. The hopes and prayers of a lot of companies are invested in the project. That makes failure difficult to contemplate.