From T206H

Hello,

Long time reader, first time poster. Here goes:

Credentials seem to be important on this blog. Here are mine: I own a business; I’m an instrument rated private pilot and I own a Cessna T206, which I regularly fly to the flight levels with large loads and suck too much oxygen as a result. This works really well when eastbound and really poorly when going west.

As for my relationship with Eclipse, I have none other than being a prospective customer. I called the Eclipse factory early this year and inquired about a purchase. Shortly thereafter I discovered this blog. Whoever noted that potential Eclipse purchasers were likely to wander across this blog in their due diligence of Eclipse (both the plane and the company) was correct. Most everyone with internet savvy and some sense of fact checking will end up here sooner or later.

Here’s another credential: I used to be the CEO of a business that went through Ch 11. It was a long time ago... It was an emotionally bruising experience. I got to see most sides of the business bankruptcy issues in that process. For instance – how does a company get to Ch.11 (what mistakes were made?); what could have been done differently; could it have been predicted?; who (which personnel?) contributed to the process in both negative and positive ways. What had I done that allowed the bad business conditions to develop? It was a depressing experience myself and for many of my company’s employees, customers, vendors, investors and bank. It’s certainly not fun – never want to go there again – and I run my current business accordingly. As a result, I do understand many of the issues which financially contribute to the demise of a business.

I will not use monikers which mock the point of view of the ‘other side’, whatever that is. An example is EA499.5. Not going to go there.

Now, I just wanted to make a few comments:

1) What about the jet in question? The complete Eclipse EA500 would be a wonderful piece of transportation. No matter what, at the end of the day, if everything’s delivered, working, certified, supported, there’s a bunch of folks who would like that plane and find it ideal for their personal transportation requirements. It’s back to being a disruptive buy at $1.25mil.

2) How could *I* afford to buy one? I don’t have large sums of money socked away; I would be a cash flow purchaser, and full disclosure: I can’t afford it. I was surprised by the factory’s indication that I would have to give a deposit in order to get in line to buy their product, and that I would have to wait until 2009 for delivery. They offered some bank financing choices, but it immediately became clear that none of the banks would act remotely like Cessna Finance. (CFC has been a great business partner for me in the purchase of my T206. Basically, if you live and breathe, have adequate cash flow and credit history, and can put 10% down, you can get a Cessna. Cirrus seems to work the same way, and I’ll bet the rest of the GA world does as well.) If Eclipse didn’t have a factory finance option, then their ability to sell airplanes would (and is) greatly diminished. The alternative, from a business standpoint, is for their management to under price the product relative to its true market value, and allow the potential equity in that statement to draw cash from speculators and the customer base who are cash buyers. This seems to have been a conscious business strategy on their part. There are numerous ways for this strategy to backfire. One of them is the FUD (Fear Uncertainty Doubt) it puts into the existing customers who’ve already ‘deposited up’ and the other is the FUD it puts into future prospects like me and many others who wouldn’t touch it until the smoke clears, if it clears. And then there’s the FUD with the vendors – it’s got to be considerable for the smaller guys with unsecured moneys owed from Eclipse. I’ve read the comments on D&B. My old company’s D&B rating certainly never said we were going bankrupt – but we did. Such is the reality of business. It’s like the fog of war – you simply don’t know the real situation.

3) How could Eclipse afford to finance the continued development and production of their product? Eclipse clearly has a program in place, where the customer provides financing to the factory by providing cash many months prior to delivery. This makes customers, in the event of a BK, unsecured creditors to the company. The recent deposit request/bump highlights how much they are reliant on customer deposits to make it through.

4) Life has taught me to be prudent in financial situations. It is a rare situation indeed where something that looks like a dead fish, smells like a dead fish, isn’t a … dead fish. There are so many aspects of the Eclipse business model which create this air of business danger!

5) However, there are exceptions to the dead fish rule.

6) In business, cash is king. Those who have it live to fight another day, and those who don’t, … don’t. It would be unreasonable to assume that Vern Raburn hasn’t been working overtime for the last two months, trying to raise another round of money. He may have been offered money already; although it may appear to him to be a personal ‘Hobson’s Choice’, because I suspect the money he’s being offered is tied to significant dilution and/or loss of control of his enterprise and/or ‘cramdown’ and/or forced BK. Alternatively, he may be working on a rational round of financing, where he’s been given some stipulations which must be met prior to close. These stipulations require meeting some milestone (EG, increased production rates; increased customer financing; you name it…) prior to close of the round. My best guess is that he’s looking at a cramdown of some sort. The early equity investors probably are facing substantial dilution. That’s how new investors make their money: essentially, older and early investors are written off. Most of the benefits of future profits flow to the last round of investors.

7) It is also clear that all of the information required to make intelligent business decisions on behalf of Eclipse are only fully known to Eclipse management. In other words, if they pull it off, they pull it off!, and we don’t know why, and life is glorious for them. This is the corollary to point #5.

8) There is life on the other side of Bankruptcy. There's also life on this side of Bankruptcy, if aggressive moves are made in time. If I was ‘King For A Day’ at Eclipse, I’d make the following moves:

8.a Take the website down. Replace it with a retooled mission statement for a couple of weeks, then bring up a new website. The mission statement would be something like this:“Our mission to produce the finest, most economical to operate 5 place twin engine business and personal jet in the market.”Below that it would read:“We’d like to talk to you about our jet. We like it a lot; we think you will too. We’ve priced it fairly and we want to help you buy it. Give us a call.”

8.b Reject all customer purchase contracts which are not profitable. Who knows, this might be every last one of them. Obviously give reorganization preference to customers who’ve already placed the deposits. For goodness sake, raise the price of the product!! If any product truly has a 3 year lead time, then management made a huge blunder in under pricing the product to market demand. Management gave equity to the customer base, and that’s just stupid. I guess I’m trying to say that there’s no such thing as a free lunch, especially in GA.

8.c Dump AVIOng in favor of generic Garmin. Heck, just drop a couple of 430s or 530s or whatever in and get the planes rolling out the door, so they can fly IFR/GPS.

8.d Pray like crazy that FIKI gets wrapped up, and that the public announcements to date on FIKI are the truth.8.e Same for EASA stuff.

8.f Same for anything else that’s been rashly promised and not yet delivered.

8.g Reset quoted production levels and delivery times to rational levels which have already been demonstrated. Reprice the product so that operations are profitable at that level.

8.h Obtain bank DIP financing that would also provide a rational tie in to post-delivery customer financing. Create a customer delivery sales program that would work like this: 10% down at order; another 10% at delivery; balance of 80% on financing. That would stir sales at rational (EG profitable) price levels.

8.i Complete the equity financing round. As a lead investor, post BK, life might get a lot easier to raise money.

8.j Find a bigger partner who wants the product and the TC, and is willing to pay real value for it. Don’t have a realistic clue who that is… can’t imagine it would be Cessna.

That’s it for real comments.

Intrigue in Albuquerque -

Chance Discovery Starts Investigation

By: Staff Writer, Washington-In-The-Know

ALBUQUERQUE, NM – A janitor’s find here has implications far beyond the banks of the Rio Grande River. Manuel Ortega was cleaning a men’s room at the Albuquerque International Airport when he found an Apple iPhone on the sink. He scrolled through a few pages before turning it over to police. The authorities identified the owner, but not before discovering a confusing collection of emails, draft press releases, government documents, campaign strategies, videos and audio recordings.

The Apple iPhone belonged to Vern Raburn, president of Eclipse Aviation, a local producer of small jet aircraft. The contents of the phone disclosed a late-night meeting at the airport between Raburn and Senator Larry Craig (R – Idaho). A draft press release revealed that the company was leaving Albuquerque to relocate in Pocatello. Senator Craig was quoted, “Eclipse Aviation has a wide stance and we’re glad to see it extends to Idaho.”

This is likely to have significant repercussions as New Mexico politicians offered tax incentives and invested both political and financial capital in the endeavor. When asked to comment, Raburn said, “Senator Craig made a particularly attractive offer and Idaho is a business-friendly environment.”

Former Vice President Al Gore also figures prominently in the discovery. Fresh after receiving the Nobel Peace Prize, Gore has become a venture capitalist. He has joined Kleiner, Perkins, Caufield & Byers, a renowned Silicon Valley firm. The documents reveal that Gore is leading an $800 million investment round in Eclipse Aviation. A press release quotes Gore, “We’ve launched an environmental fund and Eclipse Aviation is the perfect vehicle. Vern Raburn told me they make green airplanes and he is convincing. Cessna called to say that’s just the color of the primer coat but I don’t believe ‘em.”

Gore continued, “Eclipse will revolutionize travel with a jet that adds no carbon to the environment. Vern told me the Eclipse 500 actually retains carbon from each flight. You open a door after landing and unload a big bag of charcoal briquettes. You could sequester this carbon by burying it in the backyard, but hell…. I’m going to put it in my grill and cook some burgers. I have to thank Vern for helping me become a venture capitalist. He’s coached me on technology and taught me to say Silicon Valley, not Silicone Valley.”

The most explosive revelation on the iPhone relates to the 2008 presidential campaign. The documents reveal that Senator Hillary Clinton (D – New York) plans a dramatic reorganization of the Federal Reserve Bank if elected. She plans to seek the resignation of the current Chairman, Ben Bernanke, to be replaced by Vern Raburn. With little experience outside of the software and aviation industries, Raburn is a puzzling candidate.

A confidential campaign document entitled, ‘Project Evita’, outlines a disturbing plan. If Clinton is elected and Raburn is confirmed, they plan a dramatic increase in monetary inflation. Over the centuries, governments have used this to reduce or eliminate their national debt. Runaway inflation makes the deficit in ‘old’ currency easy to repay. The Consumer Price Index (CPI) is sensitive to money supply, interest rates and commodity prices.

Clinton’s motivation is described in the Project Evita document. Runaway inflation would cause widespread social, political and financial unrest. Near the end of Clinton’s second term, she plans to seek a constitutional amendment allowing two additional terms. She expects a public outcry to remain in office, quell fears and stabilize the economy. Thus her administration would run through 2024.

Raburn’s motives are less clear. No one seems to know why he would benefit from large year-after-year increases in the CPI. Analysts speculate that if the Eclipse 500 were operated as Air Force One, even more orders would be added to the thousands already on the company’s books.

Note: The blog administrator has not been able to second source this article contributed by black tulip.

The tulip mania peaked in the Netherlands during the 1630s. The black tulip was the most sought after, until found to be biologically impossible.

From Vern:

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.

Training Programs

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.

Aircraft Delivery

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.

Limited Offer

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.

This means:

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.

Sincerely,

Vern Raburn

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!

Where did it all go wrong?

This is the question I ponder as I sit in 22D, .76M at FL270 on an east bound AA flight this morning, returning to my current client’s company after a great Thanksgiving holiday with family. I hope all my fellow bloggers, regardless of which side of this discussion they come down on, had an equally fantastic holiday, and had the opportunity to give thanks for the blessing we each certainly enjoy.

Thinking back, Eclipse truly had it all, an A-List executive team, a great and talented design team, a clever little jet design, a truly innovative engine and avionics concept. All the benefit that experience, gathered from the best aviation companies around the world, could offer. An opportunity to build a true, best-of-breed, not only the design, but the processes, the procedures, the methods, the tools, the culture, in short, not just an opportunity to build a great plane but to build a great company.

And yet here we are, nearly ten years and well over a billion dollars later, no best of breed, just a small plane, half finished – a company that boasts ‘me too’ like the youngest child in a family of achievers around the Thanksgiving Day table – embarrassed and even angry about the successes of its siblings, muttering under its’ breath about ‘coulda’, ‘woulda’ and ‘shoulda’ – ‘if only’, and the ever present lament of the self-afflicted, ‘why me’.

Now, vendors languish, paid weeks later than agreed to, occasionally having to resort to withholding product or threatening mediation or litigation to get what they are owed.

Employees leave, having given up on the promise of stock-option riches, a dot-com era fairy tale, spun one too many times, diluted to the point of valuelessness by three, soon to be four unplanned additional rounds of financing.

Investors have nowhere to go, they did their part when they signed the paperwork – their promised ROI more diluted than the mixed drinks at a New Mexico casino.

But the bitterest pill to swallow comes for the customers – employees look around now to a revitalized and energetic industry with more work than bodies – investors will simply move on – even the State of New Mexico and its’ taxpayers.

No, the loyal customers are the ones who will ultimately feel the most pain. Originally promising near 700 deliveries in 2007, Eclipse will probably eek out around 80 or 90 this year, and not one will be the airplane promised. Not one will be fully functional. Not one will be fully usable, especially as we are now fully into icing season for much of the nation.

300 of these loyal customers were told, more than a year ago now, that they would have their jets in a matter of months, that their 60% progress payments were due, their jets imminent. Exactly how many paid about a half million dollars each is unknown as the Faithful will no doubt point out, but the issue is more the demand than the exact number effected. Only a month or two after demanding contractual progress payments for aircraft ‘soon to be delivered’, Eclipse announced that not only had they decided to end the relationship with Avio prime partner Avidyne (2nd prime partner, having already parted ways with ACS maker BAe Systems), that the decision had been made MONTHS prior, prior to the announcement, prior to the demand for progress payments. Eclipse reported it had in fact been quietly working on an Avio replacement for several months.

Grandiose promises about improved functionality were made, blame was assigned, and as with Williams and BAe Systems before it, once ‘world-class’ partner Avidyne was tossed under the bus by a guy who previously sat on its’ BoD. A pattern was emerging, each time the wunderjet approached the only significant milestone in any program – certification and delivery, Eclipse pulled the rug out from under itself, and blamed the rug.

Come now the present, and a major structural supplier has had to sue Eclipse for missing payments, this after renegotiating the previous volume pricing and working to freeze the design and make improvements for manufacturability. Dunn and Bradstreet shows Eclipse to be over 3 weeks late, on average, for vendors that report to D&B. Current and former vendors tell tales of engineering that has no tolerance for assembly resulting in massive scrap rates. Current and former employees tell tales of poor morale, poor to nonexistent leadership, and a singular lack of appreciation for the task of designing, certifying and delivering aircraft.

Preston Tucker boasted that his car company had the largest manufacturing facility on planet Earth, and it was true – Tucker had negotiated with the US government to give him a former war material plant, the single largest building on the planet at that time. Tucker used this massive building, flashy advertising, and his own ebullient character to raise a significant sum of money at that time, over $15M – to build the car of the future.

Tucker would later stand trial for fraud, having built only 50 cars after several years and many millions of dollars. Eventually acquitted, the similarities to Eclipse and Raburn are astonishing. Another comparison made more than once here is to that of Jim Bede and his diminutive BD5, the elusive ‘everyman’ plane. Here too we have an interesting idea, a very interesting character, thousands sold, hundreds delivered, and one of the greatest black eyes in aviation history – all for the want of an engine.

The difference for Eclipse lies only in the ability to continue to raise capital, and in the number of people around the world who will be adversely affected when this house of cards crumbles.

So where did it all go wrong? Did it start out as a scheme – I think not. I have made no secret about my early exposure to Eclipse, and that I have friends and acquaintances both within and without Eclipse. I heard the early stories, predictions of 1500 planes per year rolling out of Albuquerque, a sub-million dollar selling price – the predicted death of half-million dollar prop planes such as the Bonanza, the Cirrus, the Columbia, the Malibu and the Mooney. I heard tales of wonderment about a level of systems integration unseen on planes smaller than the 777.

It did not start out as a scheme I am sure, but each time the reality of the situation might have set in, Eclipse leadership chose to applaud the Emperor’s new clothes rather than point out he was, in fact, naked. The result is vendor after vendor failing for Eclipse where they each had track records of success for other larger and more successful customers dating back years, even decades. Of special importance here is the failure of key vendors, the chief enablers of the wunderjet if you believe the marketing hype, that is Williams International, manufacturer of the EJ-22 engine, and BAe Systems, architect of the computer system enabling Avio.

The real issue at the end of the day is that much like the dot com bubble from which Eclipse leadership hails, there is a sense that the rules don’t apply, that Eclipse is a special case, the ‘new economy’ version of aircraft. The new economy however was a bust, rules after all are rules. There is a reason that planes are designed and built they way they are and it has nothing to do with screwing the customer, creating artificially high pricing to dissuade customers from actually buying them, or just being monolithic dinosaurs mired by the inertia of their great size. No, when hundreds of millions or even billions of dollars, and hundreds if not thousands of jobs are on the line, a company owes its’ employees, its’ shareholders and its’ customers a certain amount of respect and the decisions must be taken seriously with an eye towards safety, reliability, and eventually ROI.

There was no new economy, only people who believed the rules did not apply to them – and for a while they were able to find enough unsophisticated marks who believed what they said – irrational exuberance ruled the market. A similar effort is just now completing in the real estate market – as some places see soft landings (a fitting euphemism for our discussion today), other have seen the bubble burst, and crashed and burned.

So we are left with one pivotal question – is Eclipse right and the rest of the world just doesn’t get it? This is surely the position of the Faithful. They suggest that Eclipse changes the rules, creates a whole new value-proposition.

Or is Eclipse and the business model that it and its’ major customer represent stillborn – e.g., are they dead and just don’t know it yet? This is the position of the critic, with some even allowing for a chance of success given a wholesale reorganization of the BoD, the executive team, another $300M and 18 months.

Occam’s razor suggests we get the best result when we use the least number of assumptions, and it is here that I believe Eclipse simply fails the smell test.

In order to accept the Eclipse explanation as to why five or six dozen partially completed planes are all they have to show after almost ten years, well over one billion dollars, and all the other pro’s I mentioned above, you have to believe the following:

A leading world-class avionics and vendor (BAe Systems) did not know what it was doing and is a failure

Another leading avionics vendor (Avidyne) did not know what it was doing and is a failure

A leading business jet engine maker (Williams International) did not know what it was doing and is a failure

A leading systems and lighting vendor (deVore) did not know what it was doing and is a failure

Boeing does not know what it is doing

Cessna does not know what it is doing

Hawker-Beechcraft does not know what it is doing

Traditional methods of setting price are wrongTraditional margins for aircraft OEM’s are low by a factor of 3 or 4

Or you can observe that it is in fact Eclipse that did not know what it was doing, evidenced not by crazy conspiracy theories (like OEM’s consciously NOT meeting demand to keep prices ‘artificially high’), but by facts such as:

Eclipse needing to select a new engine

Eclipse needing to redesign the avionics suite, twice

Eclipse failing to hit a single schedule

Eclipse missing the mark on MTOW by 28%

Eclipse missing the mark on needed fuel by 26%

Eclipse missing the mark on development costs by a factor of 4

Eclipse missing the time to develop by a factor of 2.

So I ask each of you, critic and Faithful alike to consider this – is Eclipse right and the rest of the world wrong, or is there a reason that planes are designed and built the way that they are designed and built?

Is there a reason why we see evolution more than revolution in aerospace?

Is there a reason that Raburn has failed, like Bede, and Moller and Tucker before him?

In a well managed program, risk is supposed to go down as time goes on – the further along you get the safer you are supposed to be – as you, supposedly, check off item after item on a well-planned effort – making progress towards the ultimate goal.

This should not result in being almost bankrupt when a finance round takes a few days or weeks longer than anticipated. This should not result in establishing a new low-water benchmark of delivering partially completed aircraft with significant but commonly expected functionality delivered in the form of an I.O.U. Incremental development and delivery might work for operating systems, it is nothing short of criminal to do it with a million dollar aircraft.

There are no free rides, there is no such thing as a free lunch, and if it sounds too good to be true, it probably is. These clichés ring truer today than ever.

Contributed by ColdWetMackarelofReality.

Dear Customer,

As we near this week’s Thanksgiving holiday, it’s a good time to step back, and reflect on several recent experiences. Even though we are not where I had hoped to be in terms of aircraft production, I am incredibly proud of what the entire Eclipse team has accomplished over the past 11 months, and 2007 is not even over! In the next six weeks, Eclipse will complete another series of important milestones that I am eagerly anticipating sharing with you. Until then, I want to share some personal reflections and highlight a few recent events.

Avio NG

This last weekend, I flew flight test aircraft N506EA, which is equipped with Avio NG, including functional ADF, DME, SkyWatch™ HP, Class B TAWS, and weather radar capability. In short, it was an amazing experience. The Avio NG aircraft is a significantly measurable improvement over Avidyne equipment, resulting in massive improvements to functionality, usability, and hardware reliability. The display readability, responsiveness, audio quality and clarity are all massively improved over the Avidyne based Avio. I can guarantee you will be thoroughly impressed with Avio NG, as it is a remarkable system that delivers the operating experience we had always planned and expected.

This flight was particularly memorable to me as I felt it marked the realization of our original vision to design an unforgettable operating experience for our customers. It is easy to be pulled down into the daily ups and downs of building a business, but this was one of those “wow” moments that showed me just how far we have come.

This flight also made it clear to me that parting ways with Avidyne was one of the best decisions we’ve ever made. Besides an inability to deliver on promised functionality, initial in-service reliability data shows that Avidyne hardware is consistently at the top of the charts for failures for systems on the airplane. As we experienced in 2002 with Williams International, Avidyne was a vendor that simply failed to deliver as they had contractually committed to do. These were both extremely difficult decisions involving strategic partners, and we knew the impact would carry a high cost in terms of both delays and capital. But in both instances, first with Pratt & Whitney Canada and now with the Avio NG team of ISSC, Garmin, Honeywell and PS Engineering, we have ended up with a much better product that more than delivers on the original promises we made to each of you.

I am happy to report that certification of Avio NG should take place next month and production aircraft 105, the first aircraft with Avio NG installed, is steadily moving through primary assembly on the production line.

I am also pleased to report that we have added another member to the Avio NG team, Spectralux Avionics which will now provide GPS hardware. Their new system is certified to TSO-C146b which now enables us to deliver all WAAS-based LPV capability in a future release of Avio NG.

Dubai Airshow

Early in the year, we made a decision to introduce the Eclipse 500 to other parts of the world. Building on our successful European journey this past spring, I am proud to let you know that on November 8, 2007 aircraft 51 left for Dubai, UAE and arrived at the Dubai Airshow a mere four days later. Leaving with less than 10 hours on the airframe, our pilot, Kent Ewing, remarked that the plane performed flawlessly in all sorts of weather conditions. It flew the North Atlantic crossing route stopping in Canada, Greenland, Iceland, Scotland, Italy, Crete, Egypt, Saudi Arabia and finally, Dubai, with minimal weather diversions. Most importantly, the flight logged just over 25 flight hours with zero squawks! That is over 8,000 miles in four days. This airplane is simply performing exactly as we expected it to.

In preparation for the trip, we installed two Garmin 430 receivers and modified the VHF COM / NAV. This equipped AC 51 with displayable GPS information and provided basic Area Navigation Capabilities (BRNAV), which are required for overseas operations. The modifications were necessary because Avidyne could never deliver this capability. Avio NG version 1.5, which is on schedule for certification in March 2008, will provide the BRNAV ability required for oceanic and European operations.

Hampson Aerospace

You may have heard that a supplier of ours, Hampson Aerospace, has filed a lawsuit against Eclipse Aviation. Hampson manufactures the Eclipse 500’s tail section, including the vertical and horizontal, rudder and elevators. I want to assure you that aircraft production has not stopped, and Hampson remains a supplier. Our number one priority continues to be delivering outstanding aircraft to you. While I cannot go into too much detail on pending litigation, I will say that as in most production situations, occasionally we get into a dispute with a vendor. However, we almost always work the differences out and very few disagreements end up in the public domain as legal action. Prior to Hampson’s filing, we sent them a notice outlining a number of recurring quality issues. These concerns have led to a discrepancy on what parts should be paid for, and which should not. Contrary to wishful speculation by our competitors and critics, this issue has absolutely nothing to do with the financial health of Eclipse Aviation. In short, it is about our refusal to accept and pay for sub-standard material. I am very hopeful that we will be able to work through our differences, and that our partnership with Hampson will continue.

Eclipse Aviation is at an exciting moment in its history. Avio NG is living up to all expectations, and we are building one hell of an aircraft and proving it in daily operations around the world. As always, we remain thankful for your continuing belief and commitment to Eclipse Aviation. Have a wonderful and safe holiday season.

Sincerely,

Vern Raburn
President and CEO

Thanks to redtail for keeping the blog informed.

Eclipse Support Model

A Guest Editorial from flightcenter

A number of people have been making the case that the Eclipse 500 is an airplane that costs more to produce than Eclipse is selling it for. Those folks have been making the case that Eclipse's business model isn't sustainable.

Now that Eclipse is delivering airplanes, it is time to look at the Eclipse 500 support model and consider whether Eclipse's support model is sustainable.

All indications are that the Eclipse 500 is an airplane that will have significantly higher down time and support costs than Eclipse and / or Eclipse 500 owners have budgeted.

The fact is that there are many complex and highly inter-related systems on this airplane which are provided by independent suppliers. When the airplane's electronics catches a cold, it is going to be very hard to figure out which vendors' products are causing the problem and how to fix the problem.

Many of the AvioNG suppliers are not naturally aligned, and in many cases they are direct competitors. (Honeywell, Garmin, and Chelton, for example).

When problems are reported, it is not hard to imagine that there will be finger pointing – and assertions of "not my problem" among the vendors.

Let's look at product support from the perspective of Eclipse and its AvioNG vendors.

Who is to blame when the aircraft's autopilot doesn't capture and fly an approach correctly?

The autopilot manufacturer? (S-Tec)
The FMS software provider? (Chelton)
The radio provider? (Honeywell)
The GPS vendor? (FreeFlight Systems)
The AHRS vendor (Crossbow)
The air data vendor (Harco Labs)
The display manufacturer? (IS&S)
The control system vendor? (Autronics)
or the systems integration software supplier? (Eclipse)

It will not be a simple matter to make that determination. Once it has been determined that some or all of the above systems need to be fixed, certified and released then Eclipse will need to coordinate product release schedules with up to 9 different companies. Some may not be able to produce a fix on the schedule that Eclipse desires.

Once all the companies have produced their fix, then Eclipse must verify that the fixes are valid, potentially by conducting flight tests. The more vendors involved, the higher the probability that one or more of the "fixes" will have a side-effect causing other problems on the aircraft. On top of this, the release schedule is going to be fraught with delays as the release of the consolidated fix will be gated by the slowest vendor to deliver. This process is hard enough
with only one or two avionics vendors on the aircraft. It becomes exponentially harder as you add vendors.

That is just the technical part of the process. We shouldn't forget that someone has to pay for all the effort required to produce the product fixes and get them to market. There is also a very real possibility that one or more of the smaller vendors may go out of business, be acquired by a larger company, or chose to terminate their relationship with Eclipse.

Now let's look at diagnosing an AvioNG problem from the perspective of the service center. How does the repair tech out on the line diagnose and fix problems that could be spread across 8 or 9 vendors?

Answer – with great difficulty.

The natural reaction will be to pull the boxes that could contribute to the problem and send them back to the various vendors, in the hopes that a new or repaired box will fix the problem.

However, a very high percentage of those boxes are going to work just fine when they arrive at the vendors' repair shops. The most likely response will be that the vendor verifies that their equipment is working to specification. In this case, they will not make any repairs and will send the box back to the service tech with a note saying "No Trouble Found". The service tech will then reinstall all the returned boxes and find out that he still has the exact same problem.

Which leaves the service tech right where he started, scratching his head trying to figure out what to do next and how to fix the problem…and the Eclipse 500 owner will be wondering when he is going to be able to fly again.

It won't be long before Eclipse gets a bill for the aircraft's downtime.

Eclipse CEO Blames Supplier for Problems

By Andrew Webb

Albuquerque Journal

Eclipse founder and CEO Vern Raburn on Wednesday lashed out at Hampson Aerospace, claiming it supplied poor-quality parts and is a significant contributor to production ramp-up delays that have plagued Eclipse.

Hampson, a U.K.-based company that builds tail sections for Eclipse at a Texas plant, sued the light jet manufacturer in state District Court in Albuquerque on Tuesday for allegedly failing to make required payments.

In a telephone interview while returning from the Dubai Airshow, Raburn told the Journal the problem was caused by Hampson's "lack of performance"— not Eclipse's inability to pay.

"I'm sad that they've chosen to take this approach and play this as a financial issue, when the real issue is they've had pretty horrendous quality problems," he said.

"We've had to spend hours solving their quality problems."

A lawyer representing Hampson said delays were caused not by Hampson but by multiple modification requests made by an "inexperienced" engineering staff at Eclipse.

The rest of the story is on line - www.abqjournal.com

Eclipse Is Sued By Supplier

By Andrew Webb
Albuquerque Journal

Eclipse Aviation took another hit Tuesday, this time from a U.K.-based company building tail sections for the Eclipse 500 jet.

Hampson Aerospace sued the Albuquerque jet maker,alleging failure to make required payments.


The rest of the story is on line - www.abqjournal.com

From airtaximan

Redtail,

I think Cessna is really satisfied with their program and their product, as well as how sales are going for the Mustang. Hundreds of real customers seem to be, too.

But I guess these idiots at Cessna could have priced the plane to sell 500 a year... but there risk in that decision. A lot of risk.

They might have developed their own avionics, as well... but why? There's risk in that decision.

Perhaps they could have forayed into a novel construction method... but there's risk in that decision, too.

Perhaps they could have designed plane around a tiny NASA experimental engine, and launched in 1998? There's risk in that decision, too.

Maybe you should re-look at how you characterize the Mustang, and revisit the $1.x billion house of cards you call a jet program at e-clips?

Everything e-clips has done was easily copied by a major company, IF it made sense.

Cessna and Textron have their BRANDS to consider. Guess what the Eclipse BRAND has come to mean... see the characterization of the in the Award article. That's what their penchant for risk has gotten them. Nothing anyone in aviation, or at Cessna/Textron would ever stand for. In fact, the entire VLJ segment is being colored a sick shade of BROWN, due to Eclipse.

Cessna was smart a year or so ago to distinguish the Mustang from the VLJ moniker, and call it the entry level Citation.