Wednesday, December 19, 2007

From Eclipse to their customers:

Three weeks ago, we announced a special offer to lock in your standard aircraft price at $1.25M USD in exchange for $625,000 in escrow by December 14th. The offer required participation from enough customers for us to raise a minimum of $30M USD before we could access the funds.

I am very pleased to report that we have reached our goal of $30M. At this point, and in accordance with the Escrow Agreement, Eclipse will have the option to draw upon these funds as needed. For those of you who participated, you will receive executed agreements to confirm your new price by December 21, 2007.

If you have questions about your transaction please contact Michael Gelpi at..........

71 comments:

gadfly said...

Phineas Taylor is alive and well!

flightguy said...

Textbook escalation of commitment. It's too late to bail out. Sad really.

Stan Blankenship said...

Anyone else watching SFH875 on flightaware?

Plastic_Planes said...

Will Rogers:

"When you find yourself at the bottom of a deep hole, stop digging"

I'm glad the employees will have some security through the CHristmas holiday. I just hope the rug doesn't get pulled out too soon after the first.

baron95 said...

It is clear that in as much asEclipse is overly optimistic about reaching its goals, the critics here are too quick to announce an imminent and quick death.

Obviously Eclipse has once again gotten a new lease on life and will chug a long at least a bit longer.

If, and that is a big if, they can do FIKI, EASA and Avio NG (most critical) before the money runs out, they'll be in a good position to get financing in a still painful, but less drastic fashion.

Good for them. The more cheap jets (at $1.25M) they pump out the better we all (buyers) are. That will put downward presure and;or keep the lid on prices of things like D-Jet, TBM850, Meridian, etc.

Mustang and Phenom are relatively immune to this - people that want a serious company behind their jets will only consider those two for now.

gadfly said...

Stan

"Anyone else watching SFH875 on flightaware?"

We are now! Help us out, here. What's going on?

gadfly

gadfly said...

2,300 feet . . . 179 knots . . . dropping . . . is this for real? . . . or just a gap in the current data?

Stan Blankenship said...

Sightseeing perhaps.

gadfly said...

It's not nice to fool "Mother FAA"!

gadfly said...

'Not to worry! The batteries in the Garmin 496 "hand-held" are probably "pooped".

('You'd think the kids would have called by now!)

gadfly

(Kids!)

Jim Howard said...

FIKI should be job 1.

gadfly said...

This last little episode of SFH875 which is “on-going” as we speak is a case in point.

The “critics” have much to say about the company that has claimed to have changed the direction and focus of “general aviation” . . . and we have very strong opinions. However, our attitude as fellow pilots, mechanics, and manufacturers of aircraft are more strongly bonded together in seeing the safety and well-being of all who dare to fly.

At no time do we wish physical harm to those who move through the “footless halls of air” . . . but rather, wish for all who dare, to enjoy the dark indigo of space, above our little sphere . . . and look down, if only for a brief moment of time, to that little planet that we call home.

Some of recent time have made a mockery of that industry of which many of us have devoted our lives, and we take offense. But for those who, for whatever reason, have taken flight, we applaud their courage, and want their safe enjoyment of the beauty of God’s creation . . . and to return to earth, to share their experiences with those less fortunate.

gadfly

Gunner said...

Hats off to the believers and, especially to Vern. As promised he now gets the Gunner's 2007 Smooth as Silk Award.

PhostreX my butt; this guy should be selling Teflon! He evidently has an unlimited supply of it. Way to go, Mr. Raburn!
Gunner

gadfly said...

Gunner

“PhostreX” will be most useful, when the “faithful”, the “die-hards”, finally open that can of beans.

gadfly

(Even “goat” may find it difficult to endure that event.)

Black Tulip said...

Like ‘Tiny Tim’ Crachit of A Christmas Carol, Eclipse must be very happy indeed to have survived to see another holiday season. Thanks to thirty million dollars worth of generosity, this story goes on better than any Charles Dickens tale.

FlightCenter said...

What is the E500 Club saying about the successful completion of the limited time offer and Vern's letter?

bob said...

And Suppliers are still not getting paid...yes, this is fact.

Metal Guy said...

This reminds me of when you use your Master Card to make a payment on your Visa card. I guess congratulations are in order!

Niner Zulu said...
This comment has been removed by the author.
ColdWetMackarelofReality said...

Wow, 50 or more owners-in-waiting pony up $30M and all they get is a short letter telling them that the revised documents detailing the 'deal' THEY HAVE ALREADY PAID FOR will be sent to them in a few days.

Talk about chutzpah.

Shane Price said...

Wonder how the REAL fundraising is going.

You know, the one where The Great Raburn is looking for a 'small percentage' of what the suckers (sorry, rich Americans with too much spare cash) have already thrown away.

I think the recent 'success' of getting the 'investors', sorry, 'customers' to pony up another $30 million will actually make the job more difficult.

After all, if the marks (sorry, investor/cusomers, ah, to hell with it, I'm getting confused) have chosen to pony up the money for a months' wages, why not get them to fund the company for another month.

Or three.

Shane
PS. Lovely FIKI weather where I am. -14 C, on the GROUND...

bill e. goat said...

Vlad_Kiz
Sorry to hear about Javelin. I was also a modest enthusiast of that one.

I tried to check their website for some good news (http://www.avtechgroup.com) but it appears to be down for now. Maybe some hope of continuation? (Looked to me like they really needed some military sales to make it happen).

Gunner,
I second the nomination of Vern for “Gunner's 2007 Smooth as Silk” award!!

(I'd also nominate him for the “Kevlar with Style” award, and the “Asbestos Undergarment Fashion Statement of the Decade” award).

Gadfly,
“Phineas Taylor”- ?? Isn't he the guy who invented Phostrex? Well, I know he's involved in it somehow :)

(Oh- that's THE P.T. ...You know, that thing in Space Odyssey 2001, where H.A.L might be a play on the I.B.M. name; maybe there some transfer algorithm to get from P.T. to V.R. ??? :)

AO,
It's good to hear Ed is trying to do the right thing with Dayjet. But- I'm still glad the “consumers” of Dayjet's “product” have substantially less “exposure” than Eclipse consumers.

It does seem like he was in some questionable dealings with Citrix- there is NO moral ambiguity about stock fraud- either it is or it isn't, I just don't know the details.

(I'm still doubtful Dayjet will ever own more than 50 E-500's, let alone 239+70, but I'm glad Ed isn't saying 1400+ like P.T., er, you know- that other guy :)

Niner Zulu said...
This comment has been removed by the author.
flyger said...

Off Avweb, Vern said:

In a recent letter to customers, Eclipse CEO Vern Raburn said it will be sometime in the spring before the company can "close the gap between customer aircraft delivery and customer pilot training."

Given that deliveries are well under Vern's forecast, what does this say about their ability to plan for training?

Does this also mean that if they ever get to a "high production rate", that the planes will be useless because the pilots can't get training to fly them?

I believe Eclipse must be either holding back production rates on purpose (due to lack of certified pieces, lack of funds, lack of training resources), or their "design for manufacturing" isn't delivering anywhere near the promised results.

I suspect both, actually.

gadfly said...

Goat

For the others, P.T. was of the "Barnum" persuasion.

gadfly

(But of course, you knew that!)

Minority Report said...

The real fund raising is doing just fine, thank you.

Eclipse has demonstrated that they are one of the best organizations in the world at raising money. There are no signs that they've lost their ability to close the funding necessary to run the company.

The company has put a huge amount of risk behind them in the past year. This will be a very attractive proposition for the next round of investors. The new investors will be able to gain control of a company that shows every sign of being a major force in the industry for years to come.

Even the early investors are now in a position to welcome the infusion of cash and the change of control required for the next round to complete.

The aircraft is well designed. The customers are loyal. They have a good plan for a follow on aircraft which will likely generate higher volume of sales than the E500.

Yes, there have been problems, but they are well on the way to being resolved. The net momentum is quite positive.

Stan Blankenship said...

So now the company has 50 airplanes to deliver that are 95-100% prepaid.

Think of the creative ways Vern can deliver around these units to maintain cash flow.

There are the auctions. These sales will generate 100% new money.

And, if I were holding let's say serial 151 and had refused to ante in for this last round, I would give Vern a call and suggest he move my unit up for an earlier delivery. Then he could put another $700k in his piggy bank.

Stay warm Shane. Keep in mind, if it was not for the U.S.'s contribution to global warming you might be looking at -24 C.

flyger said...

Minority Report said...

The real fund raising is doing just fine, thank you.

If so, why do the fire sale? Your statement doesn't ring true, to throw away $15M to get $30M just to test the faith. The amount of negative press and speculation it generated had to be harmful.

If the can raise money so easily, it would have been *vastly* more positive to do so and announce closing a meaningful sum (like $200M or something).

The company has put a huge amount of risk behind them in the past year.

Really? They don't seem materially closer to a finished aircraft than they did a year ago, in fact ditching their avionics completely this year and starting over. A year ago, the confidence was they could produce a large number of airplanes (500 or something) and now we know they can't seem to do anywhere near that.

The assessed risk is quite high now because of what we now know and what was assumed to be better before.

The new investors will be able to gain control of a company that shows every sign of being a major force in the industry for years to come.

The rest of the industry has basically decided to ignore Eclipse. They knew, and now it seems obvious, that Eclipse wasn't ever going to be able to execute their VLJ domination plans.

Vern doesn't impress me at the kind of person who gives up control. This suggests to me that the $30M fire sale was part of his "control freak" nature, to try and keep other investors out, or at least have new money get less of the company.

The aircraft is well designed.

It is not even done! It has no FIKI, no avionics, and it doesn't seem capable of being made in volumes that would turn a profit. Many of the design decisions are questionable and the field experience so far isn't enough to truly evaluate the airplane's value.

The net momentum is quite positive.

I've got to find a business where people like you are my customers. The self delusion is almost laughable.

Minority Report said...

Stan,

I'm not sure how you came to the conclusion that the 48 aircraft which are part of the limited time offer are 95% prepaid.

If you were a recent depositor and had put $159,500 down, plus the $625,000 as part of the limited time offer your total prepayment would be $784,500. That is 62% of the new base price of the aircraft.

On top of that, the limited time offer price of $1,250,000 applies only to the base price, not to options.

If you had added a reasonably well equipped option package of say $182,334, then the total price of the aircraft will be $1,432,334.

The initial deposit and limited time offer prepayment are approximately 55% of that total.

In terms of managing cash flow, as part of the limited time offer, the 48 aircraft participating in the offer will be delivered over several years.

ColdWetMackarelofReality said...

So now, according to our new blogger minority report (an excellent story BTW by Phillip K. Dick about the danger of ignoring dissenting opinion), we learn that the REAL deal with the fire sale is that the deliveries are spread out over years, apparently regardless of the customers' original 'delivery' sequence, to smooth out the loss of revenue on the fire sale planes.

Hmmmm, 'thanks for bailing us out in our moment of need, now in order to minimize the disruption to our cash flow you don't get your plane until 2010'.

Somehow, 'thanks' just doesn't seem to do it any justice.

Forget the Eclipse IPO, looks like the real money is in Vaseline futures.

Black Tulip said...

Let us welcome Minority Report to the blog. We've had a deficit of optimism here for weeks. In the holiday spirit, we can all appreciate truly unbridled optimism.

Stan Blankenship said...

Minority Report,

Are you telling us that the option to freeze the price at $1.25m was only available to the owners-in-waiting who did not have their deposits up to the 60% level as dictated by the Deposit Agreement?

To be more specific, if I had serial 151 on order and had dutifully bowed to Vern and paid the balance of my 60% deposit months ago, was I not entitled to pay another $625k to freeze the price?

If the "Faithful" holder of serial 151 was allowed to make both deposits, the airplane would be prepaid (sans the optional equipment) or am I missing something in the fine print?

John said...

DJS160 or SN 77 is on the first leg of its delivery flight -- 12/20 13:00 EST

bill e. goat said...

Minority Report,
Welcome to the blog- I hadn't seen you post before. We all will look forward to your participation and details you care to share. Sometimes the road is a little rough (actually, we're all a little rough on each other :).

But, "Arr! Welcome aboard, matey!"

bill e. goat said...

Gadfly,
I have to confess to feeling like the dimwit around here a lot, and I did have to look up who PT was (the name did sound familiar...)

http://en.wikipedia.org/wiki/P._T._Barnum

P.T. croaked in 1891- I wonder if Vern's memory will have such staying power!

I'm not sure about Vern, but I think I can hear future Eclipse exec's 100 years from now though:

"This will be a very attractive proposition for the next round of investors".

(Sorry M.R., like I said, it's a rough crowd!! :)

Shane Price said...

A datum, if only of sideline interest.

Where I am, its normally pretty thick on the ground with the sort of people who pay in US Dollars. You think Aspen is expensive at this time of year? Well, the type that can come here have left Aspen (and the entire Rockies, for that matter) behind, as being well, a bit low rent.

I've been coming here for more than 30 years, and I have never EVER seen (or heard) so few of your countrymen and women.

Must be something to do with the Euro/Dollar rate....

Stan,

Thanks for the concern. As it happens, -14 C is pretty unusual. We are only a mile high and its normally not this cold....

Shane

bill e. goat said...

Flyger,
I appreciate M.R.'s contribution, but I have to confess I'm with you- I don't quite get the $30M fire sale either- the only interpretation I can come up with is, the BoD was spanking Vern.

“Does this also mean that if they ever get to a "high production rate", that the planes will be useless because the pilots can't get training to fly them?”

I don't think so, maybe a delay until the sim facility is fully up and running (?like Vern's mouth?:)...actually, he's been gracefully rather reserved of late...maybe he's not feeling well.

“I believe Eclipse must be either holding back production rates on purpose (due to lack of certified pieces, lack of funds, lack of training resources), or their "design for manufacturing" isn't delivering anywhere near the promised results”.

I agree, and would attribute the delay to:
1)The money's from sale is already spent. To actually DELIVER airplanes, means they have to build them, and to build them, they have to BUY stuff (engines, displays, sheet metal). I suspect that the cash burn is consuming deposits, and they are short on money to buy vendor-supplier items.

2)Avio-NG is behind, and if it is going to be cut in a t s/n 105, well, better delay s/n 105.

(By the way, I consider it very odd that Avio-NG is being cut in at S/N 105 instead of S/N 134, when the Avio-old gen supply dries up...I guess it makes sense not to have to buy two sets of equipment, but I bet they're getting the Avio-OG for almost free; what else would it be used for. Seems like committing to use all the Avio-OG stuff would take the pressure off Avio-NG development, and the customers seem to be quite gracious in allowing delays in it's development.)

3)Things are mucked up on the production line, although, I'll give them credit- I would hope by now that is not the case, and will attribute the delays to the other two items.

4)The only other reason for purposely delaying the line is; a redesign of some sort is imminent.

Maybe a MAJOR redesign of FIKI, such as switching to hot bleed air ???

This is totally idle speculation, but then again, why on earth (literally) is it taking years to get FIKI???

After using artificial ice shapes, which they've announced has been done, the actual ice flights can be counted with fingers on both hands.

(If it passes. If not, well, take off your shoes, and all your friends' shoes).
------------------------
9Z,
“The last few weeks there has been FIKI weather all over the place. In fact, it's nearly impossible to avoid. So what was the excuse that Eclipse still hasn't gotten FIKI approved? Something about not having actual FIKI conditions to fly in?”

Yup, see item 4 above!!
--------------------------
Well, let's chill out and enjoy the “The Greatest Show on Earth” !! :)

Minority Report said...

Flyger,

I didn’t say that raising money was easy. It obviously isn’t easy. Not for anyone.

And Eclipse certainly didn’t make it any easier for themselves with a number of missed commitments this year.

What I did say is that “Eclipse has demonstrated that they are one of the best organizations in the world at raising money.”


You ask – “Why do the limited time offer?”
The answer – Because it was necessary to close the next round of financing. Again, raising money isn’t easy, but they pulled off this interim step and as you point out, it would have been a knock out blow for most other companies. But not Eclipse.

You say – “They don't seem materially closer to a finished aircraft than they did a year ago”

Well, let me count the ways they have put risk behind them in the last year.

Last year at this time, they had delivered zero aircraft.
So far this year, they have delivered more than 80 aircraft. Ramping a brand new TC design twin turbofan from 0 to 80+ aircraft in twelve months is an incredible achievement by any standards.

Last year at this time, they didn’t have a Production Certificate.

This year, they have their Production Certificate in hand.- Check.

Last year at this time, they were promising to deliver Model B aero-mod aircraft.

This year – Model B aero-mod aircraft have been delivered since serial #39 and meet performance guarantees. – Check.

Last year at this time, the pitot-static system needed to be redesigned. The aircraft were limited to VFR, non-RVSM flight.
This year, redesigned pitot-static system has been delivered since serial #65, enabling Day/Night, VFR/IFR, RVSM flight. – Check.

Last year at this time, windshields needed to be redesigned to extend scheduled service requirements.

This year, redesigned windshields have been delivered since serial #74. – Check.

Last year, they didn’t have service centers or Part 145 repair station approval.

This year they do. – Check.

Last year, they didn’t have training capabilities in place.
This year they do and plan to catch up with training backlog in March. – Check.


You characterize the move to Avio NG as “ditching their avionics completely”. That just isn’t true.

Eclipse changed vendors on displays, radios, transponders and FMS. The user interface and fundamental architecture of the system remained the same during the Avio NG transition. Autopilot, FADEC, ACS, AHRS, ADC are only some of the components and vendors that were not changed during the Avio NG transition.

Avio NG is scheduled to cut into production on serial #105 and serial #105 is on the production line today. In addition, IS&S said in their quarterly conference call that they had begun shipping Avio NG product to Eclipse and expected to ship 60 shipsets this year. The FAA has issued TIA for the Avio NG flight testing which is in progress.

All good signs of risk off the table.



You say – “The rest of the industry has basically decided to ignore Eclipse.”

And what exactly does that tell us? The rest of the industry had also decided to ignore Cirrus in their first couple years of production, even when they were shipping hundreds of aircraft a year. Cessna wasn’t even tracking Cirrus numbers on their lost business reports for the first two years of Cirrus production. Not exactly a testament to following the wisdom of what "the industry" chooses to ignore.


You say – “Vern doesn't impress me at the kind of person who gives up control.”

You are certainly right about that one. But neither does that mean he’ll be able to stay in control. We’ll just have to see what happens in the next 120 days. I wouldn’t write him off just yet. He’s pulled more rabbits out of his hat than many magicians.

You say, “It has no FIKI,” True, but flight test is finally underway.

You say, “no avionics” – Not True. Why would you make a statement that can’t possibly be true?

You say, “and it doesn't seem capable of being made in volumes that would turn a profit.”

Probably your best point, but this will change in 2008 now that the production line will have a stable design to work with and vendors have fewer ECOs.

The net momentum is quite positive.

When it comes to self delusion I suggest you look in the mirror. It is awfully easy to fall into group think when everyone on the blog agrees with every point made by the critics. I'd suggest that the value of group think conclusions are low - as shown by recent posts that concluded that the limited time offer would be the death knell for Eclipse.

Eclipse has a great aircraft, over 1,500 employees, more than 1,200 customers, a backlog of more than $2 Billion and new products in the pipeline. Eclipse is here to stay.

bill e. goat said...

Shane,

"I've been coming here for more than 30 years, and I have never EVER seen (or heard) so few of your countrymen and women."

If the U.S. economy continues, I fear you'll be seeing a lot more of us.

As domestic servants.

bill e. goat said...

M.R.,

"Eclipse has a great aircraft, over 1,500 employees, more than 1,200 customers, a backlog of more than $2 Billion and new products in the pipeline. Eclipse is here to stay".

You make very good points, but PROFIT's are zero (actually, worse than zero). How long will the sugar daddies carry it??

Minority Report said...

Stan asked,

"Are you telling us that the option to freeze the price at $1.25m was only available to the owners-in-waiting who did not have their deposits up to the 60% level as dictated by the Deposit Agreement?"

Yes, read Vern's letter carefully.

All the details are there.

Ken had already placed his 60% deposit on serial #151 when this offer came out, so he wasn't eligible to take advantage of the offer. Presumably because he had a $995,000 airplane.

His second position for Shari's aircraft however was eligible for the offer.

ColdWet,

Nowhere in Vern's letter on the limited time offer does it say that your delivery schedule will change by making the deposit of $625,000.

It talks about the different savings levels that are available for folks who are scheduled for delivery out through 2010.

So if I previously had a delivery scheduled for Q1 2010 and I took advantage of the limited time offer, I still have an aircraft scheduled for delivery in Q1 2010, but now I've saved a half a million dollars.

If I had a delivery scheduled for Q1 2008, it is still scheduled for Q1 2008.

So the cash flow hit of this offer will be spread over the next few years.

flyger said...

Minority Report said...

Last year at this time, they had delivered zero aircraft.
So far this year, they have delivered more than 80 aircraft. Ramping a brand new TC design twin turbofan from 0 to 80+ aircraft in twelve months is an incredible achievement by any standards.


That's the point. Over 5 years ago, people were saying there is no way they could ramp to the production rates they claimed. They said they could because they built it "differently". Now you want to claim they scored an "incredible achievement" to produce just 16% of what they promised?

Basically, it is no longer possible to maintain the fallacy that Eclipse production rates are possible. This elevates the risk substantially since *everything* depended on volume production. Without it, no low price, no profit, no company.

ColdWetMackarelofReality said...

M.R.,

I did not quote Vern's letter, I was quoting from your post, specifically the following:

"In terms of managing cash flow, as part of the limited time offer, the 48 aircraft participating in the offer will be delivered over several years."

That sounds very much like in order to manage the cashflow hit the planes will be spread out over several years, not delivered according to schedule.

If that is not what YOU meant to say so be it, I take you at your word, but it is how I read it.

Copernicus said...

It is correct that the price freeze offer went only to those who had placed an initial deposit (around $150K) and was not available to anyone who had submitted the 60% deposit already.

If you think about it, the $30 million was obtained at a cost to the current owners, since they are forgoing a few hundred thousand dollars per airplane in a year or two in order to get $30 million cash today (for argument's sake, say the future revenue loss is $50 million so it looks really expensive). It's a sort of bridge loan, diminishing the revenue associated with future sales but providing cash today.

This leads me to believe that Eclipse has a future cash investment already lined up. If there were nobody at hand to provide funds then the company would be put up for sale and whatever came in as a purchase price would go to the owners. The owners would not encumber such a sale with a money-losing plan to sell airplanes in this way. That would result in a lower price for the stock in a sale. If, however, there is a multi hundred million dollar infusion coming into the company as preferred stock, or loan with conversion to preferred (superior to the present stock) then the new people might not mind squeezing the old people in this way. Today's $30 million could be used to pay vendors and clean up current obligations. That way, if a new outfit puts in $200 million, there is not $30 million scarfed directly off the top for current items (like the long-suffering tail people)out of NEW money, rather the $30 million turns into $50 million less left over in three years (after paying the preferred dividends or interest to New investors)and that will be less going to the Old people.

Blog readers, I hope I have expressed this clearly. The summary is that greedy venture people can be found to stand on the shoulders of earlier investors. If their weight forces the earlier investors deep into quicksand, TOO BAD.

But all this goes on, and new people come in, because it is a really great little airplane.

bill e. goat said...

M.R.,
Sorry you are carrying the torch by yourself today- headcount wise, the critic side of the boat is taking on water!

Remember fellers, even if we're on opposite sides of the boat, we're all rowing the same direction!
---------------------------
(...Now, be nice and don't anyone say anything about Vern not having all his oars in the water :).

bill e. goat said...

Copernicus,
I appreciate your analysis* but think I disagree with your conclusion (that a stock offering is coming, or outside investment is coming).

I think the $30M was the board stiffing Vern's insatiable demand for more cash, until next year. They were going to leave him to his own devices to come up with the bucks, even if it not profitable in the long run (in the big picture, it's inconvenient pocket change for Al Mann). The fact Vern had bills to be paid this month is what lead to the fire sale.

I disagree that stock offering is near at hand, because I don't think Eclipse's internal books could withstand the scrutiny required for going public.

I fear I also disagree with the premise that new investors will “force the earlier investors deep into quicksand”. NOBODY is going to force Al Mann into the sand. This guy has the bucks to stay this thing out until either it makes a profit, or he can turn it with a profit. I think he is going to be the bankroller for the next 12-18 months.

People just don't get it- this just ISN'T a normal business venture. If it were, it would have gone belly up- LONG AGO. This IS some weird aberration on the aviation scene. (And this blog has the best view in the house!) Eclipse really is RADICALLY deviant. (That's an observation, not a compliment).
------------------------
*That said, I do completely agree with your reasoning- if this were a normal business.

(Um, BTW, I also agree- I think it is a nice little airplane for the individual owner/operator).

ColdWetMackarelofReality said...

Here is a question for our astute bloggers (Faithful and critic alike):

The Faithful keep saying that it is basically a good airplane.

At what point does this cease being about a (questionably) good airplane and start being about being a sound investment?

Investing is typically about ROI, yes there is the risk vs reward discussion but it is here specifically that Eclipse should fall down, they have told the story, five or six time already, and only succeeded in wasting a bllion plus dollars to deliver several dozen, incomplete, partially functional preemie jets.

bill e. goat said...

CWMOR,
I'd say that line was crossed 18-24 months ago. Ever since, it's been an irrecoverable (from a conventional business model) disaster.

I came to this blog in an exasperated search to see why they were still in business- that was a year ago.

Since then, I've come to the conclusion they won't go out of business, for reasons I don't fully comprehend. But neither can I comphrehend why they are still in business, other than Al Mann's determination of "buying in" to GA, with a BIG checkbook, and maybe a 5-10 year outlook. (Make that an ADDITIONAL 5-10 year outlook).

Nothing short of a dedicated* (?fixated?- no not really, even at $xxxM, spread over several years, Al can handle it) multi-billionaire, or a quasi-governmental entity (re: Sino-Swearingen, albeit Taiwanese government) would have this kind of staying power in the face of monumental losses.

baron95 said...

Flyger said ...That's the point. Over 5 years ago, people were saying there is no way they could ramp to the production rates they claimed. They said they could because they built it "differently". Now you want to claim they scored an "incredible achievement" to produce just 16% of what they promised?

The point is that it is not black or white. Eclipse did not reach their goals, but they also did not just sit on their hands f%$#ing things up.

As Minority Report pointed out, they did put a lot of risk behind them, they are apparently close to putting 4 more (Avio NG, EASA, FIKI, training) behind them, leaving them a single main challenge ahead - making airplanes at a cost/price/volume that reaches profitability in a few years.

It matters little if they can turn a profit making 500 year, selling at $1.5M with a $1.0M cost of by making 200 a year, seeling at $2.0M with a $1.5M cost.

So what if they didn't nail their goals? What matters is where they are and where they are going. IS that direction a path to profitability? Actually to investors it only matters "Is that a path to a profitable IPO, sale or merger?".

Skype never turned a profit, but it netted a few $B to investors when it was sold to eBay. [Yes, I know it is not a germaine example, it is just an illustration].

Minority Report - thanks for backing up your comments with numbers and fact - that is a rarity here. Welcome to the blog.

bill e. goat said...

Mouse,
What's your put on CWMOR's question, and Al Mann's staying power?
Thanks.

baron95 said...

Flyger said ... The rest of the industry has basically decided to ignore Eclipse. They knew, and now it seems obvious, that Eclipse wasn't ever going to be able to execute their VLJ domination plans.

I doubt they are ignoring it now. As a matter of fact I think Eclipse is a great M&A target for the industry. I believe HawkerBeech and EADS are the top candidates to pick them up.

Eclipse is in a prime position for aquisition (just like Columbia). A desirable aircraft, a valuable TC, lowish volume production, strugling to grow (training, support, etc) AND SQUEEZED FOR CASH.

There is no question that the next investor or aquirer gets control of the company. I think we are seeing the last throws of Vern and the present board to avoid total dilution of their position.

They are trying to show potential investors/acquirers that their backs are not totally against the wall and they don't need to take their dire terms.

It is a very typical position. I've been there on both sides of the issue. It is the cat and mouse game between owners and investors. It is a lot about posture and who blinks first.

baron95 said...

On Ballance....

Positive things for Eclipse:
1 - Good Plane: Fastest sub $5M GA plane on the market, OK range, almost OK useful load.
2 - Least expensive GA jet on the market, even if they must raise prices by 30%.
3 - Fastest GA (civil ?) jet production ramp up in history - even if it is way short of their stated targets.
4 - TC, PC, Some training, Some support in place - i.e. some maturity.

Negatives for Eclipse:
1 - Incomplete aircraft/certifications (AvioNG, FIKI, EASA, cert, etc).
2 - Supplier relations - enough said.
3 - Constantly coming short of stated goals.
4 - CEO (company public persona) personality.
5 - INABILITY TO DEMONSTRATE A PROFITABLE COST/VOLUME/PRICE point.
6 - Quality of the order book - what is the average selling price? how many options have refundable deposits or insignificant deposits? etc?
7 - RUNNING LOW ON CASH/OPTIONS - that is when companies start dong really smart or really dumb things. Was the $30M raise/$15M cut smart or dumb? Way too early to tell. It is an interesting gambit though.

FreedomsJamtarts said...

I'm glad Eclipse have finally decided to take part in this Blog. Minority report can be none other that the Eclipse marketing department. Welcome!

Way I figure it, about 25 million of that 30 Mill gets paid straight to Hampson for the 250 contracted tail units which weren't needed this year.

ItsJustSad said...

Let's give Minority Report credit... his/her posts so far are a lot easier to swallow than most anything posted by the last Eclipse representative here. While clearly an Eclipse supporter, M.R. doesn't (so far?) sound like the personification of Eclipse press releases -- with a healthy dab of paranoia thrown in for good measure -- that Dr. Meyer represented on his worst days.

M.R., welcome. The blog needed a new voice of support for Eclipse.

flyger said...

baron95 said...

Eclipse is in a prime position for aquisition (just like Columbia). A desirable aircraft, a valuable TC, lowish volume production, strugling to grow (training, support, etc) AND SQUEEZED FOR CASH.

I disagree. Eclipse, AS A STATED GOAL, said they were going to build things "differently". No existing manufacturer (you know, the ones with *cash*), want to end up supporting AvioNG, FSW, and the unique design of the airplane. It just doesn't "fit" in their systems. For example, Cessna would never had let the airplane out the door without backup instruments, much less the "can't stop the engine without battery" issue.

Columbia has no such weird bits to support. Standard avionics, engines, systems, design. Cessna will be able to integrate it into their operations easily.

If Eclipse fails, truly, then Cessna is going to win as well. There will be people who bought an Eclipse who will now buy a Citation because of it. In the 8 years since most of them bought positions, a lot of them got wealthier and can afford it.

Fundamentally, if Cessna thought they could build an airplane at the Eclipse weight and price point, they would. Why would you buy a broken down, "handy man special" company to do the same thing when you have to invest so much effort to "fix" it? It would be cheaper to start over!

hummer said...

Copernicus & Minority Report

First, thanks for being here and contributing thoughtful and accurate information regarding Eclipse. My question is why? Why would Eclipse at this stage wish to put out any information?
Previously the information mostly was from buyers/owners who have a vested interest in their responses. They, of course, are mushrooms (kept in the dark and are fed bullshit by the company or the company delegates & shills)
You both seem quite knowledgable and articulate in your presentation and facts, a most welcome change indeed.

Second, is Copernicus Copernicus Marketing, a professional corporation?

Finally, there is a saying from some older folks that the last round of financing and the $650k
from position holders up to 350 is considered
"Eating your seed corn". Could you comment on this?

Appreciate your thoughtful reply.

ColdWetMackarelofReality said...

B95 said:

"Eclipse is in a prime position for aquisition..."

At what price and by reference, at what rate of return for the investors-to-date?

As for me, I do not see Hawker-Beechcraft doing it, Onyx buys functioning companies - that is clearly not the case at EAC. As for EADS - why create the interfamily struggle between the TBM 850 and the wee-jet?

At least the 350 and 400 add something to Cessna in terms of technology, performance and market share - EAC does not represent that in the real world, not today or in the near future (1-2 years).

Copernicus said...

Copernicus is independent and tries to be an independent thinker, especially on the subject matter of the Blog. Copernicus loves anything that flies, has a weakness for entrepreneurs, under dogs and those who can hold and persevere with a principled view, especially one that is adrift from the mainstream. The afore having been said, Copernicus hopes not to be just plain dumb. Copernicus is not part of Copernicus Marketing.

Your corn analogy is interesting. I would say that the $30 million obtained by sacrificing future revenues is not eating seed corn. Rather it is a desperate or forced pledge of a portion of the harvest in order to get seed corn.

Minority Report said...

Freedom,

You got me smiling on that one.

I am several time zones away from ABQ and while I have done a stint in marketing in my past, I am not in any way affiliated with the Eclipse marketing group (or Eclipse for that matter).

I actually think that the Eclipse marketing group probably prefers having only one side of the debate represented here. That way they can write the whole thing off.

Minority Report said...

Hummer,

I'd say they are doing what needs to be done so they can live to fight another day.

Minority Report said...

Shane,

You are so right about what is going on in the travel industry.

I had similar Ah Ha! experience when I was vacationing at a very nice American resort with my family this summer.

There were about 5 to 1 Europeans to Americans in the line ahead of us checking in. The other interesting trend was that it seemed that there were also more Chinese touring the area than Americans!

I felt like I was - well, in the Minority!

bill e. goat said...

M.R.,
I think Gadfly can appreciate your observations, as can anyone from the SW USA in general,

"There were about 5 to 1 (non-US-citizens) to Americans in the line ahead of us ...".

Think Goat is a "bleating" heart liberal? My solution: Annex the Baja Pennensula, and the eastern coast too!*

If you can't beat 'em, join 'em.

(*And that is not a joke. Might as well get something out of the mix. Think of the economic powerhouse of California, with triple the land area and quadruple the coastline. Heck, if the Fed's won't do it, send in the California National Guard. They've been committed to a desert stink-hole on the otherside of the world, might as well send 'em to a closer one with better beer).

Sorry to interject such a "disruptive" thought.

I'll go take my medicine and be quiet.

bill e. goat said...

Heck, they probably even have a lot of oil in Baja.

And terrorist too!

Quick- Where's Dick and his shotgun!?!

Ah, um, errrrr, the pills are ssstartinggggggggg to takeeeeee efffect....

Dan Swanson said...

It has been obvious to me for a long time that Eclipse will not make it for a variety of reasons.

But it surprises me that with all of the commenters here, many seemingly well read, no one is talking about the hand that oil depletion will play. The economy is already struggling with the topping of production; Early next year airline schedules will be permanently curtailed. The next recession that we are now entering will necessarily lower the demand for private jet travel.

Are any of you guys studying oil depletion?? Or do I sound like an Elvis freak??


Dan

Jake Pliskin said...

sorry dan, i do not buy into your doom and gloom head for the bunker mindset.

Minority Report said...

Dan,

I'm not sure I understand what relationship you are trying to point out between Peak Oil and success (or lack thereof) with Eclipse.

But the FAA did announce this week that they will be curtailing flights in the NYC area.

It didn't have anything to do with oil however. It had to do with the fact that they thought that fewer aircraft departures per hour would result in significantly improved on time performance.

If I remember the numbers correctly, (this is from a radio report) they lowered the max departure rate from ~90 per hour to ~80 per hour at JFK.

This would seem to me to increase demand for private jet travel out of HPN or TEB, etc...

Sounds like this would be good for Eclipse and for GA in general.

EclipseOwner387 said...

Eclipse Aviation Achieves FAA Certification of Avio NG
Next-generation system provides unmatched functionality

December 20, 2007 — ALBUQUERQUE, NM — December 20, 2007 — Eclipse Aviation, manufacturer of the world’s first very light jet (VLJ), today announced that it has received certification of Avio NG from the Federal Aviation Administration (FAA). The Avio NG Total Aircraft Integration™ system, exclusive to the Eclipse 500 VLJ, provides centralized control of virtually all Eclipse 500 systems and avionics functions. Avio NG significantly reduces pilot workload by simplifying tasks, generating useful information and acting as a virtual copilot.

Certification of Avio NG marks the completion of an intensive effort to develop and certify a significantly improved Electronic Flight Information System (EFIS) and Communications, Navigation and Surveillance (CNS) functionality for the Eclipse 500. This milestone was achieved in a short ten months following the company’s announcement that it would replace the equipment supplied by Avidyne, and build and certify the improved Avio NG system. As the lead integrator, Eclipse Aviation certified Avio NG with the support of its world-class partners, including Innovative Solutions & Support, Inc. (IS&S), Honeywell, Garmin International and PS Engineering, Inc.

“Certifying Avio NG marks one of our greatest accomplishments,” said Vern Raburn, president and CEO of Eclipse Aviation. “Avio NG now provides the seamless, safe, and reliable jet operating experience we always envisioned for our customers. It sets a new standard for single-pilot aircraft operations.”

With Avio NG installed, Eclipse 500 customers receive higher primary flight display (PFD) and multi-function display (MFD) resolution, enhanced user interface features, four-color weather radar and greater overall systems reliability. Avio NG also provides increased functionality for optional equipment, including a third AHRS, Skywatch HP, Class B TAWS, DME, ADF and a Mode S enhanced transponder with diversity capability. As additional Avio NG functionality is certified in early 2008, Eclipse 500 customers will be able to add these features through simple software updates.

Avio NG is designed to align with the FAA’s Next Generation Air Transportation System (NextGen) integrated plan. Avio NG equips the Eclipse 500 for the future by providing an architecture platform that incorporates the migration of technology envisioned with NextGen. Since Avio NG is designed with NextGen in mind, all of the NextGen technology solutions can be incorporated at little or no cost to Eclipse 500 owners.

Aircraft 105, the first production Eclipse 500 equipped with Avio NG, has just received its certificate of airworthiness and will be delivered to its owner in the coming weeks. Eclipse will ensure a homogenous Eclipse 500 fleet by modifying all in-service Eclipse 500s with Avio NG by the end of 2008, at the company’s expense.

About Avio NG
Designed by Eclipse Aviation exclusively for the Eclipse 500, Avio NG provides Total Aircraft Integration through integral, redundant computer systems and advanced data and power distribution systems. Avio NG applies integration technology to the entire aircraft, including avionics, engine operation, fuel system, flaps, landing gear, cabin pressure and temperature. The cockpit features two PFDs and one MFD, which are controlled by selection keys and knobs on the displays or by a keyboard at the pilot position. The PFD and MFD provide the pilot with high-resolution display of all flight parameters, engine and system performance data, and total system control.

Stan Blankenship said...

Dan,

For my money, you are preaching to the choir.

The aircraft industry is booming.

Here in Wichita, most of the support companies are expanding and ordering new equipment big time.

When I remind managers at these firms the business is cyclical and when it is up, people think the boom will last forever, and when it is down, people think it will never recover, the managers assure me it will be good for another 4-5 years.

Escalating fuel prices due to shortages will begin to bite and IMHO, will impact us all.

Minority Report said...

Baron95,

I agree with most of the points you make.

However, I have to agree with flyger on the acquisition prospects.

Eclipse and the E500 are enough different from industry norms that it is unlikely that one of the more traditional industry companies will be interested in acquiring Eclipse.

Eclipse was born and raised to be an independent company and that is almost certainly the long-term outcome for the company.

bill e. goat said...

(See new thread Stan posted re: Avio-NG, thanks for the news, EO387).

Steve said...

You naysayers amuse me. This company has revolutionized the aviation field and none of you could have done what Raburn has done. Good luck in your own endeavors - you will need it.