Thursday, February 01, 2007

Guest Editorial - Financial Survival

Jetfumes offered some comments this morning which happen to parallel a subject I was thinking about for the next post. He makes some good points, some we've heard before, some a re-hash.

After looking at the scorecard, one delivered in 2006, a barren month of January, jetfumes comments are timely:

Let me think out loud about one specific issue: Is Eclipse financially viable?

They have spent three times more than Cessna did on the development of the Mustang - a real shame.

And what is the operating margin at the current selling price?

Why do they keep pretending to deliver 500 A/C this year, while Pratt has no plans to produce anywhere near 1000 610's this year?

The only reason I can see is that suppliers contracts are priced with production volumes. If they say now that they will really deliver 200 A/C in 2007 (which in itself would be an achievement), I'm quite sure they will owe their suppliers a couple hundred thousands more per shipset. In other words, they lose money on each aircraft!

Probably with 500 deliveries/year already. Definitely with 200.

Eventually they will have to come clean financially with their suppliers. Just look at their DOC comparison chart. It's clear that Eclipse has become master at fuzzy accounting.

The only financial way out for Eclipse is a larger 600 (three more feet cabin length, couple more inches wider, with a lavatory!, and bigger wing with more fuel, etc.) all those things adding only $50,000 to $75,000 to the manufacturing cost, retail it at $2.2M, ask all 500 deposit holders to upgrade and refund those who won't.

Since it was incredibly stupid not to do the 600 when they switched from the EJ22 to the PW610, one has to wonder if Eclipse will make the right decisions now, and if it is not too late anyway.

I also cringe whenever I read that Eclipse "invented" the VLJ.

Nothing could be further from the truth.

If it wasn't for Williams, there wouldn't be any VLJ today.

The concept of the 500 was a followup to the V-Jet II, the brainchild of Sam Williams.

The concept of what became the Mustang (which started out as a turboprop project by the way) was nicely laid out by Century Jet. And the Century Jet was a result of the development of the FJ33, the engine that really kick started the VLJ market.

Century Jet wasn't successful because Bill N. was scary when let loose in front of investors, but that's another story.

Anyway, my question is: is Eclipse doing the right thing now?

The 500 is a financial dead end and we don't want an Enron in our industry.

16 comments:

Stan Blankenship said...

baron95 offered some good comments last night on the German magazine article post.

Unlike some forums that have subject threads, the nature of this blog is, talk about what you want, when you want. For the best visibility, add your comments to the latest post.

Another Feb 1 oddity:

www.lightjetage.com had featured Mike Press and his updates on the Eclipse secondary market.

Press wrote a November and December review, nothing in January and now, lightjetage has removed his name and the previous articles from the site.

A shame since I was looking forward to hear how the market might be churning during January with no PC and no deliveries!

Green-or-Red said...

I thought that P1 ~ David Crowe's aircraft or Jet Alliance ~ was leased back to Eclipse for sales demo's and whatever. If this was true, then how/why is David making these flights/posts? Something smells.... Of course, maybe he is learning to change the tires!

Lloyd said...

I heard that one of the planes flew ABQ to Florida this week. Don't know what kind of tail wind they had.

Gunner said...

lloyd said:
"I heard that one of the planes flew ABQ to Florida this week."

I heard the same thing, lloyd. Only I heard it started the trip on Jan 10th. Lost 5 days for IFR weather, 3 days for Icing Aloft, two days for a tire change and 6 days for a new windshield....of course "only the outer layer was affected".

Gunner

EclipseBlogger said...

Lloyd, participants on this blog adhere to the timeless adage: "Good news is no news". Please curb your enthusiasm. These are the Eclipse Critics.

For the disinterested, the flight was ABQ to GNV.

Gunner said...

I don't doubt it made the flight, EB.
Just didn't realize what a milestone this really is for the company.

But tell me this:
Can you provide the Tail Number or is that now UberSecret despite FAA Database availability? I can't locate this flight in the FlightAware db for GNV.

Is it on the Opt-Out list?
Gunner

EclipseBlogger said...

Unfortunately for all of us, all test flights are Opt-Out, so none, or very few show up on Flight Aware.

Green-or-Red said...

The flight from ABQ to Gainseville Fl was with one of the flight test aircraft ~ modified to the B Model config including the new tip tanks. This was to prove range and speed guarantees for investors. Official word should be forthcoming.

airtaximan said...

G or R:

you said:
"This was to prove range and speed guarantees for investors"

Is there MORE investor money coming?

If so, this is very impressive.

Stan Blankenship said...

ABQ-GNV 1,271 nm (downwind).

Will be watching Capt. Zoom's site.

He'll be crowing from the roof.

I can see the headlines now, "Eclipse proves the Critics Wrong Again"

airtaximan said...

I believe it,

A KC-10 was seen flying at FL20 over Louisiana during the same time...

Kidding, of course.

Old Troll said...

There goes cabbie making things up again....... It was a KC-135.


I have another comment regarding the importance of the whole story. I know a fellow who purchased a Falcon 20 that crashed in Davao, Philippines. Under full power, it failed to takeoff in almost 10,000 ft and plowed off the end of the runway. If you don't know all of the facts, you could draw the conclusion that Dassault exaggerated their claim that the F-20 takeoff distance is less than 5,000 ft. If I tell you that the aircraft was loaded with eight crates of gold bullion, you might draw a different conclusion.


p.s. It's up to 1.5 deliveries per day to make 500 for the year. It's 1.75 if Vern gives his employees Sunday off.

airtaximan said...

Since we're posting all kinds of E-clips stuff, such as company-promo-videos-couched-as-interviews and home-video documercials...I figured I'd lend this poor guy a hand...he's looking or a job, and he has some incredible credentials including a stint at Toyota. Until Oct 2006 he was Vern's MANAGER OF WARANTEE AND SPECIAL PROGRAMS!

I can only imagine the reason why he left....

http://www.thejobspider.com/job/view-resume-10448.html

Frank Castle said...

Do you think the KC-135 could slow down enough without stalling ?

Oh, of course. Because they couldn't IFF EEEklops with more than a few hunnerd pounds of fuel.

The video interviews were hilarious. Gave those of us here in the kubes at Cessna something to really laugh about. We hired a few more from ALQ. Debriefing takes about five minutes.

flightfollowing said...

FROM ECLIPSE:
Many of you have been asking how the Performance Improvement Program is progressing. We are pleased to inform you that we have demonstrated that we have exceeded our performance guarantees of speed and range. Last week we flew N505EA with production quality performance modifications and achieved a maximum speed of 372 KTAS and a maximum NBAA IFR range of 1,156 nm. We are currently completing the FAA certification program such that aircraft delivered in mid-April 2007 will come with these improvements.

As background, please recall the following:

In June 2006, we notified our customers that the Eclipse 500 was not going to meet the performance guarantees we originally announced following our move to the P&WC PW610F engine. We predicted that through a modification plan, there would be two different performing Eclipse 500s delivered to customers. The early customer aircraft (approximately the first 100) would have a range of 1,055 nm (with four occupants, NBAA IFR, 100 nm alternate) and maximum cruise speed of 360 knots. Subsequent customer aircraft would be aerodynamically modified to demonstrate a higher maximum cruise speed of 370 knots and a range of 1,125 nm (with four occupants, NBAA IFR, 100 nm alternate).
Shortly thereafter, we revealed a detailed performance improvement plan that included the extended tip tank, a tail bullet refinement and engine nacelle refinements. At that time, we continued to anticipate that very early customers would only receive the extended tip tank. Our customers urged us to consider the ramifications of producing two versions of the Eclipse 500 with different levels of performance.
We listened to your concerns, and they were valid. In late 2006, we decided to retrofit all customer aircraft with all of the performance improvement modifications, thus ensuring that all customer Eclipse 500s will be the same with equal performance.
After making these decisions and announcements, we put our noses to the grindstone and started designing and flight testing our performance enhancements. We are happy to tell you that a number of recent Performance guarantee demonstrations have shown our ability to achieve our performance numbers of a max speed of 370 knots and a range of 1,125 nm with a slight margin.


Maximum Cruise Speed Demonstration

On Wednesday January 24th, N505EA completed a test flight to verify maximum cruise speed after the implementation of the performance modifications described above.

Three conditions were demonstrated at altitudes of 33,000, 32,000 and 31,000 feet. Autopilot altitude and heading hold were engaged for each test point, with engines set at Maximum Continuous Thrust (MCT). Each condition was maintained for 3 minutes, or until a stable airspeed was observed.


Demonstrated Speeds (averaged over test point):

Speed (KTAS) Temperature Weight (pounds) Altitude (feet)
371 ISA -5 5,406 33,003
371 ISA -7 5,344 32,002
372 1SA -7 5,290 30,999

Please note that the current guarantee is for a maximum speed of 370 knots at ISA and 4,950 pounds. When the above data are normalized, we meet our maximum cruise speed guarantee.

Actual Range Demonstration

On Thursday January 25th, we conducted a nonstop flight from Albuquerque, NM to Gainesville, FL. The flight originated from the Albuquerque International Sunport (KABQ), with a single continuous climb to 41,000 feet. N505EA then proceeded on a nearly direct course to Tallahassee (KTLH), shot a missed approach, climbed to 25,000 feet, flew direct to Gainesville Regional Airport (KGNV) at economy cruise setting, descended to 5,000 feet, held for 5 minutes, and ended with an approach and landing at Gainesville. This flight was a total distance of 1,333nm and we landed with 205 pounds of fuel remaining.


GPS flight track of range demonstration flight.


The chart above shows the specific range for this long-range trip. This test indicates that your Eclipse 500 is likely to have a specific range of just over 1 nm per pound of fuel when cruising at the Long Range Cruise (LRC) power settings.

These speed and range demonstrations validate the Performance Improvement Plan modifications, and indicate that the production Eclipse 500 will exceed the committed performance as follows:


Performance Commitment Demonstrated
Speed 370 knots TAS 372 knots TAS
NBAA Range (100 nm alt) 1,125 nm 1,156 nm

An important fact to remember is that although we have exceeded our targeted performance guarantees, we are not changing the guarantees. You will most likely see better then "book" performance in your aircraft due to the better then forecasted improvements. But we are not guaranteeing the increased performance.

We are proud of the entire engineering and support teams who have worked diligently to achieve this milestone.

We trust you will find this information of interest and helpful in following the development and delivery of your Eclipse 500.

Ken McNamara and the Eclipse Team

Jake said...

"shot a missed approach"? usually one shoots an approach , then goes missed

whatever i guess