Photo/IllutrationA SpaceJet aircraft being developed by Mitsubishi Heavy Industries Ltd. is shown in Paris on June 16. (Sho Hatsumi)

Mitsubishi Heavy Industries Ltd. (MHI) has clinched a deal to take over the regional jet business of Montreal-based Bombardier Inc.

With the purchase of the aircraft and train maker’s Canadair Regional Jet (CRJ), Mitsubishi aims to reinforce the development and manufacture of its SpaceJet passenger aircraft.

"This is an important step in our strategy of creating a strong, global aircraft business," said MHI President Seiji Izumisawa in announcing the deal June 25. "It will contribute greatly to the success of our SpaceJet aircraft."

But market sources noted that the purchase could come with a management risk to the Tokyo-based firm, which has already spent more than 600 billion yen ($5.6 billion) on the R&D for the project.

The Japanese machinery maker will pay about $550 million for the acquisition. In addition, it will shoulder Bombardier's debts of about $200 million related to CRJ.

The CRJs are small aircraft with seating capacity for between 50 and 100 passengers. Bombardier has already sold more than 1,900 such aircraft.

In recent years, however, the company has had difficulty winning orders, losing out to competitors such as Embraer SA of Brazil. As a result, it decided to withdraw from the passenger aircraft business.

It had already sold the rest of its passenger jet business to Europe's Airbus, and had been looking for a purchaser of its CRJ business.

Mitsubishi is scheduled to complete the purchase in the first half of 2020.

As the body sizes of CRJ aircraft are similar to those of Mitsubishi's SpaceJet, the company seeks to win orders for the aircraft from Bombardier clients that plan to replace their CRJ planes with new ones.

Mitsubishi will also take over after-sale services for CRJ planes, including maintenance work.

SpaceJet started business in 2008 under the name Mitsubishi Regional Jet. However, its development has been slowed by design changes and other factors, which caused the start of sales to be delayed five times.

MHI is now aiming to start sales in 2020.

In October 2018, Bombardier filed a lawsuit in Seattle against Mitsubishi Aircraft Corp., claiming that its staff members, former Bombardier employees, had leaked corporate secrets to the subsidiary.

In the latest agreement, however, the two companies agreed to withdraw their lawsuits after the purchase of the CRJ business is complete.

According to Japan Aircraft Development Corp., CRJ aircraft accounted for 35 percent of regional jets (planes with less than 100 seats) operating in the world as of the end of 2018.

In recent years, however, orders for CRJ aircraft have been sluggish, accounting for only about 10 percent of regional jet orders worldwide in 2018.

Each SpaceJet sale generates a profit of several hundreds of millions of yen, which is small in relation to the amount invested for development.

It is expected to take between 20 and 30 years for MHI to recoup its investment.

(This article was written by Sho Hatsumi and Taiki Koide.)