Last week, I shared some of my reflections of our recent momentum. By our own accounts, this year we have come up short in several of our projections for aircraft deliveries and program schedules. But, as measured against any other general aviation manufacturer, our accomplishments this year are unparalleled.
Eclipse has always benefited from the strong partnership with our customers. Whenever feasible, we try to honor your commitment and patience by extending the value of the Eclipse 500. As such, we are offering you a one-of-a-kind opportunity to save significant money on your aircraft while also supporting Eclipse. However, before I get into the details of this offer, let me first update you on the status of current programs and aircraft production.
Avio NG Certification Program
The Avio NG certification program has completed several milestones in the last few days. As of today, we are 82% complete with all certification testing. This exceptional news means that certification is now expected within 30 days. Production incorporation of Avio NG is occurring as planned, with the first Avio NG equipped customer aircraft assemblies now rolling down the line. A detailed upgrade plan for in-service customers will be communicated by the end of the year.
Flight Into Known Icing Certification
To date, we have completed all high-risk development flight testing using artificial shapes on the airfoils to simulate flight into known icing conditions and we will begin natural ice testing next week. While this required flight testing is not for credit, it reduces the unknowns in the FAA certification flight test program. The formal certification flight testing will be conducted in two phases, with ice shape testing occurring in January and natural ice testing occurring in February. The new de-icing boot required for flight into known icing conditions has been qualified and is now being installed on all production aircraft.
Foreign Certification Programs
Our first foreign certification priority is EASA (most European countries). This certification program is well underway but is dependant on Avio NG functionality. EASA certification activities will accelerate in early 2008 with expected completion in the early second quarter of 2008. Following achievement of EASA certification, Eclipse will continue other foreign country certification activities based on customer deliveries.
We acknowledge that, for many reasons, we have not met demand for pilot training. In an effort to correct this situation, we have made significant investments in human and physical resources. We currently have two fixed based Flight Training Devices (FTD) in operation at our new Customer Training Center at Double Eagle II Airport in Albuquerque, NM. The second FTD was delivered earlier this month and became operational last week. These FTDs are being used to improve skills and conduct portions of the type rating training. By the end of January, we will have two full motion simulators in operation in addition to one of the FTDs. That FTD will be converted to a third full motion simulator in March. With these investments online, we will be able to close the gap between customer aircraft delivery and customer pilot training.
Eclipse Service Centers
Two additional Eclipse Service Centers, one in Albany, NY and another in Van Nuys, CA, will open in early 2008. Combined with our Eclipse Service Centers in Gainesville, FL and Albuquerque, NM, this network is prepared to support in-service customers around the country. Additionally, a detailed capacity planning exercise is underway to ensure all customer aircraft upgrades are completed as quickly as possible via our service center network.
We continue to increase our production rate through improved cycle times across the line and increased efficiency in our manufacturing processes. As of today, aircraft 85 received its certificate of airworthiness. We are now building Eclipse 500s at a faster rate while becoming more predictable and reliable. This year alone, we expect to deliver more than 100 aircraft. You can see a video of the Eclipse 500 assembly process on YouTube (click here to view). This video was produced early this November and tracks the process from friction stir welding to completion.
I am proud to tell you that aircraft 58 was our first aircraft to complete production flight testing with zero flight squawks. Subsequent aircraft are also showing few or no squawks. Our customers who have taken delivery are giving us a tremendous amount of positive feedback about the flying qualities and aircraft reliability. Last week the total customer fleet passed the 5,100 flight hour mark. Nothing makes me happier than hearing our customers talk about how much they love flying their Eclipse 500.
Since the inception of the company, Eclipse has made it a priority to give something back when we were forced to make a change or didn't perform as we planned. Here are a few examples.
In 2003, after Williams International failed, we were forced to raise the aircraft price, but raised yours much less than the market price. We also made your positions fully transferable, which allowed you to realize the increased value of your position based on customer demand and price increases.
In 2005, when we increased the price of the Eclipse 500, we offered certain position holders whose deposits were in escrow, the opportunity to release their money from escrow, and save more than $30,000.
In early 2007, when our delivery schedule slipped, we offered affected customers an interest payment for every month we were delayed delivering their aircraft.
We are proud to have already built more jet aircraft at a faster rate than any other general aviation manufacturer in history. While this is quite a feat, our production is still not where we projected it to be. Our business model is based on high rate production and when we fall behind, there are more consequences than simply a delay when you will receive your long-anticipated airplane. One consequence is that our need for capital has increased. Therefore, we are making a special offer to our customers to help meet our need for short term funds while our production capability matures and we put in place additional long-term financing. As a result of the shortfall versus our production targets referred to earlier in this note, the company is raising additional financing. The financing we are seeking is relatively small as a percentage of the total capital we have raised to date. We have been successful in the past in our ability to raise capital and believe we will be able to close this financing within 120 days. In the meantime, we are looking to raise funds now so that we can complete our financing in an orderly fashion.
For a limited time, we are offering, an opportunity to fix the Standard Aircraft Price of your Eclipse 500 aircraft at $1,250,000 USD without any future price adjustments. The price will be fixed in exchange for a payment of $625,000, which will save you hundreds of thousands of dollars.
The details are as follows:
You may lock in your Standard Aircraft Price for your Eclipse 500 at $1.25M USD.
Your Standard Aircraft Price will not be subject to further price escalation due to inflation.
Your purchase price will be fixed, regardless of what changes Eclipse may make to the price of the Eclipse 500 in the future. The Standard Aircraft Price does not include any optional equipment you may select six months prior to delivery.
To fix your Standard Aircraft Price, you must sign and deliver to Eclipse a standard Eclipse 500 Aircraft Purchase Agreement, an Escrow Agreement, and remit to Eclipse Aviation $625,000 USD (50% of your new fixed Standard Aircraft Price), by December 14, 2007 (or such earlier date as Eclipse may terminate this offer). The $625,000 USD payment is in addition to any deposits you have already paid.
The $625,000 USD payment will be held in an escrow account until Eclipse has received at least $30M USD from customers accepting this offer. We believe that this amount, combined with other financing activities being pursued will be sufficient to provide Eclipse with the time to complete our capital raising activities.
Upon reaching $30M USD, funds can be drawn from escrow and made available as needed for use by Eclipse in its operations.Eclipse Aviation will honor this special offer to customers on a first-come, first-served basis only.
This offer is valid only for customers that have not yet assigned and delivered an Eclipse 500 Aircraft Purchase Agreement or remitted the progress payment due six months before delivery.Eclipse Aviation reserves the right to discontinue this offer at any time.
This is a chance for you to save a substantial amount on the purchase of your Eclipse 500 aircraft. By fixing the price at $1,250,000 USD, you are protected from changes in price due to increases in CPI-W or from other factors.
To demonstrate this incredible savings, consider the following.
If you purchased an Eclipse 500 for $1,295,000 USD with a delivery date in 2008, you would save approximately $360,000 USD - that's more than half of the $625,000 USD deposit.
If you purchased an Eclipse 500 for $1,595,000 USD with a delivery date in 2010 you would save over a half-million dollars!
The chart below indicates your potential savings based on when your aircraft is slated for delivery versus its base price. These are approximate amounts and represent estimates of CPI-W through your anticipated delivery date. The following also assumes savings on the Standard Aircraft Price only and does not include the price of Aircraft Optional Equipment.
Potential Savings ($000's) by Delivery Year
Base Aircraft Price ($M) 2008 2009 2010
$1.045 $57 $69 -
$1.070 $79 - -
$1.270 $326 $364 -
$1.295 $359 $409 -
$1.520 $350 $413 $426
$1.595 - - $509
Please take the time to review and absorb this offer. We have organized a special team that is prepared to provide the specific details of this offer, including all required documentation. This team's unique phone number is 866-436-9954, which will be staffed Monday through Friday from 8:30 a.m. to 6:00 p.m. Mountain Time. Phone calls placed into Eclipse Customer Care regarding this offer will be re-directed to this specialized team. Again, this offer is available for a limited time only.
Eclipse has accomplished many remarkable feats and is on the cusp of completing many more milestones. We are delivering an outstanding aircraft at an unbeatable value. We remain driven to providing you with the best customer experience in the industry, and we hope this opportunity further enhances our commitment to you.
President and CEO
Jetfan thanks for bringing this forward. I'm sitting in the garden area of the Honolulu terminal (yes Ken, flying commercial, AA Flt 8 seats 3H & 3J) and just read your comment. Kept reading and reading, looking for the punch line, all the time convinced you had taken a creative writing course from black tulip. About fell off the park bench, this was not meant as satire, it's real!