Wednesday, July 12, 2006

Hi'ya Bill, this is Vern.

Industrial espionage is rampant throughout the world and here is a transcript of a recording we did not hear from a bug that does not exist in Vern Raburn's office.

Vern: Get the Director of Cash Flow in here, my payroll check bounced. We are delivering airplanes, what's the problem?

DCF: The problem is, the first several hundred orders were booked at $875,000. According to the July 2006 Economist article, most were backed by a $125,000 deposit. Your June 2002 press release told me the deposits no longer had to go into an escrow account and so we spent the money.

Vern: Holy cow! That's over $150 million. We did some real work with that money. Romanced the aviation press and bought ourselves a Collier Trophy. Yes indeed!

Now, why did my check bounce?

DCF: Look at the numbers.

When an airplane rolls off the assembly line we call the customer. He pays us the balance due on his contract, $875,000 less the $125,000 deposit. We net $750,000 on an airplane that is costing us over a million dollars to build. We lose $25 million for every 100 airplanes we deliver.

How many of these low ball contracts exist?

Vern: I dunno. Get me the Contracts Manager, we need to know how many of these money losing suckers are hanging over our heads.

CM: You claimed 160 orders for 2002, in 2003.....

Vern: I don't care what we claimed. Those numbers were just for the gullible press.

Get me the Marketing Manager, maybe we can cancel these early orders.

MM: We tried to convince some of the early buyers to cancel. Told them the airplane falls well short of the predicted performance goals. For many, their situations have changed and don't need the airplane anymore. Others are put off by operating costs which have tripled since they signed the order and the $4-5 per gallon cost of jet fuel which may go even higher. And we know, the air taxi operators are under funded and have a tough sell at $3 per mile rates.

Vern: Good, cancel their orders and let's get on with the program.

MM: Sorry but these early buyers don't want to cancel. They can steal the airplane for $875,000 and offer early delivery to the same guy I am trying to sell a 2010 delivery for $1,495,000 and put a few hundred thousand in their pockets to boot.

Vern: There's always the IPO. Get me the Finance Director.

Secretary: OK, but first, the Director of Supply Chain is desperate to see you.

Vern: Send the b_____ in.

DSC: I am getting calls from Pratt in Canada, Enaer in Chile, Fuji in Japan, Hispano-Suiza in France and all parts in between.

They all believed you when you assured them we would deliver 100 units in 2006, 1,000 units in 2007. Instead, the airplane are just trickling off the Albuquerque assembly lines and these suppliers have inventory coming out their ying-yang and want to be paid.

Vern: Get the Director of Public Relations in here, he can tell the world we don't really have 2,400+ orders and don't intend to produce 1,000 units per year.

DPR: What about the press release we have prepared for the IPO? What will Wall Street say?

Vern: Get me the Director of Finance, he is working on the IPO.

DOF: We have to start with truth and due diligence.....

Vern: Get Bill Gates on the phone, what's another half-billion dollars anyway.

Sunday, July 02, 2006

Eclipse Takeoff Performance

Quoting from the Eclipse website, "This jet performs - even at higher altitudes and temperatures - were talking Telluride, Colorado (elevation 9,078 feet) in July."

Let's peel the skin off this onion by first looking at the certification basis for the Eclipse. Part 23 of the Code of Federal Regulations, Section 14.

One should note that Part 23 rules do not cover range or fuel flows. When a manufacturer publishes this data, it is not verified by the FAA even though it is published in the FAA Approved Flight Manual. Accuracy of the data is solely at the risk of the company's reputation and future legal responsibility.

Takeoff and landing distances are another matter. These numbers are determined by specific methods and must be verified by flight tests. Stall and climb speeds fall into this category. When published in the Flight Manual, this data is FAA validated and approved.

Part 23 certification applies to aircraft weighing less than 12,500 lbs. Takeoff distances are based on both engines operating and climbing to 50 ft above the runway. Eclipse has given no indication they are deviating from the basic requirement.

Aircraft weighing above 12,500 lbs are covered by Part 25. Takeoff distances are based on an engine failure during the takeoff run. The available runway must be sufficient to either continue the takeoff on one engine and top a 35 ft obstacle at the end of the runway or abort the takeoff and stop before the end of the runway.

The bottom line for Part 25 procedures, lose an engine on the takeoff run and the pilot should be able to handle the emergency. All other certified business jets and all commercial airliners operate to this standard. Even the Cessna Mustang, which will certify to Part 23, is basing their takeoff data on the Part 25 loss of engine criteria.

When Eclipse makes the claim their airplane can legally takeoff where perhaps no other jet can legally takeoff, it may be true, but not with the same safety margins. Lose an engine on the Eclipse halfway down the runway at Telluride and the results may be catastrophic!

Writing this makes me feel a bit hypocritical. In 1977, Learjet's V.P. of domestic marketing wanted to fly Jack Eckerd (owner of a chain of 1,500 drug stores in the Southeast) and three of his friends from Aspen to St. Petersburg, Florida. With a combination of the fuel to fly the trip non-stop, the temperature, Aspen's elevation and runway length, the flight could not be flown within the Flight Manual limitations. The domestic pilots refused the mission, so the V.P. turned to the international marketing department's pilots, Jim Bir and myself.

While there was no way to make a legal takeoff, we determined that by changing procedures, we could make a safe takeoff. This included added stopping power from the drag chute which is not counted in the Flight Manual numbers and reducing pilot reaction time for braking and spoiler deployment. We determined we could accelerate to the V2 speed on the ground (speed at which the airplane will fly on one engine) and if we lose an engine, the spoilers, brakes and drag chute would get us stopped before we ran out of concrete.

On the appointed Sunday afternoon, we had a shiny new Learjet 35A on the ramp in Aspen. Jack shows up with his party, we board and launch for St. Petersburg. The takeoff was uneventful, neither engine coughed. My well rehearsed co-pilot duties were to call the airspeeds, monitor the engine gauges, keep one hand on the drag chute handle and suck the gear up on rotation.

We left a Cessna Citation sitting on the ramp, the crew waiting for nightfall and cooler temperatures so that they could fly nonstop to Baton Rouge, LA.

Jack bought the airplane, our V.P. of domestic marketing was happy but the flight was an unethical demonstration for which I regret today. We put Jack's future pilot in a spot. If Jack wanted to make the same trip, how could the pilot explain that he could not do what the factory pilots had done.

But that was not the only time Jim Bir had flown outside the Flight Manual. In the early 70's, he flew the President of Ecuador out of a shorter runway than what the manual would allow.

Several months later, I stood before the Ecuadorian Minister of Defense and his military tribunal accused, on behalf of the company, of endangering the life of the president. Eventually the charges escalated to attempted assassination of their esteemed leader. The whole story can be read at:
http://www.aerotalk.com/Lear_Ecuador.cfm

There is a plaque that hangs in many areas frequented by aviators. It reads, "There are no old, bold pilots."

Such it was with Jim Bir. He took a new Learjet 55 to South Africa for demos. Just after lifting off at a small airport, he intended to roll the aircraft which we had done many times in 24s, 25's, and 35's. The 55 did not behave like the earlier aircraft and he augered in. His remains were cremated and sent home in a small stainless steel tube. I was pall bearer at his services.

We had flown together in the U. S., Europe, Japan, China, Australia, and all over South America and had shared a lot of adventures. But his death was sobering and I lost interest in driving airplanes.

Saturday, July 01, 2006

Falling Short

The Eclipse program was announced in the year 2000; the well reported engine change took place in 2003. The company expects certification "in a few weeks."
Here is where the aircraft will fall short based on the recently published Performance Chart posted on the Eclipse website.

Range:

2000
1,600 nm NBAA reserves & 4 occupants
41,000 feet cruise altitude

2003
1,280 nm NBAA reserves, 4 - 170 lbs occupants & 30 lbs baggage
41,000 feet cruise altitude
(Range to fly Phoenix to Chicago)


2006
1,125 nm NBAA reserves, 4 -170 lbs occupants & 30 lbs baggage
Cruise altitude not specified
(Range to fly, Phoenix to Springfield, Missouri)


Cruise Speed/Stall speed:

2000
355 kts cruise/62 kts stall

2003
375 kts cruise/67 kts stall

2006
370 kts cruise/69 kts stall


Weights:

2000
Takeoff 4,700 lbs
Empty 2,700 lbs
Useful 2,000 lbs
Fuel 1,330 lbs
Payload with full fuel 670 lbs

2003
Takeoff 5,640 lbs
Empty 3,390 lbs
Useful 2,250 lbs
Fuel 1,540 lbs
Payload with full fuel 710 lbs

2006
Takeoff 5,920 lbs
Empty 3,536 lbs
Useful 2,384 lbs
Fuel 1,686 lbs
Payload with full fuel 698 lbs


Price/Backlog:

2000
$875,000/160 orders

2003
$1,175,000/1,357 orders plus 715 options

2006
$1,495,000/2,400+ orders


Operating Costs:

2000
50 cents per mile direct operating cost

2003
Comparable to full fare coach airline ticket

2006
$1.41 per mile direct operating cost
$3.00 per mile total operating cost

When Eclipse announced the latest performance numbers, they boasted about the increase in useful load. They did not mention an even greater boost in fuel capacity which reduced the cabin payload with full fuel. And in spite of the latest increase in fuel capacity (9%), range was reduced 12% from the 2003 prediction, 30% less than that predicted when the program was announced in 2000.

Anyway you color the picture, it is an erosion to the performance promised to the 2,400 + customers and to the investors backing the program.

Looking at the bigger picture, the dollars may be the real problem. Operating costs have tripled, acquisition costs nearly doubled. In spite of the higher prices and reduced performance, Vern continues to insist he is going to ramp production up to 1,000 to 2,000 units per year. An ambitious plan indeed.