Saturday, August 30, 2008

Some words from staff, suppliers and customers

We've all had a little time to absorb the shocks from ABQ in the past 12 days or so. I thought it was right to share with the blog some of the email I've been getting. On the 'numbers' question, before you ask, I'd like to say this. I'm pretty sure that total accuracy on EAC will be as hard to achieve as agreeing the numbers who took part in Pickett's Charge at Gettysburg.

So, with that 'official health warning' herewith some thoughts and the supporting emails.

The blog email started to hum, big time, after Vern's shock announcement at Oshkosh on that fateful Monday. Various people were spotted coming and going at EAC and lots of rumors started flying around. I got caught up in myself and made a serious error in 'firing' several people. So I've been careful to avoid that this time, and have several sources, in almost all cases, for the information below.

The first one comes from a senior staff member who reacted to the layoffs by sending me a long and very informative email. Herewith a flavor of what was written. It goes to the heart of the matter, from someone who was there.

"My heart goes out to the group of good workers who were laid off yesterday. Due to the incompetent attitudes and behaviors of the Executive Staff many friends and good people are wondering what they will do next to provide for their families. I know that many who are still employed at EAC are feeling guilty because they were not chosen to be let go this time and in the back of their minds the question is occurring are they next?

I knew after about 6 weeks that Todd Fierro was the wrong man for this job. He was trying to apply DOT policies to a vehicle that works in two dimensions and not learning about the FAA requirements. He was making decisions that were just stupid, he was not consulting his staff of Managers who could have turned the tide around so that there would not have been the massive lay off there was yesterday.

20 Year Mechanic is right about all he has written in the blog. But most of I respect him for his ability to stay the course to make the EAC500 a safe and wonderful craft. I hope for the sake of all involved that they can see farther down the road and project a good future for EAC and for the good of New Mexico, we need to keep the doors open. There needs to be a general house cleaning with the Exec. Staff and not the "worker bees." You cannot lead by pushing, leaders have to lead from the front and the Exec. staff does not.

Mr. Raburn tried to make his craft fly before it could crawl. Again a waste and this attitude has impacted my home and my friends!

I can only hope that at some point that all the unqualified VP's are moved into mere manager positions so that they can face the general population that they angered over their inept and cowardly actions towards their charges, the employees of Eclipse, investors, and the purchasers of the EAC500. No responsibility has been taken by any one of those sons and daughters of snakes, the Executive Staff.

Karma has a way of catching up, if not in this lifetime most certainly in another."


This email was signed, and the person concerned has given permission for its use in this context.

Now we should move to the staff lay off. EAC have a company line, which says two things. One is that 650 people were laid off. The other says that 38% of the total employed were laid off. Everyone who has contacted me says that between 750 and 800 individuals got pink slips. EAC say that 1,100 positions continue in the company, when almost everyone says there are less that 900 actual people left.

How do we reconcile this? The straight answer is that 'we' can't. EAC have a poor track record with numbers. The state of New Mexico is compromised in any investigation under WARN legislation. It has after all, financial interests in the company, in several ways. I'm pretty sure the truth will out eventually, but right now, the picture remains clouded.

A short snippet from one of the suppliers:-

"EAC is returning $40 million in deposits. EAC needs to pay suppliers $60 million and that does not include volume reconcilliation since they did not achive the number of aircraft they forecast so you can add 10% and call it $66 million. They say the USA brand is "dented" so most future sale will be from Russia/Europe etc. The UBS financing guy doesn't even have an investor lined up and this is not a done deal but they feel real confident they will find a real jackass of a company to invest in this mess... OK, my wording. "experts" tell them they can do 2/day... All suppliers said bullshit to that. The ramp down was due to funding....of course. It takes 6000 hrs to build an aircraft and they need to take it down to 4050 hours. They say there are 1000 firm orders and 1100 employees. the bright news was that no one was cocky and they begged to keep suppliers on board. Everyone had a NEW attitude, a NON Vern one....but get this, they won't commit to keeping us on the E-400...that pissed some suppliers off!"

This is representative of the word from suppliers and is indeed a sad one. Many are owed multi million dollar sums and most now only deal with EAC on a 'pre pay' basis, and are hoping that something will come up to resolve the debt. Roel has offered those with bills outstanding the by now standard '6% interest' on their money, but everything depends on the UBS funding, of course. They even offered people who turned up for the conference a ride in the FPJ.

There is no truth whatsoever in the rumor that suppliers picked straws to see who HAD to fly in it...

Customers continue to have real issues. Simple service requests are not being dealt with, parts take forever to arrive, the slow down in production announced by EAC has impacted the delivery schedule and therefore the possibility of collecting the 60% '6 month prior to delivery progress payment'. And thats for the people who have stayed the course. For the very first time, reliable information has reached me on the number of deposit backed orders that were actually placed with the company. After all the dross is discarded (DayJet etc) there are just over 900.

This from another senior staffer:-

"We did get $$'s on all orders except DayJet (in the latest messaging these orders are gone), and for most of the 900 it is a 100K+ deposit. Bad news is that with almost 300 refund requests those full deposits are due back to the customer....."

Yes, I know it seems high, but remember that many people took two, three, four or in one case I'm aware of SEVEN positions. It's also over 8 years since Vern started taking deposits. Remember also that the total money collected is hard to calculate, since the first deposits were less than the later ones. Most seem to have paid about $150,000. So, how many people have asked for their money back?

As you can see, I'm told that about 300 have sought their money back. A total of '$45 million' (many paid a higher deposit) is required to keep these people happy. Roel has also stated that 'some' of the depositors have changed their mind and have asked to get back in line for a delivery. I suspect that these are people who have a very early position, and are looking at paying the price increase and getting an FPJ, or very probably loosing everything.

Other items include ongoing rumblings about senior staff, some of whom are moving 'sideways', a veritable feeding frenzy of recruitment events around ABQ and ongoing press coverage of the Ice Blue suit. I'm also hearing that one supplier in particular has been awarded '$7 million' after due process. Another couple of hits like that and the company will need serious cash, real fast.

I think I've covered a few of the bases there. Enjoy your 'Labour Day' long weekend, fly/drive/sail safe and have fun with your families and friends.

Shane

228 comments:

1 – 200 of 228   Newer›   Newest»
FlightCenter said...

If Shane's numbers are correct, then there are about 600 firm orders on the backlog.

900 orders backed by deposits minus 300 refund requests = 600 firm orders.

If Eclipse can resume production to the rates achieved earlier this year, (~ 4 aircraft / week) that would be a 3 year backlog.

If Eclipse produces at the most recent rate mentioned by RP, (~ 1 aircraft / week) that would be a 12 year backlog.

airtaximan said...

Thanks Shane - great job:
-I am glad the suppliers are asking the right questions... here's my take on the orderbook math, FWIW.

I do not believe the 1,000 orders with deposits number beng offered by EAC at this stage... simple math:

2700 is the largest number they ever dared report for "orders" and I'm sure this was an exaggeration... but, even at that, let's have a look:

WHAT WE KNOW:
- Dayjet 1402 (orders "cancelled", not yet delivered)
- ETRICK 300 (IIRC)
- Aviace 112 (IIRC)

so, we have 1842 (cancelled or BS fleet orders from Dayjet, ETRICK and Aviace) of 2700 = 858 left

- delivered planes 240 (IIRC)

= 618 left

- cancellations 300 (just admitted)

= 318 left

YES FOLKS: I think they have around 300 "orders" with deposits from real breathing potential clients.

(also, this does NOT account for Pogo, Linear, Spanishairtaxi companies and the like... or other fleet orders, which likely lack deposits-perhaps 50, 100 more orders?)

- also, what about European orders that cannot really be delivered without EASA... i am not sure I am correct on this, but it I am and there's 100 or so european customers... there are really not many planes to be made over there.

In any case, the same old rules apply - FACTOR ABOUT 50% for BS, AND you probably have a fairly good idea of "reality" compared to what EAC is saying.

(scary stuff - if there's 318 -50 pogo-like non orders, and 100 european-tough-to-deliver-without EASA orders... that leaves aound 168 deliverable orders... at this, I would certainly cut staff dramatically, and reduce production to at most 1 a week!!!)

airtaximan said...

FC, comment on my analysis, pls... be tough... scrub... remember better than me...

BUT also, remember, they are full of S%&t

;)

shoppin for the $$$ said...

Shane, great post. It is unfornate that the senior staff is somewhat still intake and some serious firing has not gone on. The senior staff that has ventured on are now at other aircraft manufacturers and spreading their no clue ideas on how to manufacture an aircraft. If you remember where some of them went it will be just a matter of time before they put those companies in jeopardy also. Good luck to the remaining workers who believed in the 500 and purchased stock. Many times everyone was warned that it was a "RISK" program.

Deep Blue said...

FC: that's a fair way to look at it. I believe those numbers are net any Dayjet and net Etirc.

I think the most critical element in determining the integrity of the order book going forward is mapping who, exactly, is ordering the aircraft: single private buyers; corporations; dealers/traders/speculators; air taxi ventures; charter/management companys; domestic vs. foreign; subject to finance or pre-financed/pre-qualified, etc.

This also speaks to the short discussion No mas and I had this morning concerning the marketplace: what kind of core user or "fan" is forming; is there a core user market forming (like certain helos going to offshore petroleum or certain of the Citation series making up the core Netjets fleet) that reflect a clear, distinct function/value discerned in the market for regular, repeated use; I don't know if we can say that yet.

airtaximan said...

FC...

"reliable information has reached me on the number of deposit backed orders that were actually placed with the company. After all the dross is discarded (DayJet etc) there are just over 900."

for the record, I read this is 900 were ever placed... the total... without Dayjet... not what's left today...

airtaximan said...

I rounded to 1,000, but at 900 which was admitted by EAC... my numbers are 100 too high.


Really scary.

Niner Zulu said...

If I recall correctly, well over a year ago the blog estimated that there were "around 800" real orders for the Eclipse jet.

With 600 orders remaining and 265 "delivered", that early estimate was pretty much right on.

Deep Blue - as far as "fixing" the business going forward, I don't think it is possible until after BK and/or the current management is taken out. You can't expect the people who caused the problem to fix it. Many of my posts on Eclipse have been negative. Why? It's not because I don't like what the airplane could be if it was ever completed and functioned as it should. It's because my BS meter goes off every time the factory issues a new statement or press release.

For example, the conference call with owners the other day was nothing more than BS. The representative of UBS was talking about the funding Eclipse was going to receive as if it were a foregone conclusion. The truth is, Eclipse can go for 60 days before it is TU. Until that new funding is "in the bank", it doesn't exist. Anyone who has ever had a business deal fall out at the last minute understands this!

The current owners think they have a good deal on the jet, and are willing to overlook the fact that their aircraft just aren't safe. They can't fly from point A to point B and know that they can return home. They are in denial about the fact that their aircraft has little to no support in the field, and that they are one missed funding round away from losing ALL support.

I'd like to be more optimistic, but there has to be a reason for optimism.

Shane Price said...

ATman,

I was surprised at the 900 to 1,000 range myself. I believe it's the lower number, as the higher one has been fed to the suppliers, in a context where EAC staff were desperate to keep them 'on side'

But...

The source(s) are pretty good, with no reason to lie to me. Quite the opposite, in fact.

However, a few words of caution, and bear in mind Major General George Edward Pickett...

Many of these orders are from the same people. If you asked me how many actual PEOPLE had ordered an FPJ, I'd say about 400.

There is a very firm view that many, many deposits came from the same people, anxious to make a killing on the secondary market. They are in a real bind, as they can hardly cancel 'half' their orders due to the price increase.

Several of them, despite not getting an FPJ for their money, went ahead and placed deposits on the Con Jet....

Words fail me!

Shane

Shane Price said...

Sorry if there is a lack of clarity about the '900' number.

This specifically EXCLUDES DayJet or any other 'order' not backed by a deposit.

That was the measure I asked the sources to use, when seeking the data. My reason is quite simple. If someone places an 'order' with me, without placing a deposit, I treat it as a serious enquiry.

When (or if) the deposit arrives, I treat it as an order, and proceed accordingly.

I'm a bit old fashioned about these sorts of things...

Shane

Deep Blue said...

In the spirit of conforming to the blog rules (staying on topic or explaining a deviation), I've pulled this thread up from the previous one for any comment as I think it speaks to the core issue concenring the order book: who is buying and why; is there a core user group and market forming where the E500 is being deployed in specific missions that users have decided it fits well (it would appear from the blog and the resale market that the current core group consists of speculators, not actual users; implications to market development and therefore future order probability clear).

Shane: good point on concentration and diversification of buyers; an important measure of risk and order book quality, once the buyer class and country of origin is known (i.e. less risk if 100 orders from Netjets/US/EU vs. new ventures/Russia).

Thank you all for the indulgence, if any takers.

Deep blue said:

Dave/Wytech/B95 et al: you had some very good thinking going concerning production economics, pricing, market size, competition.

Question: under what conditions might it be possible to realize the original volumes EAC predicted? Is it strictly price? If the E500 sold for 800K, would they be flying out the door?

As you read your comments, and others, you keep finding yourself in a box concerning how one could figure out a way to make the fundamental EAC plan work. All the issues you bring up keep pushing you back to an apparent unsolvable math. I haven't seen any comment with a "Eureka" insight or a set of assumptions that would allow not only the E500,but any VLJ, to achieve such sales levels as predicted by EAC.

The only solution I see (assuming conformity to spec, tech support etc) is a scenario where the aircraft is so relatively inexpensive that it stimulates new demand and that that price would have to be well under 1MM (prob 500-800K). I think this was (correctly) VR's original goal--build a twin jet with breakthrough pricing--but cost kept escalating such that even very high production made competitive pricing--and any real scale economies--difficult.

What do you think?

No mas said:

Deep Blue –

Cirrus has shown that an airplane with a BMW 3-series sized interior will sell great at under $600K, and people will fly them like crazy. So the question is, what premium would you pay for a jet in the same size/weight class.

Vern’s concept for a slightly bigger $837K airplane was in that realm … but the rest is bitter history.

The E400 is close to that realm, just at 2x the price of an SR22 … how many folks will pay that for a sports-jet?

What would the E500 cost if not for the extreme burden of full-service concierge Eclipse Flight Support overhead burden?

NM

August 30, 2008 8:00 AM


Deep Blue said...
No mas:

Good thinking; and Cirrus is clearly a rare example of a stand-alone aircraft OEM (versus multi-line, conglomorate-owned like Cessna/Textron or an airline and defense-diversified OEM like EMB or Boeing) that has succeeded (although I do not know Cirrus financials).

I like your descriptor "sport jet" as that may be much closer to what the aircraft really is in the marketplace (versus an "air taxi"). In fact, VLJ may be a useless identity for the airplane class (all it says is that it's very, it's light and it's a jet).

Looking at the charter market acceptance (effectively none it appears), the difficulties with Dayjet and jet "air taxi" generally and lastly, the high number of E500s for sale on the secondary market, one might conclude that the E500/VLJ class has not in fact found a core user audience yet, and that perhaps fundamentally it does not actually meet anyone's particular price/performance interests.

Given the trade-offs VLJs in general represent to jet buyers (i.e. buyers seeking twin jet performance and system fidelity), in the form of a very small interior, no lav, limited payload/range, that price alone is the only value that could unlock consistent demand.

That is, for jet buyers, you've got to overcome competitor/model advantages in performance and after-market and for the Cirrus buyer, you've got to overcome a hard budget ceiling and/or unecessary jet performance given their typical missions.

Still, at a breakthough price, a VLJ should make recips/tprops absolete but the market doesn't seem to be cooperating (at least at 2+MM).

August 30, 2008 8:36 AM

airtaximan said...

Shane:

Does my math above make sense? Starting with 2700 magic orders, and cutting the Dayjet and ther BS out... you get a few hundred left.

If you are saying there are multiple orders for many folks, there may be a few as 100 or 200 "position-holders" with 1,2,3 positions...

That's really sad. Fomr a risk perspective, from a market acceptance perspective, and a sorry comment on market acceptability of the product - there are more speculatation-positions than user-positions.

This explains a lot - and, also means the market for this plane is smaller than anyone thinks or has been led to believe... alot smaller.

Imagine if afet all the hype and marketing money, there are only a few hundred real "user-buyers"...

airtaximan said...

"Still, at a breakthough price, a VLJ should make recips/tprops absolete but the market doesn't seem to be cooperating (at least at 2+MM)."

Seriously, props win for the short trips the E500 is capable of with passengers.

The idea that a pro is a BLOCKER for a purchase decision is a little silly.

YES, some folks want a jet, because its a jet. And yes, made cheap enough to own or operate, it might even make sense.

We're not there, not by a long shot.

The volume production economies of scale and forward low price offerd by EAC is failed.

The E500 is DOA. There are (even more clear today) very few buyers for this plane. Even after all the hype/marketing.

The business was high rate and low cost - and the rate is not there by a long shot... the resulting high cost and price make it "impossible".

DOA.

To save the company, even for a short while (ask "why?") will require a really tall tale. More BS than before.... and Roel has started in europe spreading the "Vernure"... but its the same old story. Dayjet is failed... the order book is weaker than we all thought... it will take a TALL tale.

Shane Price said...

Further clarity...

I really must try to get organized!

'900' is the ALL TIME total, including those orders already delivered.

300 is the number of deposits due back to those who've cancelled.

So...

'900' minus 300, less 255 (deliveries)

equals

345 remaining.

At 5 per week that was only 18 months worth of work, anyway.

No wonder they think the 'brand' is damaged in the US. There are hardly enough 'orders' left to make it worthwhile resuming volume production.

Clear?

Of course, don't forget that I should have put 'Eclipse TM' beside 'orders' 'deliveries' etc.

Shane

FreedomsJamtarts said...

As long as I have been on this blog TM has been calling the on the order book BS. The Die hards at various times said the blog was just being negative and eclipse bashing. Funny how time provides the truth.

You can bet your left testicle that when EAC say's 900 it means less than 900!

I agree with the direction of ATM's estimate, but think ATM is an optimist.

I don't like the round numbers always used in connection with Eclipse. The rest of the industry has clear requirements for booking (and dropping) an order. You always see year end order numbers for Boeing like 963 or 1056 orders.

My guess on the Eclipse order book is 2700 meant 2513

Of those 1400, were dayjet, ETRIC 300, Aviace 112,

that left 901.

But those 901 included all sorts of 1 order, plus 19 options, with three reserved line positions, and only a single 100K payment kind of nonsense for various European start ups.

For this lot, I am going to subtract 237 orders leaving 664.

They have delivered about 240 jet incompletes, leaving 424.

There are not 300 people asking for refund (round number) so I'm guessing 308.

These are all wild arse guesses based on nothing but reading this blog, but I come up with 116 orders, from people to plain stubborn or stupid to have seen the gift the last refund event offered them.

Of those 116 orders, I would guess 12 won't deliver because the buyer is insolvent.

My call is there being 104 reliable orders still in the order book today. You can see why they are thrilled that the FAA is auditing them. Any excuse to stop work about now helps maintain the threadbare illusion.

The cool thing about such a wild arse guess based on no reliable information, is that I bet I am still closer to the truth than the Eclipse board of directors plans :)

FlightCenter said...

562 Firm Orders

I've updated the Eclipse 500 Order History spreadsheet to reflect the new information that ~300 depositors have requested refunds on their deposits.

The Eclipse 500 Order History spreadsheet has kept track of the major public announcements from Eclipse regarding order and option status since 2000, when the first platinum depositors placed their orders.

It is highly consistent with the information provided by Shane today.

The latest major update to the E500 Order history spreadsheet took place in June when Vern announced that nearly 100 E500 depositors had switched their deposits to E400s.

Based on that information, the Eclipse 500 Order History spreadsheet as of June 2008, estimated that Eclipse had 800 owner flown deposits, 74 air taxi / fleet deposits and 110 air taxi / fleet options. That would be a total of 874 firm deposits. This is essentially the same number as the one provided by Eclipse sources today.

The number of E400 depositors was then updated by Eclipse to 107 on August 1st.

After taking the refund requests into account, the number of firm deposits is estimated to be 562 deposits.

To ATM's question, what is included and what is excluded from these numbers?

All Nimbus, Aviace and DayJet orders and options have been eliminated from these numbers.

Linear Air, JetSet, Our Plane and Dubai orders are still included.

ETIRC's 120 orders are still included in these numbers.

FlightCenter said...

Freedom,

I agree that a lot of folks who could afford an Eclipse when they put their original deposit down, can no longer afford one today. NASDAQ was about 4,000, the dot.com bubble hadn't burst back in 2,000 when they took most of their original orders.

However, you forgot about the people who passed away or lost their medical while waiting for their Eclipse to arrive.

Let's say the average age of an Eclipse depositor was about 50 years old.

I'm not an actuary, but a meaningful percentage of that depositor group must have passed away or had a serious health issue that caused them to lose their medical while waiting 8 years for their aircraft.

Deep Blue said...

Of course the next investment and due diligence event (which should be strictly institutional under high risk assumptions) holds all the cards on the order book issue and it's very simple: all they have to do as an investment precondition, among others, is conduct a "forensic" audit of the orders, including interviewing all order holders and their intentions and then mapping out the order book profile based on risk level (credit profile, among others).

FC: very nice summary; thank you.

All this order book confusion makes one think that the TC and PC should include "GAAP" like conformity standards on order book clarity (as it affects supplier risks, production conformity, hiring and training and other stresses to the larger regulated industry). It is odd that such a regulated industry can apparently game their production pro forma as well as the order and book-to-bill ratio etc.

Shane Price said...

I'm grateful to FlightCenter for updating his 'Order History' information.

I should remind newer readers that there are a number of useful links, available on the 'home page' of the blog. They are located on to the top left hand side, on most browsers.

Flight is also correct in his concerns for the health and well being of the Eclipse customer base. I understand that one of the aircraft awaiting delivery in ABQ will have to find a new home, as it's 'soon to be' owner sadly passed away just a few days before he was due to collect it.

Finally, I would draw your collective attention, one last time, to the difference between 'deposits' and actual people. I have the strongest possible suspicion that a large percentage of those who placed deposits for the FPJ did so for multiple aircraft.

This also works in reverse. I understand that many of the '300' deposits are held by people seeking more that one back. Whisper it, but at least one person is alleged to be seeking '$1 million' back. That could be more than 7 positions, at $150K each....

See how quickly you reduce the true number of 'customers' if you make an effort? I stand by my 'guesstimate'.

400 actual people placed deposit backed orders for just over 900 aircraft.

I could (and have been) wrong.

But I don't think so, and I know of no way to clarify the situation further.

Unless there is a stunning 'truth epidemic' at EAC.

Shane

ColdWetMackarelofReality said...

Shane, thanks for your last post on numbers, you saved me a bunch of typing as I was coming up, as I always have, with less than 400 remaining aircraft to be delivered.

I wonder if the layoffs have touched the INCOMPETENT sales and marketing group?

How else do you describe a team that has basically failed to add any new orders for the better part of 2 or 3 years now?

If the company needed 600-700 per year for breakeven, the order book would NEED to be about 7,000 sales backed by deposits to cover the ever implausible math Vern used to use.

Even if the new, new, new, new pricing reflects break even at a more realistic 300 per year, they need to find another 2500 orders, backed with deposits, just to cover the sales that SOULD HAVE ALREADY BEEN MADE.

No company can survive for long if it is not even approaching the sales necessary for break-even - ALL ELSE IS MEANIGLESS.

TBMs_R_Us said...

Shane,

The EAC staffer said "300 refund requests". Wonder if some of the "requests" are for multiple aircraft, just like the orders. If so, the outstanding unit orders are even lower.

Deep Blue said...

CWMR: cld u pls explain your math; thanks;

Black Tulip said...

FlightCenter,

“…but a meaningful percentage of that depositor group must have passed away or had a serious health issue…”

A long time ago in a galaxy far away we started a list of 101 Uses for an Eclipse. I believe we got up to number 23, the best being “a chock for my Gee Five.” Perhaps you could add number 24 – some depositors may wish to be interred in their Eclipse.

airtaximan said...

Shane's 345 remaining orders includes fleet orders from Linear Air, JetSet, Our Plane and Dubai orders plus the ETIRC's 120 orders (I was wrong, I though they had more) and others I am sure...

This seems like the true state of affairs over there.

Without fleet orders, there are probably only around 145 planes, and some of these are slated to go to Europe - with no EASA.

Pretty tough to swalow this, especially sine Vern and CO KNEW all along how shabby the order book was, and STILL misled everyone. Pieper, still claimingin a huge backlog just this past week in Europe.

Karen... Karen... I smell a story.
-

FlightCenter said...

Ok, at the risk of beating a dead horse... 317

862 total orders backed by deposits
300 requested refunds
245 E500 aircraft already delivered

Those numbers lead to the conclusion that there are 317 remaining orders backed by deposits. This includes the orders from Linear Air, JetSet, Our Plane, Dubai, ETIRC and individual owners.

I would bet my mortgage payment that the 300 number of refund requests provided by Eclipse sources to Shane includes refund requests from air taxi / fleet depositors.

You would probably be double dipping if you subtracted the air taxi/fleet orders from the 317 number of remaining orders.

If Eclipse can get back to 4/week, then they have a little over 18 months of backlog.

If Eclipse stays at 1/week production rate, then they have a little over 6 years of backlog.

Finally, I have personal knowledge of at least one individual that I met at Oshkosh 2000 who had placed platinum deposits on 5 aircraft.

I ran into him again couple years ago and at that time he was in the process of selling all of his positions at a substantial premium to his guaranteed purchase price.

Shane Price said...

ATman, TBMS,

Again, I have to be careful. I tried to be very specific in checking numbers. In all cases, I've talked about 'deposit backed orders'.

So, '900' were actual orders with deposits. I expect (but don't know at this stage) that this excludes 'fleet' orders of the 'DayJet' type. Vern clearly cut Ed a deal to provide a boost to both companies. This is now transparent even to the Die Hards. It would be reasonable to extend the same 'terms' to the other fleet orders, or the vast majority of them.

So, my 'number' of 400 actual people who paid deposits on (probably) multiple positions could include a small number of these start up's. But not very many deposits, so I refuse to count them as orders.

No matter what EAC say.

Back to those requesting refunds. Same terms apply. The refund is of the deposit so if one person has 5 positions, that's 5 refunds required.

How many actual PEOPLE requested refunds is hard. Let's all agree, for the sake of discussion, that my '400' number stacks up.

Divide 900 by 400 and you get 2.25 as the 'average' of positions per customer.

Divide 300 by this average and you get...

133.33, recurring. Let's say 135, to be simple.

Makes sense to me, given that I've had contact with just over 10% of that number, directly.

Put it another way, my guess is that about one third of the customers chose to walk after the price increase.

Taking a third of the orders with them...

Kinda adds up, in a neat way, eh?

This is of course speculation. I've taken a couple of sources to build the 900 and 300 numbers. Then I've used several sources to satisfy myself that there are many people who've placed multiple deposits, thinking they were going to make loads of money. Finally, I've decided that 900 deposits represented (based on gut feel) 400 customers.

I don't know this to be a fact. But if anyone looks back at the history of the blog, or has access to the various other discussions going on about EAC, it's reasonable to take a stab at there being less customers than deposits. As an example, I have two sources telling me that there is one individual out there with 7 positions. Another is of our South AfriKen friend, who has one FPJ and another position, currently for sale.

Others will come up with alternatives, and someone will cry foul. There might even be that 'truth epidemic' at EAC.

I look forward to the day when we call all look back and say 'you got that totally wrong Shane, there were xxx deposits and yyy refunds'.

Don't expect that will be anytime soon, though.

What do you think?

Shane

baron95 said...

Deep Blue said...
Question: under what conditions might it be possible to realize the original volumes EAC predicted? Is it strictly price? If the E500 sold for 800K, would they be flying out the door?


No it is not just price. To have ANY chance to realize the original volumes with the EA500, you'd need (in addition to your premise of the $800K price):

1 - A fully functional airplane with a fuly itegrated G1000/GFC700/SVS. And I do mean G-1000, not G-1000 equivalents - that is the standard light GA avionics package and it is important for #4 below.

2 - Successful EASA and other foreign certifications in Brazil, Mexico, India, China, etc...

3 - Top-notch training, support, sales, production.

4 - Quick upgrade of the in-the-field fleet (to bring their prices up, and get them to stop competing with new sales).

Since an $800K price is not achievable, you'd need to have a two plane startegy E400 at $1.4M, E500 at $2.2M, both fully functioning with the above avionics.

Even with that, the maximum they'd get would be 350 or so E400s and 150 or so E500/year. That is about 1/2 the production rate.

But in the real world, the window is shut for them.

I can see the story playing all over again....Eclipse raises another $500M to get the E400 in production, Cessna comes out of the gate later and gets the Pony-505 (a smal mustung with 1/2 the engines, get it?) out the door first and kills the E400 like they killed the E500.

And don't think Cessna won't go there. They know they have a *HUGE* hole in their product line, from the $600K C400 to the $3M C510.

airtaximan said...

FC,

"I would bet my mortgage payment that the 300 number of refund requests provided by Eclipse sources to Shane includes refund requests from air taxi / fleet depositors."

FC, I don't think Etrick has any real deposit money down, really, nor the other fleey order companies, really..

So, how can they be counted in the refund category? There's not a lot to refund...

I know of one "order" for a lot of planes, counted at one point, but almost no money at all exchanged hands.

The level of deception regarding the orders is astronomical... greater then 50% given the Dayjet deposit/orders/options/floptions reality - I suspect, this was not unique.

They pumped the orderbook any possible way they could.

I think they pretty much ran out of real deliverable orders, except for 100 or so, and shut down production for FEAR of having white tails forever.

I almost want to believe they could have cranked out more planes, BUT WHY?

They lack REAL customers.

this is the point.

Its also the ony real reason to slow down... oterwise, take the cash on all fronts... deposits and final payments upon delivery.

If they even have 1 years worth of deliverable orders, they should be cranking them out.

They undoubtedly lack these orders.

airtaximan said...

caravan = $1.8 - $2.2M

just to be clear on the hole in Cessna's line....

baron95 said...

I think Eclipse has somewhere in the neighborhood of 300 undelivered orders backed up by deposits. Of those, 200+ should already have posted the 60% payment (either via 6-month progress payment calls or the december save-the-company special) - the average value of those planes is $1.5M.

So the $$$ value of the Eclipse firm backlog is approximately 200x0.4*1.5M + 100x0.9*1.5M, for a total of $195M.

300 refunds of $150K is $45M. Reported owned to suppliers is $60M. Estimate to retrofit fleet is $40M for a total of $145M.

That means the net revenue potential of the backlog is $50M.

Assuming the cost to Eclipse to produce each plane is $2.5M, fulfilling that backlog of 300 planes will cost $750M.

That means that Eclipse needs to spend $750M to collect $50M in net revenues. That, being very generous, requires a net infusion of cash of $700M.

Add to that the R&D and certificaiton effort to get Avio/400, EASA, etc, plus E400 certificaiton and we are easily at a net cash need of $1B.

Get it? $1B net cash infusion.

If UBS is saying that they need ONLY $500M (acording to Pieper that is their losses before breaking even), they are still low balling investors.

READE IT INVESTORS - Wnat to get this company to break even without BK? It will take $1B.

Take it to BK, and the best you can hope for is to wipe the vendor plus IOUs plus dopositor refunds, so you only clean $150M.

So there you have it. $850M with a BK trip and $1B without it. Take your pick.

Either way, $100M, $200M, $300M will do NO GOOD.

BricklinNG said...

B95

Even if your numbers are more extreme than actuality, one point does not change. Investors look for ROI. The possible R (if there is one) does not change one iota if a depositor is paid back or if the old fleet is revamped. Since a trip through bankruptcy clears these items away, any rational investor would hold back until the BK trip had been made. This lowers the I, thus increases the ROI. Who would invest money to pay back a depositor or honor a promise to fix an existing airplane if it were not necessary to do so? As it currently stands, those expenses are associated with zero revenue. After a bankruptcy the new EAC could charge for the revamps. So more chance for R and hence a larger ROI.

As you suggest, the numbers are probably sufficiently bad that it is all a lost cause anyway, but if there is any chance at all for UBS to find money it will have to be on the basis that a new investor would be free from any of those past obligations. Don't you think?

baron95 said...

Brickling said ... if there is any chance at all for UBS to find money it will have to be on the basis that a new investor would be free from any of those past obligations. Don't you think?


Eclipse comes way short than even the most speculative investment I'd ever made, that I can't even think of a scenario under which I could see a knowledgeable individual/firm investing.

As I said before, Eclipse (pst BK) is probably only viable as a company to service the existing fleet at extorsionist prices.

gadfly said...
This comment has been removed by the author.
gadfly said...

There is a “bankruptcy” not measured in dollars . . . with Eclipse it slipped by many years ago. It is not fixed by the infusion of dollars . . . nor, for that matter, by clever management.

It is a bankruptcy of ethics. And is almost always fatal.

gadfly

flyger said...

airtaximan said...

I almost want to believe they could have cranked out more planes, BUT WHY?

They lack REAL customers.


Well, 60% of the Mustang order book is overseas, assume that Eclipse is similar, so 250 domestic airplanes means 375 overseas orders that can't be filled for lack of EASA certification. That's a total order book of 625 planes that are either delivered or stuck.

With the air taxi guys going away, the refunds being requested, the EASA hold up, there might not be very many planes left to build for the US any more.

baron95 said...

Question for the blog...

Lets say you are a depositor who has put up the 60% payment on a $1.5M order. Eclipse calls, your plane is ready for pickup.

Do you:
a) Wire the remaining $600K (40%), get the metal.

b) Walk away from your $900K (60%).

I'd really like to know what you would do.

baron95 said...

Then I'll tell you what I would do ;)

FreedomsJamtarts said...

B95,

1/ For Anyone who had "deposited" money with Eclipse, and failed to take advantage of the last refund, 900K is the least of their worries as they are clinically insane!

Your question make no sense. The only persons in that position are so far detached from reality that the decision the rational blogger would make is irrelevant.

2/ If they did take advantage of the last refund event, they are now waiting for payment which will never come. Anyone with 1 1/2 buck to flutter on a little plane toy has a lawyer. Where are the 300 law suits? Since Eclipse have lost games of chicken repeatedly (Hampson law suit, Blooger Supeana etc), if I was a refund candidate, I would be teaming up with two other creditors and a lawyer, and applying for involuntary BK as a lever to force them to give my deposit back.

FreedomsJamtarts said...

B95,

I like your summary of $1 000 000 000 to fund Eclipse to break even now vrs $850 000 000 after BK.

Not like this project could ever break even.

As I said before, Eclipse (pst BK) is probably only viable as a company to service the existing fleet at extorsionist prices.

In comparison with other orphan A/C where this business model worked, the other types were largely well sorted, complete, reliable A/C, whereas the level of certification work due to the level of integration of the Eclipse, combined with the lack of basic completion of the existing product, has always lead me to conclude that their is no stable service business model.

Maybe for a year or five, but the things are not flying now with current production. To support these things medium term, you need an organization able to certify software changes to high cert levels, electronic hardware changes to various equipment from different vendors, do fatigue and damage tolerance analysis on a poorly understood, experimental technology like a stir fried welded pressure vessel.

The closest thing to that extortionist business model is the cooperation which has served the war bird scene well. But they are A/C with clear historic and sentimental value, are simple in the sense that the parts they need require manufacture but not certification, and the A/C were completed designs.

Apart from a few hard-core, die hards who will keep them going through cannibalization much like WWII war birds, in ten years the only Eclipse 500 you are going see will be in museums, as gate guards, or in kids playgrounds.

Shane Price said...

Freedom,

Maybe, just maybe, someone is taking your advice. This from the ABQ Journal yesterday.

http://www.abqjournal.com/biz/30105129biz08-30-08.htm

Saturday, August 30, 2008

Company Sues Eclipse for Refund

By Richard Metcalf
Journal Staff Writer
The British buyer of an Eclipse 500 has filed a lawsuit in New Mexico to get a refund of its $180,000 deposit, plus costs, after cancelling the order to buy the jet.
The lawsuit appears to be the first of its kind against Albuquerque-based Eclipse Aviation, said Santa Fe lawyer Robert Sutphin, who filed the claim on behalf of London-based Ice Blue Air Ltd.
'It's a straightforward lawsuit about a voided purchase agreement and a buyer saying, 'I want my money back,'' he said.
Ice Blue signed up to buy a 500 jet in July 2006 at a price of $1,520,000. The company decided to cancel the purchase this past June after Eclipse raised the plane's price to $2.15 million, according to the lawsuit. The purchase agreement allows for cancellation and a full refund in the event of a price hike, the lawsuit says.
The $180,000 refund was due Aug. 1, but failed to come. On Aug. 5, Sutphin filed the lawsuit in U.S. District Court in Albuquerque.
In a terse response to the lawsuit filed Wednesday by Albuquerque lawyer David Thuma, Eclipse Aviation denies the purchase agreement entitles Air Blue to a refund.
'Eclipse ... denies the allegations to the extent inconsistent with the agreement,' the response says.
Eclipse recently said it had 2,300 back orders for its jet, the vast majority of which involve purchases made before the recent price hike to $2.15 million. Most of those buyers would have grounds to cancel their order and get a refund, Sutphin said.
'I've received several inquiries from other buyers, both here and abroad, since word got out on Ice Blue's claim,' he said.
A Fort Wayne, Ind.-based company recently filed a lawsuit against Eclipse seeking a refund of its $150,000 deposit, but the circumstances are different. Geiger Excavating filed its lawsuit in Northern Indiana Federal District Court over a billing dispute for a plane scheduled for delivery in October.
A week ago, Eclipse announced the layoff of 650 workers and a slowdown in production of its light jet. The company, which still has 1,100 employees, said production would pick back up in 2009.
Before the layoffs, the company said it was building about three-quarters of a jet each day.


Hmmm....

Looks like the beginnings of an avalanche to me. Anyone not already in the queue is pretty much bound to join it now, as they risk losing out big time if they don't.

So Roel has a real 'Hobson's Choice' type of decision. Pay off the depositors, from cash he simply does not have, or give UBS permission to flog the company for cents on the dollar.

What would you do?

Shane

FreedomsJamtarts said...

I don't understand all those who qualified for a refund, requested a refund, didn't get a refund and are not sueing.

At the moment they have a valid contract with a solvent company, who has publicly stated they are refusing to honor the contract (instead saying they'll pay back refunds only once the next round of endless financing is complete, and will give 6% in the meantime).

Whether these people will ever see a dime...time will tell, but but suing while Eclipse is still solvent, at the least first few have a chance.

airtaximan said...

Also, I think there's a period of time where all payments to anyone can be considered "preferential" and recalled, before BK. I think its 3 months, but not sure.

In any case, demand for payment should be made, if you think EAC is going to crater, and you want to be in line.

airtaximan said...

"300 refunds of $150K is $45M"

who says some of the refunds are not intial plus 60% deposits?

IIRC there were at least 400 progress payments called upon... actually I think it was more....

airtaximan said...

Baron, I like you reasoning for how much money it will take...

But, they are lowballing the plane cost, for sure...

Also, they are lowballing the refunds.. although, I think, if they came up with $500M, and asked the refund guys to back off and take planes, as a condition to financing... they would probably do it.

Finally, there is no real sizable market for the plane, and 1 of every 2 deliveries will find its way on Controller at a discount.

This INSANITY reflects the clients, after all this time, somehow believe they can market and sell e500s better than EAC themselves after 12 years an $XXX,XXX,XXX.XX in marketsing and sales dollars.

There is no business case for the plane - even IF you can make some math work today, there's no ROI... no real market beyond a few hundred fliers and many speculators... and failed air taxi models...its DOA.

Shane Price said...

Some other numbers to chew on.

A few sources offered up this little snippet. At the previous 'rate' of about .75/aircraft per day and including payroll, parts costs and 'ordinary' expenses, the FPJ's were costing the company....

$2.5 million each.

Again, taking the average selling price towards the end, but excluding any provisions was...

$1.7 million, each.

That works out at tidy loss of $800,000 every time they shipped one to a customer.

What's not is the cost price was any provision for debt repayment, warranty costs, upgrades or sundry other items.

No wonder they decided to cut their losses and reduce 'production' to one aircraft per week.

If I was them I'd go to one per month....

Shane

Deep Blue said...

B95's question:

I would demand delivery of my aircraft at net 60% (since a refund is unlikely and even if made could be a pref payment given tech. insolvency) with no further payment and additionally demand a second plane at price=$0 (sitting on the ramp at ABQ) as compensation for delays, non-conformity to spec and to settle a potential lawsuit against the company and its principals. Then I would donate the two aircaft, net the 4 engines which I would sell back to PWC, to an A&P training school/university like ERAU, Perdue, Southern Illinois, where they could do an airframe tear down and forensic investigation as training. As there is a qustion as to airframe life, an involuntary tear down may have to occur anyway. The school could sell the parts and retain the proceeds for an A&P scholarship. I would then hand over the net financial transaction and donation facts to my accountant for tax treatment.

flyger said...

Before the layoffs, the company said it was building about three-quarters of a jet each day.

Well there's the problem right there. If they would take a little longer and build the whole jet, I bet things would be better.

airtaximan said...

from very, very far away, without any direct experience/knowledge from EAC, I always said I thought it was costing them more than $3M per plane, all in...

Once again, DOA.

I do not believe any amount of assembly time improvement helps this lost cause of an excuse for an airplane business. Also, the BK erasing the debt service concept makes no appreciable dent in this fiasco - it is not a business, no one can make money building this plane and selling it for anywhere near the price it was or even can be sold for. It may have been a nice "story" for IPO... but, I guess the jig is up.

twinpilot said...

Baron95,
I know a depositor who has his 60% in and I am sure he would love to pay the rest of the money if his jet were ready for delivery. It would probably be the right decision since I think he could put it on the market and probably sell it for say 1.1 million and then only lose 400 of his 900 already deposited. I think he has already lost his 900K, so the real question for him is: is the jet worth 600K to him and does he think he can sell it to someone for more than that.

airtaximan said...

twin,

Is the plane really worth $1.x million?

Seriosu question, not assuming any value here.

If anyone has some examples that can provide insght into a potential value - all things considered, such as:

1) the business case is so whacky that survival chances of this company is pretty much "nil"

2) the planes are unfinished, and likely require $500,000 just to finish them

3) the plane has shown very limited demand from end-user customers... after 12 years and $xxx,xxx,xxx.00 spent on hype and marketing, only around 400 real clients showed up. This is worldwide, award winning ads, billboards, busboards, huge booths and presence at the aviation shows, a ton of press, mostly very positive FOR TWELVE YEARS.

4) supportability of the plan is definately going to be a problem

5) there are issues regarding the avionics which may have to be redesigned and replaced

6)FSW may have long term fatigue and corrosion issues

So, all things considered, what is the real value?

Are any e500 selling in the aftermarket? There are 80 Eclipse listings on controller alone (indicative, not definative)...

I am not sure there's a value there, but I am probably not 100% clear n this.

Any takers? What's the vlaue of an e500, today, really?

julius said...

B95:

without type rating: no good money after bad; no good times for FPJ. Yes, it was an expensive nice experience... or so...

With type rating: If is't my last money - perhaps some 120 day VFR hours in the air at 5000$ each - yes a crazy view on life as FPJ is not really safe! There is no chance for FIKI, moving map etc. for free.
At the end - good idea - donation to a university (if they accept) or something else.

julius

WhyTech said...

"What's the vlaue of an e500, today, really?"

Lower limit could be the value of the engines, and the value of the hull as scrap or parts. Maybe $500,000? But, then, if the engines and parts can be used only on the EA500, maybe even less.

twinpilot said...
This comment has been removed by the author.
twinpilot said...

I am not saying the 500 is worth 1.1 million, I am just saying you could probably sell it for that. At this point it just has to be worth more than 600K plus the hassle of selling it for him to take delivery. Most of the Eclipse buyers don't have the insight into aviation that the original Eclipse Aviation Critic and now NG contributors have. They don't read this blog and if they did, they'd just discount the information they read here. I know a few Eclipse owners and they are very positive people, and continue to say positive things about the airplane. They expected the company would conduct itself in a professional manner, and deliver a quality product. They also thought that if it was FAA approved that it had to be just fine. With Gates' money behind it financing wasn't a problem etc. In my opinion, there are still some very positive people out there, and just enough positive talk about the airplane that would make a sale at a greatly reduced price possible. They think with more than a billion "invested" that someone will put in more money and the company will pull out of any financial problems they have. Maybe they're right. Given my beliefs about the product and the company it wouldn't be a very moral thing to do to sell it to a greater fool, but if the seller could recover 500K of lost money it may go a long way in helping him justify the act. If he is going down that road my advice would be to not get greedy trying to get all of your money back. Just take the 250 to 500 hit and blow it out for what ever you can get. Take the first real offer.

airtaximan said...

twin,

Iwas not hammering you, you just brought up a good point and a smart way to rationalize things.

I am curious about opinions on the "value" and ability to extract a price out of a buyer...


thanks

TBMs_R_Us said...
This comment has been removed by the author.
TBMs_R_Us said...

The reality distortion field created by VR is quite impressive, and it is very much still alive and kicking. The owners are captive to a closed customer website, and don't venture out into the wild very often, as if it's not safe to leave the distortion field. The idea that Gates invested is part of the distortion field, although anyone who's met Michael Larson can tell you he's no fool, and he for one wouldn't be fooled by the distortion field (don't look for a re-up from that direction).

Aviation purchases are not generally rational, especially for us owner/operator types. These decisions are made for a complex set of reasons, but being a smart investment usually isn't high on the list. Spending thousands of dollars for a 500 mile trip that one could buy from Southwest Airlines for $100 is pretty normal, and certainly not rational economically.

At this point, thankfully, the safety record of the E500 is OK, nothing to cause great alarm if you're inside the distortion field. After all, Vern himself said the NTSB was either exaggerating or outright lying when they questioned the safety of the aircraft after the Midway incident, and all was set to right by the AD. Wasn't it????

It's as if there are two realities: The one this blog writes about and the one inside the distortion field. We don't want to go into their reality, and vice versa. No one has really broken ranks yet on Controller. It will be amazing when someone does list an Eclipse for a realistic price, instead of the current wishful thinking prices.

WhyTech said...

"No one has really broken ranks yet on Controller. "

Hard to tell. Anyone who has bought and sold an airplane knows that there is the "asking price" and the real price. Savvy buyers disregard the asking price and make their own price offer at what they are willing to pay.

baron95 said...

AT said ... who says some of the refunds are not intial plus 60% deposits?

Eclipse said that the price increases would not affect ANY position holders that had already placed the 60% progress payment.

baron95 said...

AT said ... I think, if they came up with $500M, and asked the refund guys to back off and take planes, as a condition to financing... they would probably do it.


If Eclipse came up with $500M, they'd not want the refund seekers back. They'd send them back to the end of the like at $2.15M instead of delivering the plane for $1.5M average of the current positions.

airtaximan said...

Baron:

"Eclipse said that the price increases would not affect ANY position holders that had already placed the 60% progress payment."

OK, what about the infinite delay recently announced?

What about the infinite delay on mods and fixes?

I think everyone can ask for a deposit back... BTW, I think there were not even 300 depositors left who did not place the 60% payment...

900 total
500 or so required to place 60% (IIRC)
245 delivered

HUH?

airtaximan said...

Baron, I suspect you are correct!!! No way EAC needs to lose $1M per plane on 300 deliveries, so they would pray these guys would be gone - I keep forgetting how whacko this plan is.

OK, so who will buy the planes at a profit? The number is more like $3M according to recent reports.

I don't think anyone bought one for even $2.15... how are they EVER going to sell this contraption at a profit?

baron95 said...
This comment has been removed by the author.
baron95 said...

I think the market price for the EA500 at this time has NO BOTTOM.

I don't think even the engines are that valuable since they are not in use by any other type and no EA500 is going to need replacement engines for years to come (if at all if the fleet is grounded). The core may have some commonality with the PWC615/617, but those engines (flying in the Mustang and soon Phenom) will not need replacement cores for years to come and PWC can't put used cores on new engines. Again, no obvious economic value.

Seling it for scrap aluminum is not that valuable either. Scrappers like high aluminum to other materials ratios. If you fly a 707 or KC135 to the desert, there is a lot of easy to extract big hunks of aluminum. You take a little EA500 in there and you need to spend a lot of time unstuffing the bird, removing/disposing of the fluids/hazzards, for half the aluminum in a 707 ruder.

Selling them as drones does not work anymore. With all the cheap UAVs, target drones from old airplanes are no longer cost effective.

There is really no supporting floor for a EA500 in the maret today, let alone for a position to be delivered in the future.

You could very easily list your early 2009 position on Eclipse for your deposits + $100K and get no takers. You can list it for your deposits +$0 and still get no takers.

You can list it for 50% of your deposits (to minimize your losses) and still have no takers.

There is really no floor - this product can not be priced as is in the market.

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

B95,

You are so right. There is no floor on the pricing of an E500.

This reminds me of the housing market in our area. For nearly a year after the housing bubble burst at the end of 2005, market prices didn't really drop. Nothing sold, either. What we had was a Mexican standoff - sellers believing that their homes were still worth the ridiculous numbers they'd seen in '05, or more, and buyers just not buying anything. The fact is, the market prices had already dropped. Just because Sellers weren't willing to acknowledge that fact, didn't mean it wasn't so. It wasn't until prices dropped by about 20% or more that homes started to sell again, but that started price-cutting as the only viable strategy for selling your home, and that's where we are today. He who is willing to lose the most, gets to sell.

I see the same thing happening in the E500 market. Everyone trying to get top dollar, & nothing moving. The first one to lower their price gets to sell their plane. The next one to sell will have to go even lower, and so on. A few sales from now, Eclipse position may be worthless, with position holders just having to walk from their deposits.

Owners of actual aircraft may find themselves in a "short sale" position, owing more to the bank than the plane is worth.

Except for the diehards who are too far gone to turn back, who is there now that would actually still consider buying an Eclipse given all the negative information surrounding the plane and the company?

ColdWetMackarelofReality said...

9Z,

That is my point from earlier, but it is not about who would buy one now at $2.15M - it is about all the folks who did NOT buy them at $1.8M, or $1.5M, or $1.25M.

They have not sold any planes for years now. The order book has been stagnant, and worse yet, 60% of the stagnant orderbook is also vapor - it does not exist.

This is the dirty little, poorly kept secret - all of the EA-500's that were going to be bought by average joe's dreaming of a cheap jet have already been bought.

Even today, the claimed orderbook is the same as it has been - for years - even after DayJet has obviously failed Eclipse still clings to the 1400 floptions, 60% of the claimed orders.

Eclipse is not selling airplanes now, and they have not been selling airplanes for years.

Selling 20 or 30 planes per year when you need to deliver 600 or 700 per year can only be called FAILURE.

eclipse_deep_throat said...

Once again... I have to waive my little tampon in protest...

Shane, I think it is a mistake to say that each plane cost $2.5 million. In other words, I'm saying that it is a mistake to use Cost Accounting methods in the airplane biz. When I saw my coworkers scrapping $800k in windows from Nordam, how is that allocated to each plane in the fleet -- each plane delivered and NOT YET delivered? Someone has to pay for that cost whether they are willing or unwilling, BK or no BK.

The second mistake that I think we are all guilty in making is in assuming that EAC is what economists call a "profit-maximizing" firm. It clearly isn't since it hasn't made ANY profits, real or on paper. Do we ever think EAC will be in a position to pay its investors a dividend? Even when I cap costs at $1.7mil per plane, I can't show it earning a profit until sn 505. Now I think that I am also being generous in only requiring the planes to pay for 25% of the legacy/RnD costs, hoping the IPO will cover the other 75% PLUS a reasonable profit for all the risk investors put up with. My assumptions are further muddied in thinking that other, later investors will be equally enthralled with the idea of owning an airplane company. We have to think about 2 different kinds of 'consumers' here: who wants to show off to their golf-course friends that they OWN a jet (the 2008 equivalent of a Dodge Viper) ...and who wants to show off to their circle of friends that they own STOCK in a company that makes jets?! Perhaps that was Vern's genius in trying to appeal to both of those groups.

Anyway, I'm not even sure what to call EAC at this point; perhaps Vern was trying to use a Microsoft biz model. What I am sure of is that over a 10+ year period we have had some semi-rational investors, managers, board of director members, aviation magazines, and high-profile celibrity customers (read: John Travolta, Ed Iacobucci) all agree with the notion that aviation travel COULD be 'delivered' to the masses. And perhaps all these good-intentioned people just don't want to admit they were/are wrong. Bounded Rationality: when you think you are right, you stop looking for new information that proves you are wrong.

TBMS_r_us' recent post was very interesting in terms of a more rational person just spending $100 to fly on Southwest. I used to argue (usually, just with myself, LOL) that it was equally IRRATIONAL for a corporation to supply the market with mini-vans because I figured at some point, American families will start to become smaller, etc. As the automotive market is now, the irrational exeuberance really only manifested with **people who had the money to spend** choosing to buy expensive gas-hog trucks. And I find it equalliy silly when our local Zangara Dodge dealer brags about making national headlines when he started selling trucks last month at 50% off MSRP. What does that tell you about the real value of trucks??! It's only worth the $50k when you have a buyer willing to pay it.

In order to clear the glut of (inferior) inventory, will EAC be next in offering older EA500's at 50% off MSRP of $2.15 million? Like others have said, we don't yet know the bottom of this market

So, think about what it means when 10 years later when the market changes it preferences! The EA500 and EA400 are truly just new toys for the semi-rich. Like buying a new Dodge Viper (I have no clue why I'm using Dodge so much in this example, ha!). But the other conundrum is the **people who had the money** part: they made a choice to put down a deposit. Even with the option to move to the EA400, we are not seeing a mass of 1500+ orders for them. Anyone think that a DayJet biz model could work using ONLY the single-jet plane to ferry 3 passengers around???

Eclipse has avoided these issues for so long. Something is certainly going to snap soon. Most likely it will be customers not willing to pay $2.15 million for an incomplete plane, customers who are able and willing to WALK AWAY from the sunk costs of their deposit. LOL, then it is just like the housing market: EAC has a plane with a $2.15mil list price that no one wants to buy. Once customers change there minds, inventory will pile up on the Abq ramp. Then investors will see the banks downgrade the value of the EA500 inventory just like publically-traded housing builders go thru. And you have the Perfect Storm converge because all these values assumed that customers wouldn't change their minds. If EAC is still borrowing money from the Bank of NY on its inventory, that might change soon if/when the bank(s) decide to loan EAC only 10-20% of its MSRP "value." Then one day in late October we hear that EAC didn't make payroll...

I never bought a house on my own until last year ...but man, was I tempted at times to walk away from the $500 deposit on a $165k house. Similar feelings must be going thru the minds of position holders/owner-operators, LOL, even the one's that don't plan on living in their plane!! ;-)

E.D.T.

eclipse_deep_throat said...

um...mebbe i better clarify my first point:

if you could itemize a scrap cost on the invoice each owner gets, i'm sure that each one would flip out if told they had to cover X dollars of scrap allocated to each plane, IN ADDIDITION to the price they agreed to pay. therefore, most of that cost has to remain at a higher level, as regular operating overhead that someone else will need to pay later. this is what i mean regarding how cost accounting doesn't work here, since so many of these costs can't be passed on to all/each customers.

E.D.T

Shane Price said...

Another source offers some further 'numbers'

1. Approx 250 people have requested about 270 refunds, with more coming in. Seems like the 'personal purchasers' are getting out, along with the speculators. Some of this total must become available to other companies, if they ever get a refund.

2. So far in 2008, EAC have had zero orders for the FPJ. If this is true, it's pretty scary for potential investors, don't you think?

3. Since the 'official' announcement of the ConJet (sorry, E400) at Oshkosh, a total of 100 deposits have been placed. This includes those who have chosen to transfer from the FPJ.

4. There are about 500 deposit backed 'positions' still left for the FPJ, which is pretty substantial. However, the lack of new orders makes a production 'restart' to high volume unlikely in my opinion.

As will all such info, we must be careful. Only those with access to the bank accounts at EAC know the real state of affairs.

One thing is clear. My '400 customers' guess had better be badly wrong, or EAC are in much worse trouble than anyone thought....

Shane

BricklinNG said...

Shane said, "500 deposit-backed positions left"

So these must be a combination of the 60%ers and the 150Kers, right? The former group of about 250 face the B95 question when their number comes up--"Is it worthwhile so send in $500K and get the jet or should I just walk away (selling the position no longer being an option)?" . The latter group get doesn't get to this question until they first contemplate sending in about $800K when their 6 month delivery call is made.

For the B95 question, I would probably take the hardware saying that previous amounts paid are sunk costs and I am buying a jet for $500K and hoping that one way or another I can keep flying it for years. This would be a calculated risk. If B95 or others think this is flawed judgment based on a really bleak outlook for the jet and EAC, I would ask what price would you pay today to get delivery of one of these jets? If not $500K would you go $300K, $50K or what?

For the second group, I can not imagine that any one of them would respond to a 60% call. Who would send almost $1 million to EAC today? So I do not think that these orders can be counted as real backlog. Maybe these folks realized that they would never get deposits returned so they elected to stay in and see what happens, hoping that some kind of sound footing would be found.

airtaximan said...

"a total of 100 deposits have been placed. This includes those who have chosen to transfer from the FPJ"

IIRC, Vern claimed this prior to opening up the "oportunity" beyond the e500 position-holders.

This would mean, not one new customer in 2008, if you are correct.

I wonder if there were any in 2007, either? Or 2006?

You get my point.

FlightCenter said...

From a recent Eclipse Newsletter –

Eclipse launched a 110-aircraft upgrade program in January 2008…

In the population of in-service aircraft, 38 require the performance modifications, including extended range tip tanks (ETT) and the Avio NG retrofit. The other 72 aircraft require only the Avio NG upgrade.

As of August 15th, we have completed 7 of 37 performance and 23 of 72 Avio NG modifications.


Eight months into an upgrade program that was planned to be complete in 12 months, Eclipse has completed upgrades of only 30 aircraft or 27% of their goal.

80 aircraft out of 110 are waiting for Eclipse to close a new funding round before they will receive their performance and/or Avio NG upgrades.

In addition, all 245 aircraft delivered so far are waiting for FIKI which is dependent on Eclipse receiving Avio NG 1.5 certification.

It is interesting to hear from Eclipse that 110 "in-service aircraft" require aero and NG modifications. Eclipse announced with much fanfare that they had cut Avio NG into production on serial #105. The newsletter implies that serial #124 will require an Avio NG upgrade.

Yet another reminder that the real truth of the situation does not typically appear in Eclipse press releases.

We know that N333MY (serial #103) is no longer among the "in-service aircraft" that will be requiring upgrades. Are there other aircraft that are no longer "in-service"?

Niner Zulu said...

There is actually one or more scenarios under which I would purchase an E500 and pay up to $1.9m or so.

It would have to go something like this:

A. Eclipse gets bought out by someone like Cessna, Piper, Raytheon, etc. who start building it under their banner
B. The panel gets ripped out and replaced by something else. Preferably the G1000 with SVS, FMS etc.
C. the overall quality is brought up to the same standard as the other aircraft built by the new owners
D. I'd like to see the tip tanks go bye-bye in favor of a redesigned wing, but this is not mandatory

So, I am not nor have I ever been an "Eclipse hater" as some of the diehards have suggested. The reason I won't buy an E500 because it is built by a company that I don't trust to build a safe and reliable product, one that I wouldn't entrust my life and the lives of my family to.

That makes the value of the current Eclipse, to me anyway, worth no more than it's value as scrap.

Black Tulip said...

Niner Zulu,

In the case of Cessna its called a Mustang. It weighs 45% more and is therefore far more capable. It has the panel you want, all the required certifications and is well supported. The Mustang costs more than your $1.9 million target but, "The bitter taste of poor quality lingers long after the sweetness of low price."

baron95 said...

Briklinng said .. The former group of about 250 face the B95 question when their number comes up--"Is it worthwhile so send in $500K and get the jet or should I just walk away (selling the position no longer being an option)?"

The 150K-ers are also in a tough position when Eclipse comes calling on them - they need to fork over to the 60% level for an airplane that (acording to Eclipse's and only Eclipse's projections) is to be delivered 6 months down the road.

With all these cancelations and conversions to the E400, plus people just walking away from the delivery or refusing to take delivery, I'm sure Eclipse will start knocking on more doors looking for 60%.

CLARIFICATION: Can someone (Shane ?) calrify if the 60% progress payment, takes the position holder to a total of 60% all in or is it another 60% on top of the $150/10% deposit, taking the position hoder to 70% all in. Thanks.

baron95 said...

Shane said ... There are about 500 deposit backed 'positions' still left for the FPJ,

Shane, could you clarify? Are the 270 that asked for refunds included in this "500" total?

If so, that means that only 230 planes total are still left in the order book to be delivered by Eclipse.

baron95 said...
This comment has been removed by the author.
baron95 said...

So here is what I'd do if I were a 60%-er ($900K all in) and got a call from Eclipse scheduling my delivery within 30 days requiring an extra $500K payment.

I'd list the position on eBay "EA500 for delivery in 30 days, SNxxxx, all current mods, training slot, etc..." with a reserve price of $900K (my walk out of jail break even), and a buy it now price of $1.0M and a auction ending in 1 week.

If I had no offers in 1 week, I'd lower both reserve and buy it now by $100K. Same for week 3 and 4.

If the plane sold on week 4 I'd be realizing a loss of $300K+missed money opportunity on the deposit.

If I got no offers prior to delivery date, I'd hire an inspection firm to document all discrepancies from the plane proposed for delivery and the contract (no FIKI, no FMS, missed range, etc...), refuse delivery, demand all my money back, file a law suit against Eclipse for $2.7M ($900K + money costs, plus breach of contract, plus deceiptful business practices punitive damages). I'd ask the courts for interim orders requiring Eclipse to place at least the deposit money in Escrow immediately.

Concurrently, I'd organize a creditor's comitee to push for BK and a class action against Ecipse and its present a past officers for deceiptful business practices. I'd make details of the complaints available to all press and blogs in the industry. That is called maximum presure strategy (Schock and Awe).

Then, I'd go on with my life, and see how much of the $900K I'd ever see. But I'd never fork over another $600K to Eclipse. Never.

But that is just me.

Shane Price said...

Flightcentre,

We know that N333MY (serial #103) is no longer among the "in-service aircraft" that will be requiring upgrades.

How can you say such a thing! I'm sure Ken could be persuaded to repair it, fully, and would be happy to fly such a 'value'.

He has form in the matter, after all....

Shane

Shane Price said...

Baron,

My understanding (but I'm not a contract lawyer) is that the 60% payment means exactly that.

It's a call by EAC to 'stand and deliver' that percentage of the total final price, including all options.

And you do this '6 months before delivery' (TM, Eclipse Aviation Corporation) in cash.

Second question, but first a 'health warning', again. I've had about 20 conflicting messages on these numbers, from all nooks and crannies of EAC. This '500' number is the total now outstanding, after all the 'dross' is cleared out.

From one source.

Others would place the 'outstanding' number at something in the 350 range.

Take your pick. I don't think it really matters if EAC can't raise finance pronto. It will become one of those moot questions like, "Is Vern enjoying his Mustang?" or "How many FPJ's got upgraded to AvioNG?"

Remember what Gadfly always maintained. Eclipse would never complete a single FPJ. I think he has an excellent chance of having the last laugh.

Shane

eclipso said...

250, 300, 500, 900......

Whatever the actual number is, it's a FAR cry from, 2300, 2500, 2700 which all the "news" reported and got the investors to pony up. I agree with Baron. The ONLY way to this to stop is for owners/investors collectively sue EAC. They may cause BK and end up with nothing, but it looks to be the order of the day anyhow.

flyger said...

Long article with lots of subtle information buried in it:

http://www.ainonline.com/news/single-news-page/article/post-vernal-eclipse-faces-myriad-challenges/

"Post-Vernal"?

Black Tulip said...

Flyger,

Thanks for the link, a very interesting article.

No Mas said...

Some disparate comments on a bunch of issues ...

Word from a Eclipser at the end of AirVenture is that they sold "about 20" E400's since open to the public. Better source believes that 10-15 is closer to reality.

NG was cut in at 105, but there were a few non-NG airplanes after that ... like the SomeDayJet airplanes with the mechanical 3rd attitude indicator.

In addition to cheap airplanes, Eclipse was investing in DayJet. When DJ needed US capital to keep US/Foreign ratios in line, Vern was busted ... so DJ took it in the gut.

SATS Air and others are showing there is a limited market, but not enough to amortize a $2M plane with high AOG.

If DayJet was serving the NYC-BOS-DC (etc) instead of Ed's backyard, they might be just fine. Short notice shuttle fares, taxi, rental car, tolls, etc. times 3 people is costing us upwards of $2K per trip. Most customers are close enough to satellite airports to make metro-metro ops viable ... at least for us.

baron95 said...

Mike Press (AIN interview) said... "I’m not sure the Mustang or the Embraer or even single-engine jets would have been built as fast as those other companies came in if Eclipse failed. It kind of woke up the industry; they said, ‘Hey, there is a demand for small jets, and we’d better get into the market.’”

Jack Pelton said (AIN interview) ... “I hope they can weather this storm. It’s critically important; competition is good. I don’t want to see people lose confidence in this industry.”


My sentiments exactly. I don't want to see people lose confidence in the industry and in personal relatively affordable jets. In the end, that is my only stake in this whole Eclipse saga.

We need a Hyunday Genesis of light jets. Unfortunately Eclipse was no Hyundai and the EA500 was no Genesis.

It is trully sad, that, without the Eclipse, the only planes that can beat the Baron's speed on the BDR-MVY mission cost $3M. The Meridian can't do it. The Meridian can't do it (speed limited down low, too long to climb to be useful) turbo piston singles can't do it. The Eclipse can do it at $2.15 new. The TBM, PC12, Mustang can do it for $3M+.

How sad that you can't beat a 40 year old design on a simple mission.

I hope some one else steps in to get it done.

FreedomsJamtarts said...

This AIN article ends with all sorts of drivel hommage to the great Vernster. Nearly made me puke!

Hey, give me a billion dollars and I'll blow it developing gas turbine powered Ferrari's. Hands up who doesn't thing jet powered Ferraris would be way cool.

These will cost $3 million each in direct manufacturing costs.

I'll sell the first hundred for $995 000, the next four hundred for $1.3 million. and after that they will cost $1.6 million. Ferrari sells about 5,000 cars a year (I made that up), but I am going to show those dinosaurs, and sell 50,000.

Since I am going to use inertial welding for all chasis, and interior decor parts ( a cutting edge technology which creates the cleanest, defect free weld, and has so far only been used on stuff like putting blades on blisks, or assembling disks into spools) the initial delivery date of next tueday might slip by a year or 11.

I have a rich bored friend who was employee number 13 in Enron who will soon be released. He has a great idea for a bus service using my jet powered Ferraris. I'm going to lend him $2 million as a downpayment on his first 80,000 jet powered ferraris.

Once we pass the european crash worthiness tests, our European distributor will do a Russian bus service.

We are tossing up between a fully intergrated motor and entertainment management, or just using a Garmin street pilot.

WhyTech said...

"How sad that you can't beat a 40 year old design on a simple mission."

This says more about the mission than anything else. Even a Citation X wont make a life changing difference in the duration (speed) of a BDL-MVY flight - only benefit would be between the ears. You already have the ideal acft for this mission.

Shane Price said...

Freedom,

Ferrari have a stated policy of LIMITING supply. That way, they can continue to (over)charge for a FIAT.

Which, as we all know, stands for:-

Fix It Again, Tomorrow.

As it happens, you are probably only a little high for this years production. It's been boosted in the recent past to open up Russia, China and the Far East generally.

Unlike EAC, where 'production' is something they used to do, and certification for Europe continues to be a distant objective.

Shane

Black Tulip said...

Baron95,

Bridgeport to Martha's Vineyard... 114 nautical miles.

I suggest that a jet for this route is using a sledge hammer on a tack. Boston Center would be reluctant to let you into the flight levels with the westbound descending traffic flow into New York. Most or all of the trip would be below 10,000 feet and bound by the 250 knot speed limit. Piston, turboprop or turbofan - the route times will be within minutes of each other.

airtaximan said...

At first, the bloggers and faithful were reticent to look at the economics, preferring to look at the technological challenges.

Today, we have come full circle -the company has succeeded at building and certifying (I'll give them this) a small twin turbo fan aircraft that is priced at half of what it costs to built... and attracted a few hundred pricing arbitrage delivery-position specultors, a few hundred real user-clients, and a bsket full of trumped up orders from fledgling air taxi startups including themselves.

The only question left is, how will they ever make money given two facts:
1- the plane will never cost less than $2M to build
2- the market for the plane at even $1.5M is demonstrated to be very, very small.

I do not buy the BS regarding "operational excellence" - they have had years and tons of money to get this right, and they are 90% there if they are anywhere. A stop, redesign and re-start of the production line will require another learning curve... and at most, will result in minor improvements. I do not believe they can get to 4000 hrs per plane, and someone says they are at 6000... even IF you believe this is the problem, and IF you believe THEY can resolve it and save the whole $200,000 goal in labor, it will not make a difference, here...no way. But I can hear it as a rationale for moving to Siberia - I really can. Its a story.

But its BS - because it is irrelevant to the central point - the total economics. How do you sell enough of THIS plane at a profit, when you couldn't even come close to selling enough after 12 years of selling it at HALF its profitable selling price?

They sold it for Half off, and couldn't get anywhere near the volume they required.

Anyone?

baron95 said...

Well, the Baron, as much as I like it, is far from the "ideal" plane for the BDR-MVY mission.

You have to understand the requirements:

1 - It is a personal trip, so no planes requiring professional crew and/or 2 person crew need apply.

2 - You need to be fairly confident that your plane will be able to launch at least 99.9% of the time. So it does require high dispatch reliability and capability. There is no alternative way to make the trip if your bird can't launch and spouse/kids/friends at on the ramp with bathing suits on looking at you. That, by itself, makes a piston powered plane, very unsuitable.

3 - These and similar mission amount to 50-150 hrs/year for most pilots doing it (and there are many). Fuel cost is not a major consideration. A/C aquistion, depreciation, insurnace, maintenance cost is a major consideration. That rules out most of the expensive SP JEts and TPs.

So what is the ideal plane? Turbine powered (twin preferred for passenger sense of safety over water), 5-6 seats, VMO of 250KIAS or higher, operating costs (including depreciation/financing) of less than $150/year to keep the fixed cots/hour in the $1,000-$3,000 range.

So a jet or TP with a 250KTS VMO and 5-6 seats at up to $1.5M would meet the mission perfectly.

You can fly at 2,000 ft at 250 KTAS - some 25% faster than the Baron, or you can go to 10,500 ft and open it up to 300KTAS or higher, 50%+ faster than the Baron. You don't have to worry about your piston engine starting and shaking the plane or AOG in the Islands.

A Meridian had the potential to do the mission, but with their ridiculous VMO of 188TAS it can't go anywhere fast down low.

D-Jet is a possibiity, lets see how it flies and what the limiting V-speeds are.

Eclipse, if it were finished as initially proposed would have fit the mission like a glove.

Which makes it too bad.

flyger said...

baron95 said...

So a jet or TP with a 250KTS VMO and 5-6 seats at up to $1.5M would meet the mission perfectly.

Conquest I, II
King Air 90, 100, 200
MU2
Turbine Commander

Used, but reliable, and all can be had for $1.5M or less (much less for some). Sounds like a 425 Conquest I would be a perfect fit, simple systems and PT6, suitable for owner flown missions. Much faster than a Baron not only in cruise, but climb/descent where a lot of time is spent on this short trip.

Now if you insist on "new", then you are SOL.

FreedomsJamtarts said...

Should like you are not far off the profile for a Helicopter Baron :)

wiz-kid said...

Freedom Jam
Do you have first hand knowledge on "...do fatigue and damage tolerance analysis on a poorly understood, experimental technology like a stir fried welded pressure vessel."???

or Air Taxi do you ...
"6)FSW may have long term fatigue and corrosion issues"???

Just curious if you know how Eclipse complied with 23.571, 572, 573, 574 or 575?

Just zis guy, you know? said...

I can't believe nobody latched onto the supplier comments:

..that does not include volume reconcilliation since they did not achive the number of aircraft they forecast so you can add 10% and call it $66 million.

I can't believe suppliers signed up for this. Here's how this shell game worked:

Eclipse only was bound and determined to build a $750,000 airplane. They needed to build 1500/year to hit the price target, so they only cared about the 1500 piece price and WANTED stepladder pricing to enable it (most OEM's want flat pricing regardless of QTY's). So you got something that looked like this:

1-250 $100 (good OEM margins)
251-500 $75 (low OEM margins)
501-750 $40 (who cares, they'll never make 500 airplanes)
751-1500 $25 (HAHAHAHAHAHAHAHA)

Of course, there's always a production ramp, and Eclipse didn't want to EVER pay the 1-250 price, so they said they would supply a forecast that looked like this:

Y1 100 airplanes
Y2 400 airplanes
Y3 800 airplanes
Y4 on 1500 airplanes

In Y1, instead of the 100 piece price, you were to give them the 400 piece price. In Y2, you were to give them the 800 piece price. In YEAR THREE, if they didn't actually meet their goal of making 251 or more airplanes in year 2, they would give you the difference in $$$'s for year 1. In YEAR FOUR they make up for year 2, etc.

Think about that. They generate a liability that goes out 2 years in the future. Or, they just now owe for what they didn't do 2 years ago. This will get ugly as this liability is:

1) growing
2) way more than 10% difference in cost unless people took a much different attitude towards their pricing than I would expect

Anyway, this was such a shell game that it was a large contributor to our company telling them to get bent (using some Brit lingo there). It should also be a large contributor to some folks getting sacked (more terms you learn reading British authors) at some aerospace suppliers who actually signed up for it.

I am shocked that anyone would sign up for this type of contract.

Shane Price said...

Just zis,

I'm pretty sure that the money is less important now than who stays as a supplier.

Basically the word is out about EAC and their contempt for normal business methods. The one key thing that can shut down the factory, right now, is lack of ALL the parts required.

I'm already hearing about 'robbing Peter' efforts in ABQ, as delivery staff struggle to finish aircraft and get a customer to sign off.

Once you hear these types of things start to happen, no amount of mere money can get a production process going.

I'm pretty convinced that the only thing keeping the plant working at all is the value attached to the TC and PC for the FPJ.

What beats me is how EAC can justify building aircraft at a loss. Before the layoffs, I'm told the payroll was $4 million.

Every TWO weeks...

Go figure.

Shane

TBMs_R_Us said...

Baron,

So a jet or TP with a 250KTS VMO and 5-6 seats at up to $1.5M would meet the mission perfectly.

Or a used TBM 700 would do the trick nicely (VMO 266).

BTW, speed limit is 200 KIAS, not KTAS. At 10,000 that works out to KTAS of around 240. I looked at the flight plan for a TBM 850, and it's best not to climb at all. But down low, the speed limit becomes the limiting factor. Even if you climb above 10,000, you'll have to slow down in the descent. I guess this would be similar in an Eclipse.

Maybe Cirrus will pull off their jet, which would also fit your profile.

julius said...

jzg,yk:

IIRC there were some hints on high inventory (3M$?). VR's intention were a low inventory.

Perhaps the current stock is higher approaching the number of real orders!

BTW:
Some members of EAC's Leadership team don't have any responsibilities ( not: xxx is resonsible for ...).
IIRC something changed!
The Senior Fellows "led" and for the time being are doing ... waiting for their money?
Mr Edward M. Lundeen is responsible for the expansion and development of Eclipse's international business activities and is presently working with Eclipse's partner, ETIRC, on ... Russia ...(see Eclipse leadership team)!
I expected ETIRC Aviation to be responsible for this region of the world or is it just a typing error?
Anyhow there is some money for dreams...

julius

Black Tulip said...

Baron95,

The list assembled by Flyger hits the target. As a Turbo Commander owner for more than a decade, I’d put it at the top of the list.

However I suggest you reconsider how you would fly one of these aircraft. The experienced pilots I know would not fly at Vmo at ten thousand feet. It’s too hard on the airplane and potentially dangerous. The Turbo Commander 1000 has a Vmo of 252 knots… that’s the good news. But maneuvering speed is around 140 knots depending on weight. The chances of unexpected turbulence are much greater down low and the stresses on the airframe are proportional to the square of indicated airspeed.

So… you’re ripping along at Vmo when you encounter a lee wave off the Connecticut hills. The airplane would experience 3.2 times the design gust load and possibly bend or break. Jets have similar issues, for the CitationJet Vmo is 263 knots and Va is about 170 knots at mid-weight.

FreedomsJamtarts said...

Whiz-kid,

Sorry I live on a different continent, and I have no idea how Eclipse complied with the fatigue and damage tolerance requirements of part 23.

The FAA inspectors filed a complaint that they were pulled off the job for doing it properly. This, combined with cross throttle control non-compliance, and it's associated non-compliance for lack of AFM information on this mode of operation, support my opinion that the there are probably significant areas which have not be adequately addressed by Eclipse, or investigated by qualified FAA certification experts (as opposed to management in Washington who signed off the TC on a Saturday).

Luckily the Congressional review is being lead by a lobbyist with significant expertise in keeping the issues snug under the rug where they were swept.

Aviation, being a self cleaning oven, will address these issues over time.

Normally one would have expected some CRI's be raised against the stir fried airframe, even if just to adequately document the FAA and Eclipse's positions with regards to means of compliance of this new and novel method of production.

flyger said...

TBMs_R_Us said...

BTW, speed limit is 200 KIAS, not KTAS. At 10,000 that works out to KTAS of around 240.

FAR 91.117 Aircraft speed.

(a) Unless otherwise authorized by the Administrator, no person may operate an aircraft below 10,000 feet MSL at an indicated airspeed of more than 250 knots (288 m.p.h.).

TBMs_R_Us said...

Flyger,

My bad. You're right. I meant to point out that it's KIAS.

airtaximan said...

Wiz..

"6)FSW may have long term fatigue and corrosion issues"

I said "might"... just rasing a risk item.

Gadfly can explain

baron95 said...

Shane said... The one key thing that can shut down the factory, right now, is lack of ALL the parts required.


Well, actually, the factory can be shut down for the lack of ANY ONE of the reuired parts. As in, ANY supplier of a needed component that is not in stock can cause production to stop.

In fact, I think this is exactly what has happened. Eclise did an inventory of parts on hand. Figured out that they could build some 20-odd planes between now and the end of the year, figured out one or two suppiers that they needed to pay (prob PWC), and set up it's build schedule with mostly parts on hand.

Lat gambit to find more financing.

baron95 said...

flyger said...
Conquest I, II
King Air 90, 100, 200
MU2
Turbine Commander

Used, but reliable, and all can be had for $1.5M or less (much less for some). Sounds like a 425 Conquest I would be a perfect fit, simple systems and PT6,

Now if you insist on "new", then you are SOL.


That is just it!!! The planes were available for the mission - including the suicide Cheyennes. Now they are not. 40 year old designs that kick the pants out of anything new. Something is wrong with that.

P.S. I agree the Conquests are nice machines. I like the IIs better, the Garret engines may be noisy, but boy they have great SFC, huge TBOs, and are simpler than the PT6 to maintain.

I flew the BDR MVY in Conquest IIs a few times. As I said before, one of the potential VLJ buyers that I advise, owns one with a -10 conversion. We can almost catch a Mustang and C500s on it.

baron95 said...

TBMs_R_Us said...
BTW, speed limit is 200 KIAS, not KTAS.


Speed restriction (I hate the expression "speed limit") is 250IAS below 10,000 feet MSL in the US.

I know the rule of thumb is 2% increase in TAS for 1,000ft at a given IAS, so you'd think at 10,000 ft you'd be burning 300KTAS, but, in practice it is never like that. It is more like 1%.

So at 10,000 ft you'd be at 275KTAS - still not bad.

Check out the price of a 15 year old King Air 90 with a Black Hawk -135 Mod and the Garmin 1000. It is $2.5M, if you can find one. Almost the same for a Conquest I + Blackhawk + Avidyne.

If the used TB700 got a glass panel update, it would be above $2.5M.

Point being, that buying used saves little as the used planes are more capable than most current production.

Cessna, to this day, has no current plroduction plane that can touch the Conquests. None.

Dave said...

I'm back and I'm catching up...

What do I think is needed for a company to sell 1000 jets per year? I really don't see that happening because jets are a very small market (relative to cars). Even if jets were given away for free, the operating costs are way too high for most people to afford.

I don't believe if Eclipse had successfully delivered a $1 million dollar jet that there would be the volume of orders there. Of those who could afford a $1 million dollar jet, there are many options of what to do with the money and that has to be considered. To go through a list of what all could be purchased as an investment/business/hobby would be too long to list, but even if there's a large market of those who have the money, there will be a small market because not everyone wants to be a private pilot (the same goes for owning a sailboat or motorboat).

Eclipse talks about these foreign countries where the Eclipse will supposedly have huge sales as if they're in the stone age. However, Turkey, Russia, etc might be better served with props than a jet. It would seem the more this is true about not having a proper aviation infrastructure, the better they'd be with a props...many props dont even need an airport to land. To create an aviation infrasture, I just don't see it as practical to be built around VLJs (regardless of the manufacturer).

The only way I could see VLJs have a drastically different market size would be if the manufacturing process was truly revolutionary in cost (if a VLJ could be built for under $1 million while taking only 600 hours to build plus painting and testing) and some other fuel source was used as the annual operating costs are just too high. The key driver would be what are the total annual costs for owning a jet and the more that decreases, the greater the potential and right now jets are very expensive to use in addition to their purchase price. Buying a $1 million dollar home for instance very easily would have much lower operating costs. Luxury yachts can be very expensive to operate, but a $1 million dollar yacht isn't quite in that range where you have a large crew and a big fuel bill and not everyone who could own a $1 million yacht has one. The more people that can afford the annual operating costs (and the cheaper compared to other substitutes), the more a product will sell.

flyger said...

Baron95,

So… you’re ripping along at Vmo when you encounter a lee wave off the Connecticut hills. The airplane would experience 3.2 times the design gust load and possibly bend or break. Jets have similar issues, for the CitationJet Vmo is 263 knots and Va is about 170 knots at mid-weight.

If Va is your criteria, then Commanders are not a very good choice, too many have come apart in the air. Among my list, the clear winner for Va is the MU2 at 180 KIAS or more which exceeds many jets. With that small strong wing, it cuts through turbulence very nicely where a Commander will beat the snot out of you. Of course, the MU2 comes with its own problems, but falling apart in mid air is definitely not one of them.

Still think the 425 is the best entry level owner flown turboprop out there. A lot more conventional than an MU2, not as big or fragile as a Commander, and faster than entry level King Airs. The 441 is too much airplane for this mission by about 2,000 miles.

x said...

Dayjet Utilization (last 2 weeks August)

Week 47 -- 75 hours in 10 craft
Week 48 -- 123 hours in 15 craft

late report, have been getting my freshman son settled.

TBMs_R_Us said...

Baron,

If the used TB700 got a glass panel update, it would be above $2.5M.

No one's likely to put a G1000 in an older TBM. But someone is very likely to put a G600 in one. That wouldn't raise the price by that much. Could get an A model with G600 for well under $2M.

gadfly said...

Interesting turn of events:

Patron Saint of the Little Bird, Gov. Bill Richardson, is under investigation by the FBI.

Well, here . . . you read it:

http://www.roswell-record.com/main.asp?SectionID=51&SubSectionID=124&ArticleID=31498

gadfly

(Birds of a Feather comes to mind!)

gadfly said...

The question about corrosion comes up now and then . . . with aluminum we speak of intergranular and intragranular corrosion. In government we might called it inter/intra personal corruption. In either case, it works between adjacent parts . . . and often goes undetected until the corrosion or corruption has gone too far.

gadfly

(Fill in the blanks as you see fit.)

Dave said...

Patron Saint of the Little Bird, Gov. Bill Richardson, is under investigation by the FBI.

He really should be investigated and not just for CDR. Richardson has repeatly steered the taxpayer's money to his donors...Eclipse comes to mind.

Also here's another article on Eclipse and the FAA:
http://www.ainonline.com/news/single-news-page/article/as-scrutiny-intensifies-sturgell-defends-faa-cooperative-programs/

Also Russia is reducing taxes on jets under 19 seats in size:
http://www.ainonline.com/news/single-news-page/article/as-industry-puts-pressure-on-russia-lowers-aircraft-taxes/

gadfly said...

"It ain't over 'til the fat lady sings!"

Well, if the "fat lady" is Jane Eaglen, we're all in for a treat of massive scale . . . and I'm not speaking of the size of the "lady" (although she can easily reach more than a couple octaves . . . on the scales).

Sometimes, good things come in large packages . . . and when this lady sings, someone (as myself) who lives on fine music . . . especially "Richard Wagner*", you'd think that you had died and gone to Valhalla**. Her rendition of "Ride of the Valkyries" is without comparison, bar none.

(Yeh, I have countless recordings of Kirsten Flagstad, and many of the "old ones" . . . so don't get picky . . . I love them all.)

And to give perspective to my analogy, Jane Eaglen sang the opening and closing songs in "Sense and Sensibility".

The bottom line is that "when the fat lady sings", there will be a time of "Sense and Sensibility", as the last "Eclipse 500" is carried out . . . not to Valhalla, but to the aluminum recycling center.

But the series is strangely accurate. Let’s look at all four in Wagner’s famous “Ring Cycle”:

Das Rheingold . . . the little jet was the final answer . . . and some folks were going to get “very rich”.

Die Walküre . . . these are the workers . . . the ones that will bring it to market.

Siegfried . . . he’s the hero . . . ‘recently “gone” (Remember?).

Götterdammerung . . . “politely” translated into English as the “Twilight of the gods”, but you get the point.

Yep, the fat lady will indeed sing . . . and for once will bring “sense and sensibility” back into the picture.

The original production of four operas in the Ring Cycle ranges from fifteen to eighteen hours of music . . . depending on various factors. For some of us, we enjoy listening to the complete “cycle” over and over, never tiring of the beauty of the beast. But when the “fat lady sings” in ABQ, we hope for the final curtain.

gadfly

(If you want “real opera”, go fifty miles north to the world famous Santa Fe Opera, but not to ABQ . . . they’ll sing you a different song . . . the same old tune of the past decade.)

(*And to some of you . . . it’s pronounced: “Rikkard Vagner” . . . ‘just so you’ll sound “knowledgeable”, next time you’re at a social event, in your “tuxedo”.)

(**Valhalla . . . Nordic version of heaven . . . “the Valkure” [“Die Walküre”] good looking Nordic female creatures [Not much different from the little Swedish blond that has kept me company for 47 years, come this December, and still more exciting than a Wagnerian Opera] that carried the wounded/dying warrior into a far northern heaven of frozen mountains and clouds, etc., not unlike the conditions of FIKI, which is forbidden to the “little bird”.)

Shane Price said...

Aaah, Gadfly, you are in good form today...

I wish the same could be said for the troops still in the trenches at EAC.

Further intelligence reaches your humble custodian, who resides in a land blessed with copious rainfall.

All year round, it seems...

Sorry, I digress.

The inbox continues to hum. It would appear that a considerable number of senior staff have decided that the ship is indeed headed for the rocks. I hear that close to 80 have resigned in the past couple of weeks, and that this 'natural attrition' is actually encouraged by the new 'duopoly' at the top of EAC.

Yes, my friends, Roel has decided to be a back seat driver for the remainder of the trip. So far back that he will (it is said) be issuing his commands from the safety of the south of France.

So, step forward, the Peg and Mike show. Peg will run all the 'production' side of things, and Mike will do the service and sales end. Both will be very busy, not producing, selling or servicing, well, anything really.

Mark Borseth is now overseeing IT, HR and is still in charge of Finance. Apparently, Mark is off with Ed Lundeen, 'assisting' UBS in their efforts to find a mug, sorry, investor with $200 (or was that $400, I've lost track) million in loose change.

Todd is lurking in there somewhere, but no one is talking to him, least of all Peg. He must be a real charmer, as I've heard nothing but praise for him in the inbox.

That last bit was ironic, by the way.

I continue to hear complaints about trim tab failures, with reports of long cycle times to cure the problems. I'm aware of at least two aircraft with extended AOG as a direct result. I gather that the supplier of the actuators has been changed, although this may also be part of the FIKI upgrade process.

That's about it for tonight.

Shane

gadfly said...

Dave has brought a highly technical term to the surface: "Cozy"

The beauty of the term is that it explains so much, with so few letters. Four letters . . . "cozy"! There are other four letter words that have long ago lost their impact, because of their crude intent . . . yet here is a four letter word that expresses so much more. The “old four letter word” was an attempt to degrade a beautiful relationship between a husband and wife . . . implying something "crude" in something "beautiful".

But "cozy" in the relationship of industry and government control or inspection . . . That says far more . . . expressing a low level of morality, all too common.

"Cozy" implies, rightly so, a street level relationship between government and business, not unlike the activity that occurs a block from our shop on "Old 66" (Central Avenue), a highway of history.

Over the last eight or ten years, due to public outrage, the activities on Central Avenue/US 66 has diminished . . . where motels sometimes charge by the hour.

The political scene that has not much changed over the years may also "catch up" to the attitude that such behavior, whether along "Central Avenue", or out at the airport, is not in the best interest of Albuquerque.

There comes a time when ABQ should not be seen as the "Whore of the Southwest”, where "Wham, Bam, Thank You M’am!" is no longer tolerated.

Yes . . . you read it correctly. The "gadfly" did, indeed, say it.

If Albuquerque is to move on, into the future, and experience a clean growing economy, the corruption must be removed. Do I think this will happen? . . . Frankly, No! But I wish to be totally surprised.

Our little shop has for almost 33 years existed close to "Old 66" . . . and had much opportunity to observe the comings and goings of many schemes . . . Eclipse is not the first, and probably not the last. But to Eclipse’ credit, I will say that they are among to most flagrant in their claims.

gadfly

(Don’t you wish this would all “Go Away” . . . and we could get on with legitimate business? There were times . . . brief . . . but pleasant!)

Dave said...

Yes, my friends, Roel has decided to be a back seat driver for the remainder of the trip. So far back that he will (it is said) be issuing his commands from the safety of the south of France.

It's called plausible deniability. Look at L&H and Computer Associates where Roel's friends engaged in fraud and then he was shocked SHOCKED to find out about it after the damage had been done. If this is true that Roel is skipping out on doing his job as Chairman and CEO of Eclipse, that should really encourage a new round of investors to put hundreds of millions of dollars into Eclipse. Perhaps Roel wants Eclipse to crash (I think he might be trying to abscond with Eclipse's IP, just I don't think that IP is worth what he'll pay for it)...

Dave said...

In light of Roel fleeing to France, I thought I'd adapt the Sir Robin song to Roel as I've previously done it for Vern:
Brave Roel ran away.
Bravely ran away, away!
When being a Going Concern reared its ugly head,
He bravely turned his tail and fled.
Yes, brave Roel turned about
And gallantly he chickened out.
Bravely taking to his feet
He beat a very brave retreat,
Bravest of the brave, Roel!
He is packing it in and packing it up
And sneaking away and buggering up
And chickening out and pissing off home,
Yes, bravely he is throwing in the sponge...

eclipso said...
This comment has been removed by the author.
eclipso said...

eclipso said...
Shane said:

"That last bit was ironic, by the way."

THAT scared me. I thought Shane had fallen and hit his head.

..don't tell anyone...GAD said "whore"..

Dave said...

Here's another company where Eclipse's slowdown has hit:
http://seekingalpha.com/article/93120-labarge-inc-f4q08-qtr-end-06-29-08-earnings-call-transcript?page=-1

gadfly said...

Yep, Eclipso, I did indeed say what you said I said.

Does it not seem prudent to find safe haven in a life boat? Yes, I know that the orchestra is playing a calming rendition of “Nearer My God to Thee” . . . and the sea seems most calm . . . but that slight angle of the deck seems to be increasing, even as we speak.

We are witnessing an event not unlike something that happened long ago in the North Atlantic . . . in April, 1912, if memory serves. Another great idea was about to change transportation . . . and indeed, it did.

gadfly

(Amazing, the things that people will cling to . . . even while the water rises in full view.)

Shane Price said...

eclipso,

I'm glad you enjoyed reading it as much as I enjoyed writing it.

My remarks about Todd were aim at EAC staff, not the wider blog. But you got it, as I'm sure others will.

Someone should tell Peg to set me up with an email address inside the company. It's just plain inconsiderate of her, as staff have to wait until they get home or to McD's to send me the news.

Think of the lost productivity, Peg. If your troops could get it off their minds straight away, they would get back to work immediately!

So there, no one can claim I've never offered positive advice to the top management at EAC.

Shane

eclipse_deep_throat said...

I threw some numbers together to try and understand how DayJet could work. From what I understand of 'high finance,' I'm figuring that a plane is paid for over 30 years, like a mortgage. Or leased, like I think the big airlines do. Is 30 years too long? Would a finance company expect to get paid in 20yrs?? I’m breaking down costs here by the hour and not per mile since I believe a/c maintenance has to be done based on total hrs on the airframe/engines. Yes?

The basics:
$2,000,000 = total retail cost for one plane, including financing charges
$5,556 = plane cost per month, principal and interest
$100 = per hr, operations cost, maint AND fuel (too low??)
$100 = per hr, PILOT/CO-PILOT cost (ok, how much do pilots/co-pilots cost?)
$100 = per hr, assumed admin overhead (clerks, CEO salary, advertising, financing charges, etc.)

29.7 = 30 day month with plane in-service at least 99% of the time (30 times 0.99)
8 = hrs per day, plane has PAYING customers
This is a big assumption since I don’t believe the EA500 has managed an average 99% service-level.

$185 = plane cost per day, including insurance (5556 / 30)
$800 = maint/fuel cost per day
$800 = pilot/co-pilot cost per day
$800 = admin overhead cost per day
SUM:
$2,585 = minimun cost per day for ONE plane (185+800+800+800)
$646 = min Average Cost allocated to 4 customers / day
$711 = min Average Fare needed from 4 customers / day (assuming a flat 10% mark-up, and NOT counting the $99 DayJet requires for the membership fee)
$2,844 = min Avg Revenue per day

TOTALS:
$84, 458 = assumed Avg Revenue / Month @ 99% service-level (2843 x 29.7)
$77,556 = assumed Avg Costs / 30-day Month

EQUALS: $6,902 min Avg Gross Profit / Month, per plane
$230 = min Avg Gross Profit /day, per plane
FINAL:
$83,980 = min Avg Profit per YEAR, per plane (230 x 365)

Do these numbers seem plausible? The thing with taxis in a bustling city is the “elasticity of demand” is kinda hard to deal with: so much competition it isn’t easy to jack up prices on customers when YOUR costs go up (i.e., gas, Jet-A). Also, I can always choose to WALK to my destination. Or subway ...or some other form of transit. There are many similar services that will get me from point A to B. I gather that a $700 fare would only get a person an ‘average’ of 350 miles ($2 per mile). Who in their right mind is going to pay that? No ...who is going to pay $1400 round-trip for a 350-mile flight?

I think we can easily show that an air-taxi model is lunacy ... and ipso facto, so is the EA500. That seems to be an awful lot of work to do for just over $200/day. I thought disruptive technology was to make jet travel cheaper per mile than my old Honda Civic. Damn, I should have never sold that car. Does anyone know if Ed was able to sell those 16 jets?
:)

E.D.T.

PS - I just found this on the FAQ section. What does flight at 25k do to fuel economy when not at the much-touted 41k figure??!

At what altitude will we typically fly?
While the Eclipse 500 can fly at 41,000 feet, your typical DayJet flight will be around 25,000 feet.

gadfly said...

e_d_t

The problem with your logic is that “logic” was eliminated as part of the disruptive technology. In fact, “logic” was the first thing to be thrown overboard . . . No, make that the “second”. Honesty was the “first” . . . logic is a “kissin’ cousin”.

You can throw numbers together until the cows come home . . . or maybe the “goat”. (What ever happened to “the goat” . . . BEG?) The faithful are not listening . . . and even the others have long ago fallen asleep.

‘Sorry, but that’s the way it is. We speak to a wall!

gadfly

(Them that wish to be fooled will not be disappointed!)

eclipso said...

EDT,

After reading through that, I feel like I fell and hit MY head...good math!

gadfly said...

If this were a piece of machinery, for a machine shop, the basic cost would be multiplied by just over 1.5 . . . and must be paid in full in five years (sixty months). So, a piece of equipment has a useful life of five years . . . 10,000 hours. $2,000,000 becomes a $3 million investment, and must return $300 per hour, for the machine to just “sit on the floor”. Airplanes cannot possibly fly 2,000 hours per year (in the airtaxi market), but even at half that rate, there’s a burden of $600 per hour to pay for the equipment. This does not cover maintenance nor fuel . . . and is merely the beginning burden. To expect this equipment to exceed five years of full use is not realistic. Technology, wear and tear, all maintenance, will use up the full investment in five years . . . and much faster, considering the lack of durability of the little bird.

Beginning with this base, add maintenance, fuel, and all the other overhead expected for basic service, and there is nothing left for profit . . . unless something quite creative is going on with the books.

Play with the numbers all you wish . . . there’s nothing there.

gadfly

(This gets right back to the wardrobe of the emperor!)

Recruiter said...

To Everyone:

Shane said:

The inbox continues to hum. It would appear that a considerable number of senior staff have decided that the ship is indeed headed for the rocks. I hear that close to 80 have resigned in the past couple of weeks, and that this 'natural attrition' is actually encouraged by the new 'duopoly' at the top of EAC.

Please, anyone who has names of senior staff you have resigned plese post names.

I may be able to help some of these folks find new postions.

Thanks,

R

eclipse_deep_throat said...

Recruiter,

Help them find new positions? Like, holding Satan's fork in Hell? OH, now I get it. They will be performing 'other' services for him...

baron95 said...

flyger said...
Baron95,

So… you’re ripping along at Vmo when you encounter a lee wave off the Connecticut hills.....


Flyger, actually Black Tulip said that, not me.

SOP on the Citation Jet is to descend at 250 KIAS unless there is turbulence - same on many turbine airplanes. I don't see any problem in operating turbine airplanes close to VMO in smooth air - remember that gust certification limits are different for turbine VMO is really VNO on a piston plane. Having said that, I have ALWAYS been uncomfortable flying the Meridian and JetProp conversions where you are operating AT VMO ALL THE TIME. The plane is useless if you fly it any slower than VMO which is a paltry 188KIAS on the Meridian and even lower on the JetProp (I don't recal of the top of my head, but I think it is 178KIAS).

And BT, you do know that the highest ant hill in CT is only 2,300' high and the highest point in the BDR to MVY is 50 feet, right? Things are different here in the east. IFR altitudes around NYC are severely restricted. The only way to go somewhere fast for distances of less than 200nm sometimes is to fly at 250KIAS at 5,000 or 6,000 ft. For example the BDR ACY mission, there are two altitudes going 4,000 or 6,000 and two coming back 3,000 and 5,000 and only one airway. To pass slower traffic you climb and descend or descend and climb.

baron95 said...

Is it possible that R. Pieper was really that ill informed when he made the original ETIRC investment?

I know it is difficult, with all due dilligence, to really find out what is going on in any company, let alone one like Eclipse, but at least the warning signs where all there, the right questions to ask where right here in this blog.

How did Pieper get taken so badly? did he just get greedy and thought he was making a kiling by craming the original investors for almost 50% of Eclipse? Did he really think he'd get a good return on his investment?

Eiher RP is incredibly naive (to be polite), or there HAS TO BE more to this story.

If I were cynical, I'd guess some thing along the lines of someone in Russia needing to put some money in the soak-wash-rinse cycle machine.

Dave said...

How did Pieper get taken so badly? did he just get greedy and thought he was making a kiling by craming the original investors for almost 50% of Eclipse? Did he really think he'd get a good return on his investment?
Eiher RP is incredibly naive (to be polite), or there HAS TO BE more to this story.


I believe he is incredibly naive and there is more to the story. Roel does have a record of being friends with frauds and then supposely being surprised to find out they're frauds (Computer Associates and L&H). I don't think that Roel is the most ethical businessperson around and I think he's naive.

Roel Pieper put in millions in the Jan Sloot's data compression:
http://crackpottheoryoftheweek.blogspot.com/2007/04/jan-sloots-data-compression.html
If you read about this on the web many think that Roel got taken while others who think the technology worked think that Roel stole it and is just waiting to cash in (supposedly Jan Sloot's office was cleaned out after he died). It wouldn't surprise me if it is both true - Roel got taken for millions and he stole worthless technology.

I think Roel has done a poor job ever since he got involved with Eclipse as a distributor, then as the non-executive Chairman and finally as the Chairman/CEO. I also think he's tried to use his position to his advantage (even if illegally so) every chance he's got. Hearing that Roel turned tail for France right when Eclipse is at the most dangerous moment in the entire history of the organization only confirms how poor a job he's doing...a Chairman/CEO fleeing the country when the company faces BK is ridiculous! Though I don't think this is why, about the only time you hear of CEOs fleeing the country when their company is in trouble is when they face criminal charges. What I think has happened is that Roel has used his position as Eclipse CEO to do what he thinks will benefit ETIRC (even if it harms other investors/debtors) and now that he's done that, he has no need to stick around. Then when Eclipse goes under, he will have arranged for himself to acquire it for what he thinks is on the cheap.

The biggest reason that I think Roel is more than just naive is because of his continued cooking of the books with the inflated claims of the order book size. I think Roel is knowingly engaging in fraud, though just because someone is a fraud, it doesn't mean they aren't also naive. I also think that Vern was a combination of a fraud, some degree of being naive as well as having a chip on his shoulder. Fraudsters can get hoisted by their own petard.

TBMs_R_Us said...

Eiher RP is incredibly naive (to be polite), or there HAS TO BE more to this story.

Doubt that there's more to it than that! Remember how the large ego plays with aircraft decision making. RP got what he paid for, and then some.

If it were me, I'd love to retreat to the south of France, and never look back. If, no I mean WHEN, it goes TU, the south of France will continue to be chic, and RP's life will go on without much of a burble. No point hanging out in ABQ waiting for the inevitable.

baron95 said...

Thanks for your comments Dave.

On the "order book" thing, I think people are barking up the wrong tree and making much a do about nothing.

If Eclipse delivered 245 planes (known fact), had 270 cancelations (compiled by Shane from inside sources), and has an additional 500 firm orders backed up by deposits (ditto), then the "firm orders" number was around 1,000 give or take.

Since Eclipse never told anyone how they defined orders, it is totally safe to assume (and every intelligent person would do so) that they were counting both firm (deposit-backed orders) and soft (options, LOIs, etc) in their orders totals.

Some companies are strict. Boeing, for example, only counts orders and post it on their web site when they have a firm, deposit-backed contract. Airbus is a tiny bit looser (not much) and will announce LOIs as "orders", but still make a distinction in their financial reporting. Other companies are much looser and will count even a handshake as an order - e.g. Piper, Bombardier, etc.

So far from being fraud. Just because some people insist on pretending that Ëclipse's soft references to "orders" mean firm orders, when Eclipse never ever made that claim, doesn't make it fraud.

The press, should have asked the tough questions, and, if they choose to ever print 2,700 or 2,600 hundred, make it clear to the reader that "Eclipse has never disclosed what portion of those are firm, deposit/contract-backed orders".

Simple as that. Don't read into Eclipse's statements what they haven't said and call it fraud.

Instead, blame the press, some members of this Blog, etc for attempting to perpetrate a lie or misconception that Eclipse ever claimed they had 2,600 or 2,700 firm deposit-backed orders. AFAIR, they never did.

As such, they can count anything they want.

airtaximan said...

baron:

they specifically said "orders backed by deposits" AND

they claimed Dayjet ONLY had 229 plus 70 options...

They intentionally misled everyone, and they knew it.

PS. smart people would say; "well, you bloggers could figure it out... so they must have provided enough insight"

And they would be right - except, as a general rule, we assume Vern is lying about everything, or is so far off miscauclating (always in his favor)... So, I was just guessing Dayjet and other dajet-likes had most of the orderbook...

Shane Price said...

'Recruiter'

Contact me at

eclipsecriticng@gmail.com

I may be able to help....

Shane

Shane Price said...

Gentlemen (and ladies),

Let's be careful here. Roel travels quite a lot, and always has. For instance he 'left' the customer conference call early a few weeks ago as he had to catch a plane from one point in Europe to another.

What I said was:-

Yes, my friends, Roel has decided to be a back seat driver for the remainder of the trip. So far back that he will (it is said) be issuing his commands from the safety of the south of France.

This was in the context of sharing with you a change in Peg and Mikes respective roles, giving them wider responsibility. This has not been announced to the public at large, but has hit the inbox so many times I can't ignore it anymore.

For all we know, Roel was ALWAYS based somewhere in Europe and just appeared in ABQ for the odd meeting or three.

To be completely clear, Roel is still Chairman and 'Acting CEO'.

As far as I can tell, anyway....

Shane

Shane Price said...

Baron,

As such, they can count anything they want.

Agreed.

As long as they kept this misleading count
private...

The problem I (and others here) have is the WAY they used their inflated order book.

Vern kept banging on about the volume orders he was picking up, using clever language to imply that these were 'industry standard' numbers.

The irony is that he could actually have been honest and impressed us anyway.

I'm floored that they still have between 350 and 500 deposit backed orders, depending on which source you believe.

Total orders, deposit backed, of between 900 and 1,000 was a huge achievement. The sad part it that Vern could not control himself and over hyped the company.

And underpriced the plane.

And fired too many suppliers.

And 'burned' too much money.

Et cetera, et cetera, et cetera

Shane

FreedomsJamtarts said...

E_D_T,

Finance leases on airliners normally run between 8 years for something like a 737 thru to 12 years for Large widebody like a 777.

Whether the financing for a small A/C goes longer than Gadfly's very good estimate of five years, I don't know.

Try running your numbers with 5 year financing and 1 flight hour per day (which seems to be Dayjets average, and you will end up with some mind blowing costs.

airsafetyman said...

"For instance he 'left' the customer conference call early a few weeks ago as he had to catch a plane from one point in Europe to another."

After shipping how many EA500s to Europe he has to fly commercial? And not that the conference call was kind of important or anything.

Shane Price said...

ASman,

Again, be careful. 'The' aircraft was waiting. No word on what it was.

Mind you, if I was him and wanted to move around central Europe quickly, I'd 'let the train take the strain'. Maybe he was telling a little white lie and really had to run for one of them....

For the record, Roel was delayed getting on the call too.

Shane
PS, at last count, there were about 18 FPJ's on this side of the pond.

airsafetyman said...

Roel has a conference call with people he has taken tens of millions of dollars from and he 1: can't manage to show up on time or 2: stay until its finished. Sounds like the Euro version of the Vernster is no better than the home-grown version. Guess it is harder to be served subpoenas when you are out of the country, though.

Black Tulip said...

Shane,

I agree that not too much should be made of Roel’s travels. As you can confirm Continental Europeans are required to take an extended vacation for the entire month of August. If you do not leave your home, the Holiday Enforcement Authority of the European Union will visit you with stern words. This ensures that excessive business is not conducted in August and boosts the employment rolls.

Baron95,

I see the Connecticut hills often as I live a short distance away, and have flown into all the airports in question.

MagicSky said...

Story in ABQ Journal

Anyone a subscriber that could copy and paste the article for all to see?


http://www.abqjournal.com/biz/Eclipse_Aviation/index.html

1. ABQJOURNAL BIZ: AROUND N.M.
Wednesday, September 03, 2008 AROUND N.M. Eclipse Restructures Operation Eclipse Aviation has restructured its operation, creating two divisions headed by veteran executives at the Albuquerque-based jet manufacturer, the company announced Tuesday. Peg Billson was named president and general ...

Orville said...

Eclipse Restructures Operation
Eclipse Aviation has restructured its operation, creating two divisions headed by veteran executives at the Albuquerque-based jet manufacturer, the company announced Tuesday.
Peg Billson was named president and general manager of the Eclipse Manufacturing division, which includes engineering, supply chain, quality, production and flight operations. Billson was formerly chief operating officer.
Mike McConnell was named president and general manager of the Eclipse Customer Division, which includes marketing, sales, customer support and flight training. McConnell was formerly vice president of sales and marketing.
Mark Borseth, the company's chief financial officer, will lead newly established process improvement teams for both divisions. All three executives will report to Roel Pieper, now Eclipse's permanent CEO.
“I have absolute confidence in this leadership team's ability to deliver the profitable results this company requires,” Pieper said in the announcement.
The restructuring is part of the company's “operational excellence strategy,” which involved the layoff of 650 workers less than two weeks ago.

Dave Ivedorne said...

Peg Billson was named president and general manager of the Eclipse Manufacturing division, which includes engineering, supply chain, quality, production and flight operations.

Peg will be in charge of rationing out the remaining airframe parts.

Mike McConnell was named president and general manager of the Eclipse Customer Division, which includes marketing, sales, customer support and flight training.

Mike will be in charge of not returning deposits.

Would you like the combo? Well, we're out of beverage lids but we do have straws. And you don't mind if the bun has no sesame seeds, do you? And we're out of fries, so we'll just substitute some hash browns. Pull around to the second window,
DI

baron95 said...

AT said ... They intentionally misled everyone, and they knew it.

No arguments there - Eclipse has OBVIOUSLY and REPEATEDLY inflate all figures and projections in their favor. But they did it mostly by providing half info and by omission.

I don't recall (maybe I missed it) Eclipse ever saying something like "We have 2,700 firm orders backed by deposits".

Regardless, I'm not defending Eclipse's slipery communications style with orders and everything else. I was just pointing out that some peope are trying too hard to claim they did state it as above.

airsafetyman said...

"Mark Borseth, the company's chief financial officer, will lead newly established process improvement teams for both divisions. All three executives will report to Roel Pieper."

So the company now has two divisions except for the Borseth money dude who apparently is not of either and reports directly to the Roelster. No Goatscrew there.

Shane Price said...

I've got it!

We'll make a film of the EAC 'story' and call it after one of my all time favorites...

"All the Presidents' Men"

Makes sense to me, now that Peg and Mike are BOTH 'presidents'.

I hear that Vern lost out in a most peculiar way. Seems that EAC are making payments to ETRIC on a regular basis but one failed to make it on time.

Whatever rules governed this deal, the failure meant Roel was entitled to take control, which he did, and promptly offered Vern the door.

My source claims the failure was Peg's 'fault' and that she admitted it, but Roel still went ahead.

And another thing. Can anyone confirm if President Peg and Governor Bill are meeting Congressman Jim Oberstar (Chairman of the House Transportation Committee) shortly?

I do wonder what all these people find time to talk about....

Shane

baron95 said...

Shane said ... Shane Price said...

Agreed....

Vern kept ... using clever language to imply that these were 'industry standard' numbers.

The irony is that he could actually have been honest and impressed us anyway.

I'm floored that they still have between 350 and 500 deposit backed orders,


Exactly!!! Thank you Shane. You were much more eloquent in stating the point I was trying to make.

Eclipse was accomplishing a lot (raising lots of money, overcoming their engine mistake, geting TC/PC and production at a pretty good clip). They also had some, very natural and understanting problems for a startup.

WHY Vern felt the urge to always exagerate the positives and always obfuscate the negatives is completely beyond me. He mad a fool of himself, his customers, his employees and his company.

Agrrrr - it gets to me, that things could have been so much better for Eclipse and GA without that attitude.

Things might still have not worked out for the business, but at least Eclipse would have a proud image and proud accomplishments, which wold make it easier for it to recover under new ownership from say HawkerBeech or EADS.

Now they muddied their name so bad, that honest people don't want to come near them. So they end up with some convoluted Russian/Dutch associations.

Agrrrrr - so bad!!!!

baron95 said...

BT said... Baron95,

I see the Connecticut hills often as I live a short distance away, and have flown into all the airports in question.


I'm gld to know we have at least one more northeaster/new-englander on the blog.

As an avid skier (the snow type), I so wished we had bigger hills in CT. I just didn't want you to (a la Vern) "inflate" the CT mountaineous order book ;)

Dave Ivedorne said...

Mark Borseth, the company's chief financial officer, will lead newly established process improvement teams for both divisions.

We, too, have instituted 'process improvements' - credit card scanners and a third drive-thru window, to be specific.

- You'll be required to pay 10% of the cost of your meal at the order board.

- At the first window, you pay an additional 50%, and Peg tells you that it'll be ready Real Soon Now ( TM Burger Depot ).

- At the second window, you pay the remaining 40%. If you don't, Mark tells you that you can apply for an eventual refund on the 60%, but that it won't come before another couple rounds of financing.

- At the third window, Mike hands you your meal. "Don't look in the bag, pull ahead, whatever's in there, it's what you ordered, and you love it!". When you come inside to point out that the bag's filled with Purina One, Mike let's you know that there'll be no refunds - that the food is yours.

Genießen Ihre Mahlzeit,
DI

baron95 said...

The reorg makes sense Peg running internal ops and Mike surring customer facing ops with Mark as the General Accounting Officer and Inspector General.

Probably Mark+One-President signature required on things. Keeps Roel out of day to day ops.

But the question is - is this going to solve Eclipse's problems? I doubt it.

They need lots of moola to buy lots of parts to build lots of planes at below cost prices and upgrade planes for free, therfore requiring yet more moola, and so on and so forth.

baron95 said...

Shane said ... My source claims the failure was Peg's 'fault' and that she admitted it, but Roel still went ahead.


If she engineered that (Vern's departure), I'll go to ABQ tomorrow and kiss her on the lips. (I hope she is good looking and smells good, cause it will be one heck of a kiss) ;)

airtaximan said...

Baron:

just one example:

From:
Eclipse Aviation News -
Airport Journals
December 15, 2005
Vern Raburn: In Love with the Sky, But Willing and Able to Change It
by Di Freeze

"Presently, there are 2,357 orders for the Eclipse 500, including 1,592 firm orders with 765 options. All 2,357 aircraft are secured with nonrefundable deposits. This figure includes two recent Eclipse 500 fleet orders, specifically 30 aircraft by Massachusetts air-taxi operator Linear Air and 50 aircraft by JetSet Air Ltd., UK."

Something tell sme, the fleet orders are still on the bokks, bTW..

Also:

"One large user could be DayJet, which said last year that it had already ordered 239 Eclipse 500s with an option to buy 70 more"

and...

Very Light Jets Spread Their Wings
By Stephanie Reitz, Associated Press Writer
posted: 30 October 2007 06:10 pm ET

"Eclipse Aviation says it has taken deposits on orders for more than 2,600 Eclipse 500s so far and has already delivered more than 50"

... there's a long list of this BS...

and , I for one think its very easy to just say the truth, clearly... but I don't think the suppliers, employees or investors would have really bought in, if say they claimed 500 orders after 10 years... and BTY&M, I do not think they have many more than this... if this many.

- speculators buying 1,2,3..7 slots
- dayjet
- etrick
- other fleet orders, which I believe are being counted and have little if any deposit - I'd say this amounts to at least 150 of their claimed remaining orders if not more...

I think had they continued making production progress, they would have run out of real deliveries, this year.

Dave Ivedorne said...

Crank up your Irony Detectors for this one ( from 2004 ):

"Billson's decision skills proved to steer her right again when she accepted the position as vice president and general manager of Honeywell's Aircraft Landing Systems division, previously known as Bendix Wheels and Brakes. As she explains it, Honeywell's Landing Systems is an integrated business. Design, development, production, overhaul, or repair, if it's wheel-, brake-, or tire-related they have something to do with it."

By juxtaposing this nugget with the FPJ's stellar 'landing system' performance, we can safely infer that she's not a micro-manager.

Would you like to try our Shredded Tire Carcass Treats?
DI

Dave said...

I don't recall (maybe I missed it) Eclipse ever saying something like "We have 2,700 firm orders backed by deposits".

Albuquerque, New Mexico-based Eclipse Aviation is leading the pack in its mission to secure a sizeable slice of the new Very Light Jet (VLJ) market with its six-seat Eclipse 500. It amassed 2,200 firm orders one year before certification, an indication of how popular this new market is going to be.
http://www.eclipseaviation.com/company/news/news.php?c=3&id=828

Mr Raburn said the group had a backlog of 1,950 firm orders including 160 jets previously ordered by Etirc, which also had options to buy a further 60.
http://us.ft.com/ftgateway/superpage.ft?news_id=fto011520081146580181&page=2

Firm orders stand at about 2,200; the company has collected non-refundable deposits totaling more than $65 million, according to Eclipse executives.
http://seattlepi.nwsource.com/business/206530_air05.html

As well, he’s suspicious about Eclipse Aviation’s order book claiming 2,111 firm orders.
http://www.rsvpair.com/pages/dipiazza1

Albuquerque's Eclipse Aviation hasn't sold an airplane or made a penny yet, but the startup aircraft company says it will be $2.6 billion-a-year concern and will build 1,500 planes a year by 2011. It will employ 1,500 people and have profit margins in the 30 percent range -- and that's just in the U.S. market.
To get to that point, Eclipse is betting on a market that has yet to develop: air taxi or air limousine services.
Documents from Eclipse's recently completed fifth, or Series E, round of equity funding, show that nearly two-thirds of the company's 2,099 firm orders are from air limo or air taxi services. Only 557 of those orders are from what Eclipse calls owner/pilots.
http://www.bizjournals.com/albuquerque/stories/2003/08/25/story5.html

However, what really got to me was what Roel said recently in a foreign-language article. In it Roel said that Eclipse's order book was expanding and they needed to build the second plant in Russia to meet the demand. That is where I see the actual fraud coming in (I believe it was you pointed out it could be a money-laundering operation or it could be fraud on any number of levels). In that article Roel very very recently claimed the size of the order book as the justification for the second plant in Russia and that is what smells to high heaven to me.

Also to address what Shane said that Roel might have always been in France since he was CEO. I don't see that as making a difference - if anything that is worse than having recently departed. Roel became CEO when Eclipse was in dire straits (and it still is in dire straits) and occasionally flying in just doesn't cut it. As only being the Chairman that would probably be expected, but not remotely for the CEO to act that way.

Regardless, I'm not defending Eclipse's slipery communications style with orders and everything else. I was just pointing out that some peope are trying too hard to claim they did state it as above.

Roel personally stated the large order book was the justification for building the second plant. Roel claims Eclipse has more orders than it can handle, while this blog has shown the opposite to be true. Here's the translation of the article:
According to various U.S. media would be the major reason for dismissing the financial crisis in the United States, bringing the number of orders has fallen significantly and even some customers have withdrawn their orders. But according to Pieper is true that not. "There is a huge increase in orders. We have more than 2400 orders now. The competition has not even collectively. Therefore, we must produce more. Eclipse goes even one additional factory in Russia to build the orders to be able to. "
http://translate.google.com/translate?hl=en&langpair=nl|en&u=http://www.quotenet.nl/biz/wereldrecord_jets_bouwen_roel_pieper.php&prev=/translate_s%3Fhl%3Den%26q%3D%2522roel%2Bpieper%2522%2Band%2B650%2Band%2Beclipse%26sl%3Den%26tl%3Dnl
Skunks smell like perfume compared to Roel's statement. Roel has claimed that orders have INCREASED. This is beyond slippery given how Eclipse is seeking funding now and is supposedly building the Russian plant.

Shane Price said...

For those of you who were laid off by EAC in the recent past, I am informed that both the following companies are seeking engineers for their ABQ operations at present:-

www.aspenavionics.com

www.sandia.aero

Shane

FreedomsJamtarts said...

Black tulip hit the nail on the head.

Whereas Americans live in fear of CIA/FBI/NSA etc surrveillance, in Erp we shudder at the thought of a visit from the EU commision/ department of unconsumed vacation.

It is differcult enough as a protestant in a catholic country (Where all religious public holidays are to be strictly obeyed) to find time to get some work done. Any Thursday holiday is of course to be turned into a four day weekend.

In finding a free appointment for the weeks skiing in winter, the two weeks in Greece in summer, the biannual month doing in-depth vacationing in Asia/US/Oceania or Africa, it sometimes gets tough to consume the whole five or six week annual holiday allocation.

Because salaried workers (TM EU) get paid overtime, and the companies have issues with the financial burden, many of us have a glide time scheme, were we are requested to reduce our plus hours by taking days off.

Intercontintental trips are a real drag, as you have to offset all those travel hours by taking nearly a week off when you get back.

As you can imagine, the stress levels rise dramatically in December as we try to balance enough punch drinking afternoons, shopping sprees etc to reduce the plus hours, while still taking vacation, yet finding time for a decent departmental piss up, and the company Xmas party. All that in a month with a real concentration of public holidays.

All the time your boss is on you back to take days off, as his annual bonus has average days of holiday carried into new year <5 as a management performance goal.

You can see why training is such a high priority in the EU. We are constantly forgetting what the hell the job was, cause we weren't in the office last month.

Dave said...

www.aspenavionics.com

Former employees of Vern that ended up in litigation with Eclipse:
http://www.aspenavionics.com/index.php/news/detail/aspen_settles_eclipse_litigation/
Maybe other former Eclipse employees will also go on to create businesses of their own.

Shane Price said...

Freedom,

You forgot Easter, May Day and the various national 'liberation' days, like 14th July in France.

It would of course be remiss of me not to mention our very own St. Patrick's Day.

Maybe those senior people who took their 'two months salary' as severance after the leadership meeting could find some time to take a break.

What's remarkable is that anyone stayed, when it was made very clear to all that the 31st of October is a real deadline.

No new funds by then equals no future for EAC.

Shane

Shadow said...

Shane,

re: deadline. We saw the same thing happen to Adam Aircraft earlier this year. A deadline was set by the banks and when the financing round failed Adam was forced to file for BK. Appears that history is repeating itself.

Shadow said...

And I should note that Adam Aircraft also had a TC and PC, in addition to some aircraft in the field, when they went BK. Eclipse has all of these things (the TC and PC, for now. who knows after the FAA audit is done) and a large liability to owners for upgrades/mods and deposit refunds. That presents a huge hurdle, even if the credit market was more fluid than it is now.

gadfly said...

http://www.bizjournals.com/denver/stories/2008/08/11/story7.html

gadfly

(It appears that someone in the State of New Mexico has the "Midas Touch".)

Dave said...

An extended article on Eclipse focusing on DayJet's operations in Macon:
http://www.macon.com/198/story/434742.html

baron95 said...

airtaximan said...
Baron:

just one example:


AT, thanks for digging it up - I stand corrected - it looks like they did claim firm and deposit-backed for over 2,000 orders.

Now question, do you think Eclipse actually produced signed contracts with those orders during due dilligence to ETIRC?

If so, they either did in fact have those contracts. If not, ETIRC is really naive to the extreme for not having checked that thoroughly.

baron95 said...

Dave said... Firm orders stand at about 2,200; the company has collected non-refundable deposits totaling more than $65 million, according to Eclipse executives.

Ditto for you Dave - thanks for getting the info - I stand doubly corrected.

However, simple math from the numbers above means an average deposit of only $30K per order (hardly a meanigful deposit) - again, missed opportunities for hard questions from the press.

flightguy said...

How much more can a company make by selling 2 divisions?

If you had to sell one division, which one?

If you could move the company to Russia, how much of the old company could you take with you and still have the same identity?

baron95 said...

flightguy said...
If you had to sell one division, which one?


Flightguy, very interesting question.

Obviously, Pegs entire division can be replaced with the "Russian" operation when it is all said and done. So that is a good candidate.

OTOH, HondaJet has decided to outsource sales and service to Piper. So there is precedent to outsource Mike's division as well. A good candidate would be one of the larger FBO holding companies like BBA.

So in the end, Eclipse may just be a VLJ brand with outsourced production in Russia and outsourced sales and services to BAA or similar.

Perhaps if they had started out that way, they'be in better shape today and have a lot of change left over from the $1B.

flightguy said...

If there was a post bankruptcy, don't you think that a Customer support division may be needed and profitable by itsel?

Dave said...

However, simple math from the numbers above means an average deposit of only $30K per order (hardly a meanigful deposit) - again, missed opportunities for hard questions from the press.

I think the questions can still be asked since Roel is using the allegedly growing order book as justification for the Russian plant. If the russian plant is for real, it seem like hiring hundreds/thousands of people for non-existent work would do twice as much damage to people's lives than if just ABQ closed. I don't want to see average russians promised work and then having their lives disrupted by the likes of Roel.

airsafetyman said...

"..Pegs entire division can be replaced with the "Russian" operation when it is all said and done. So that is a good candidate.

OTOH, HondaJet has decided to outsource sales and service to Piper."

Not to beat a dead horse but any Russian plant would have to be signed off on by the FAA in order to produce airplanes with the US Type Certificate and there is no reason to think this would ever happen, especially in light of recent developments in Georgia.

Also Honda is going to do the European sales and service of the Honda Jet themselves. Piper will be involved only domestically.

flightguy said...

Who says that thhey need a US type certificate. The US market is DOA, remember?

airsafetyman said...

Well they need a TC from SOMEBODY that will be recognized by EASA. I doubt if a Russian TC will fill the bill any more than a US certificate.

flightguy said...

Approved under a Russian Registry will allow for exports and reciprocity by EASA. It is not a case whether we like it or not. Besides, planes are being operated in Europe now and shipped from the US. Which is closer?

x said...

Regards Dave's cite of the Macon DayPort story.

My data base records a grand total of 4 KMAC departures in August:
8/7 two flights -- to Pensacola and Boca Raton
8/13 flight to Tallahassee
8/29 flight to Greenwood County

FreedomsJamtarts said...

An order for 50 Aircraft for JetSet Air UK....

We have all become so jaded from seeing Dayjets 237 orders plus 70 options plus 1000 floptions nonsense that a line like the one above barely registers.

But think about it. A fifty jet order was something only a company like AA, United or the USAF considered until fairly recently.

Try googling JetSet Air LTD UK. All I found was one forum entry noting that Sun Air UK had bought the brand in Jun 2005. That is all!

How many Eclipse 500 has JetSet Air Ltd UK received from their 50 A/C order. How much did they pay in deposits? $7.5 Million - doubt it! If they did, they haven't squeaked since.

In the same posting from Eclipse's newsletter they mentioned 160+50 options from ETRIC. $24 million deposit? Doubt it (they got got stuck with the company :(

I think if the blog does a really thorough trawl through all the old press releases, we will find that the number of "orders" which are attributed to these new start up, vapour ware, drinking the cool aid operators which have vanished with barely an internet ripple, is more like 90% of the "Order Book" (tm Eclipse).

For example I found this page, which list 10 orders and 40 options for Alpha Airways of Austria.

http://www.alphaairways.com/_images/downloads/Newsletter_alpha1.pdf

Searching airliners.net, I can't find a single image for an Alpha Airways jet. Do you think they paid $1.5 Million in deposits? Doubt it!

According to this report they would have 5 planes in operation by AUG 07.http://www.linz-airport.at/www/cm/bda/_related_content/de/news/archiv/index/alpha.html.

That would imply at least a further $30 million in progress payments. Who thinks this money was wired through?

This lead me to this cool press release:

http://www.newsfox.com/pte.mc?pte=080116008

The Air Taxi Association of Europe:

AccelJet, AirCab, Air-Cannes, BIKKAIR, Blink, byJets, ETIRC Aviation, GlobeAir, Gonow, JetBird, Jet Ready, LEA: London Executive Aviation, Taxijet, and Wondair

How many Floptions do you think this happy little party was worth? To be fair a couple are listed as Mustang or Phenom customers.

The others are probably waiting patiently for the EASA Cert.

I bet we can do due diligence on their order book with nothing more than Google.

Only 557 of those orders are from what Eclipse calls owner/pilots.
I would love to know how Eclipse defined the owner pilot. Did Alpha Airways and JetSet Air fit that description?

I can't understand why it was so hard for the dumb rich people to cut through the smoke and mirrors to get to the pure unadulterated BS!

FreedomsJamtarts said...

Approved under a Russian Registry will allow for exports and reciprocity by EASA. It is not a case whether we like it or not.

Do you have a reference for that?

To my limited knowledge, the only CIS A/C with an EASA TC are a handful of Antonov AN-2's listed by S/N which were grandfathered from a german TC granted at the time of reunification. May be a few more similar cases, but in general, nothing with a CIS TC is eligible for EASA system CofA.

Numerous attempts have been made to stretching back ot the JAA days to certify or validate niche A/C like the AN-124, Beriev water bombers, or some of the heavy lift Helis, but none have been successful.

Since EU-OPS entered into force this summer, numerous EU countries have issued exemptions against the basic regulations flexibility provisions to allow commercial operations with non EASA standard Cof A A/C to continue (also affects historic A/C such as the 707, DC-6 and Electra).

The Eclipse's lack of a EASA TC and thus EASA standard CofA is what also prevents it being put on a european AOC.

airtaximan said...

smokeing order book:

"Only 557 of those orders are from what Eclipse calls owner/pilots."

Psst: Dave, you are way better than me at this!!!


OK, admitted 557 order from owner/pilots.

Lets go with that - knowing what sShane says, some guys has 7 deposits, asome has 1... some had 2... AND some were just speculating on 1 deposit.

How many real aircraft sales were there?

I'd say MAX 350.

The rest were second and fourth speculative orders, or first speculation orders...

so, 350-240 or so delivered = 100 left to build to deliver to real clients.

Why is this importnant: well, look at controller. There are 80 listings - PLUS mike Press said there were 100 transations in the aftermarket BEFORE a plane was ever delivered.

So?

You can bet no one will recoup $1.5M for their planes, ever. No way.

The economics, for many, many produced at lower prices makes no sense. The real user market vs Cab-of-beans market for this plane is so small, its embarassing.

PS. we wondered why there was a meager showing at the owners club, and not too many die-hard-afrikens showed up evven on this blog. You have your answer boys and girls - there really were not amny buyers for this plane. Reall... really only a few hundred at most.

flightguy said...

FJS,

Your point should be, nothing recent.

airtaximan said...

baron:

on your "produced signed contracts" question:

answer, "if you believed the dayjet paperowrk, whatever it was, you were hooked lined and sinkered"

and who better than another BS orderer.. ETRICK to buy into such a scam?

Farce

Dave said...

I think if the blog does a really thorough trawl through all the old press releases, we will find that the number of "orders" which are attributed to these new start up, vapour ware, drinking the cool aid operators which have vanished with barely an internet ripple, is more like 90% of the "Order Book" (tm Eclipse).

I agree. I think the order book is very suspect even if these companies wanted to buy the fleets, they wouldn't have the money to do so as they are risky ventures themselves. Eclipse has for years acted like all the orders with deposits are full on sales for the face value, but that can't be as it isn't like the order themselves are from Fortune 500 companies.

After 10 years of worldwide marketing and PR it looks like Eclipse has solid orders for between 500-700 units (including the alleged 270 already delivered). That could have been great news if Eclipse built itself to operate profitably on 150 units per year, but instead Eclipse decided to make itself the next dot-com boondogle claiming that it would make and have customers for 1500 units per year and be the fastest company since Amazon to reach $1 billion in annual sales and be a hot IPO company.

The same also goes for DayJet. Just as Eclipse needlessly wasted hundreds of millions, DayJet needless wasted tens of millions by pretending to be something totally new when in reality charter and other modes of transportation had been around for decades. DayJet too could have been profitable (or at least significantly better off) if it had scaled back its claims (and all the expenses for ASTRO, which seems pretty useless compared to the amount spent) and figured to operate 15 planes rather than 1500...and it probably would have been better off with something besides the Eclipse, but even excluding that DayJet could be doing much better now if it had used the money wisely.

airsafetyman said...

"Approved under a Russian Registry will allow for exports and reciprocity by EASA."

We have been around this many times already. Why would EASA reciprocate for a Russian TC for the Eclipse while disapproving a American TC for the very same airplane? No European owner/operator of an EASA-member country can register the airplane in their country unless it has EASA certification. All commercial operations in Europe are dead in the water until/unless that happens.

airtaximan said...

...it looks like Eclipse has solid orders for between 500-700 units "

remember, sold for around half what it takes to actually make one of these planes.

Also, the number you are using is "planes"... not buyers. If you are interested in real buyers, as in "I would like to fly one of these things" the number could be half.

Imagine blowing $1.xB on a program that can only find 300 or so clients to buy their product at half of what it costs to make?

DOA

Black Tulip said...

Does anyone know a professional Grief Counselor? They could serve a humanitarian cause and pick up a few bucks next week in Sunriver, Oregon - September 11th to 14th. I wish I could be there Friday evening to hear Brian Shul speak about flying the SR-71. His book “Sled Driver” is great.

flyger said...

The split into two divisions makes sense.

Manufacturing goes to Russia. Eclipse gets EASA certified (hence the focus on doing that which makes no sense for the US market at all).

US service stays here as a separate company that can make money because they have the owners by the balls.

The left behind US manufacturing company goes BK and with it, all the liabilities that a BK clears out.

ETIRC ends up with an EASA Eclipse built in Russia. No debt to pay back to the US. They also own the new support company in the US which makes money. The black hole that ate all the investment is gone.

Pieper needs to do the following ASAP: Sell the customer service division to ETIRC for the entire world. Have to get it out from Eclipse Corporation. Then get EASA certification using whatever little money is left in the US engineering/manufacturing company. Then setup in Russia to build the airplane using new vendors. Let the old Eclipse company die. Extract money from the US owners for support.

That's the plan as I see it. It is much, much better than a total implosion and no support at all. It makes Pieper's investors happy, they want Russian jobs and work. It gets Pieper into the European market which is 50% of light jets these days. The only losers are the Eclipse investors and employees, and a BK cooks their goose anyway.

airtaximan said...

flyger:

your smart.

They've already begun offloading the support division, vis contracts with FBO, like the Canadian one.

Who could argu with this solution... "we were going to close the company, so, instead we sold off the support ide, and now you all pay for fixes, upgrades, all the stuff we promised for FREE".

Also, the $2.15 new price is curious, since folks here guesstimate it will cost around $500k to finish the planes that are delivered (EAC TM) so far.

So, I guess, if you got an e500 for say $1.5M... its going to cost you $2.15 anyways, when its "finished"... nice rationale for the price.

I fear, this company screwed the pooch on the spec/marketing as well as the engineering. Wrong spec, in my opinion. separating the companies only exacerbates this - it shows no one over there really has a cue - -but I admit, there's no long term thinking anyway. How could there be?\\There are not enough customers for there to be anything "long term".

Dave said...

That's the plan as I see it. It is much, much better than a total implosion and no support at all. It makes Pieper's investors happy, they want Russian jobs and work. It gets Pieper into the European market which is 50% of light jets these days. The only losers are the Eclipse investors and employees, and a BK cooks their goose anyway.

That's the way I see it other than I don't see this as being a good deal. I see Roel stealing a bag of jewels only to find out that what he got was costume jewelry and the robbery cost more than the trinkets were worth. Europeans aren't stupid and sooner or later they'd catch on as to the history of the FPJ...that is assuming the FPJ ever gets certified by EASA. If he's setting up the Russian plant just like the ABQ one with 1500 employees supposedly going to be producing 2+ per day, he'll have the same problems all over again except that he wont even have the US market to sell to, so it would be hundreds of millions down the drain for the factory and russians would end up how those in ABQ are now.

Niner Zulu said...

ATMan,

With regard to the number of buyers, you are right on. Over the past couple of years, there just have not been that many "diehards" appear on this blog, or any other for that matter including VLJ Planet, E500 Club or factory forums. So few, in fact, that we know most of their names (or monikers) by heart. True this is anecdotal evidence, but if there were really so many buyers as Eclipse claimed the VLJ forums would be jammed with diehards and no one could get a word in edgewise, and this just hasn't been the case.

Occam's razor applies here - "..other things being equal -- the simplest hypothesis proposed as an explanation of phenomena is more likely to be the true one than is any other available hypothesis.."

Roel must know the truth, which is why he is in Europe enjoying a fine Bordeaux as he gazes over the gently rolling hills of France, far from the screams of employees fleeing the Titanic that is Eclipse as it slowly sinks below the sands of Albuquerque.

airsafetyman said...

"ETIRC ends up with an EASA Eclipse built in Russia."

Built with whatever parts float down the Volga? Come on people, the Russians can build some fine airplanes, no question, but this one is not even a finished design as yet. Any of the Russian design firms could probably straighten out this mess, but it would doubtless be more of a headache than starting from a clean sheet of paper.

airtaximan said...

I found an order from 2008 for e500's... who said there were NO orders in 2008???

"Following the results of the Petersburg international economic forum on extralight jet aeroplane Eclipse 500 8 orders from Russia, Ukraine and Kazakhstan have been received, the press-service of the government of the Ulyanovsk area informs. The number of potential buyers includes Bank VTB and City Crocus, among the large companies which have appreciated commercial appeal of an air vessel, it is possible"

I had to dig through 23 feet of snow to find this....

flightguy said...

Now it looks like you are seeing the big picture as Roel would see it.

airtaximan said...

ORLANDO, Fla.--(BUSINESS WIRE)--Sept. 9, 2002

"Eclipse Aviation Corporation today announced that the order book for its lightweight, six-place, Eclipse 500 jet totals 2,072 aircraft. With 1,357 firm orders and 715 options, the company has secured more than $65,000,000 in non-refundable deposits for this breakthrough twinjet.

"Demand for the Eclipse 500 jet has been exceptionally strong, demonstrating the market creation and expansion made possible through not only the compelling purchase price, but more importantly, the low direct operating cost of this aircraft," said Vern Raburn, president and CEO of Eclipse Aviation. "To our knowledge, the Eclipse 500 order book is greater than that of any single civilian jet in the history of aviation. Nonrefundable deposits secure all orders for the Eclipse 500 jet."

I guess we now have to TM "Nonrefundable deposits secure all orders for the Eclipse 500 jet."

airtaximan said...

I promise, this is the last one... I'll stop... and BTW, the April 1 date does not mean it was a joke...

"April 1, 2006 The dream of Eclipse Aviation Jets-of-the-Future

".....Earlier this month production commenced on the first of 2350 Eclipse 500 jets that have been ordered with non-refundable deposits – more than US$3 billion worth of orders."


Hmm... I am 100% sure Vern made these sorts of comments to gov't oficials on his many trip to the hearings ... I just can't seem to find the perjury quickly...

Dave said...

"Following the results of the Petersburg international economic forum on extralight jet aeroplane Eclipse 500 8 orders from Russia, Ukraine and Kazakhstan have been received, the press-service of the government of the Ulyanovsk area informs. The number of potential buyers includes Bank VTB and City Crocus, among the large companies which have appreciated commercial appeal of an air vessel, it is possible"
I had to dig through 23 feet of snow to find this....


Yeah, Borat bought one to fly Pamela Anderson to Kazakhstan with him.

Also following-up on an EASA certified Russian FPJ, I just don't see there being much of a demand for that and that Roel would have been better off starting from scratch if that was what he wanted. No offense to the russians, but I don't believe there are many "world class" aviation suppliers in Russia and that outside of Russia and a few satelite states, I don't see much demand for an Eclipske even if there was a demand for an FPJ (with the existing suppliers). I would also think that many of those russian companies would see all the devastation caused by Eclipse in the US and europe and they'd either steer clear entirely or sign very tough contracts with ETIRC.

No Mas said...

Shane -

The situation at the end of 2007 must have been bleak for Vern to agree to a Sword of Damacles deal.

But, why would EAC be making payments to a principle investor (eTurk)? That just slams your cash at the very time you need it. Recall that NG was finally cut in at the end of 2007.

Making Peg (asleep at the wheel) and Mike (they only laugh at you behind your back ... OK, sometimes to your face) P&GMs can only be for UBS efforts. They will both be gone IF any new money comes in.

NM

airtaximan said...

no mas,

I told you, ETRIK IS the bank.

I said it before, you did not want to believe me...

ETRICK IS THE BANK.
- there are other banks, but etrick acted as a bak, made a loan... and now you see the result.

Dave said...

Hmm... I am 100% sure Vern made these sorts of comments to gov't oficials on his many trip to the hearings ... I just can't seem to find the perjury quickly...

Here's various testimony from Vern:
http://sats.erau.edu/newsarchive/2002/2122002_vern_raburn_testimony.pdf
http://finance.senate.gov/hearings/testimony/2007test/071907testvr.pdf
http://www.commerce.senate.gov/public/_files/RaburnTestimony_SenateAviationSubcommittee_9_28_060.pdf

flightguy said...

FYI, the russians see their capability and aviation future quite differently.

Just ask Epic in Georgia trying to produce in Russia.

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