Économie de bouts de chandelles

This phrase solved a real 'writers block' for me, so thanks Fred (and Julius) for your inspiration!

What I want to draw everyone's attention to now is the future of our favorite Very Costly Jet, and this lovely French 'truism' (roughly translated as 'saving the end of the candle') is apt in this context. The question I've been asked most in the past few weeks is 'What should depositors do?', and I've tried my best to illuminate what MIGHT happen, for those who've contacted me. 

A BIT OF BACKGROUND

It's easy to forget, sitting here on wearing our critic's uniform, that there are something like 450 '10%' and 230 '60%' people out there. A lot of them will have had a very nasty shock on the 25th of October, and really don't know where to turn to. A considerable number joined the 'E5C' group, which remained under the control of the 'faithful' throughout this process, some did their own thing (the 'Production Line Group' and those stuck in the ConJet) and a surprising number seem to have been kept in the dark. Many seem to have sent the money, sat back and blissfully ignored what they'd been suckered into.

'We' need to be aware that people reading the blog find it difficult to understand that we're not doing this for the fun of it (alone) but in a sincere effort to prevent further losses by the unwary. So, let's all try to cut the new reader or poster a little slack and make sure to reference the home page for the 'historical' stuff, as well as our little 'Glossary' of common terms.

THE CURRENT POSITION

I should issue a health warning, as in 'this is what we UNDERSTAND' is the current position. Sometime in the next few days the sale of the assets of EAC will complete. At that time, s/n 260 will (finally) be delivered to its owners and will become the LAST ever FPJ shipped by the original company. Thereafter EclipseJet Aviation International (EAI) is the beneficial owner, free of all contracts and liabilities, of the factory and all associated with it. The current fleet loses all warranty or contracted services (JetComplete) and has to pay whatever EAI decides for parts and labor. Under a Court sanctioned deal, the 27 aircraft on the production line will be finished and delivered to their purchasers upon payment of a further $1.375 million. This money is IN ADDITION to all payments made to EAC in the past.

However...

The Production Certificate for the FPJ 'died' with EAC. This means a number of months will pass (average guess is 6) before a new PC issues to EAI. I'm taking from this that it will take at least this long to get the last of these birds out the door and I suspect it will take longer. We know that critical suppliers have abandoned the FPJ, so new ones will need to be integrated, and others will likely be very reluctant to ship without cleared funds.

EASA certification requires full FIKI and AvioNG 1.6 and both of these need full FAA approval. In the revised circumstances, I pretty confident both agencies will be going over the aircraft with a fine toothed comb....

FUTURE PROSPECTS, IF ANY

Basically, those 10% and 60% people are in a real bind. In my opinion, EAI will seek more money, probably quite a lot more money, from this pool. They are already invested in the aircraft and will be under pressure to get something (anything) rather than walk away. So, I expect an offer will go out to these unfortunate depositors which says 'your deposit on s/n xxx has been converted to a coupon with a value of $yyy,000 which can be used to purchase a fully equipped FPJ at $2.5 million'. After some flowery words about a brave new outlook (or similar marketing fluff) the kicker will be something like:- 'In order to secure your position in the new order book, please remit $1.5 million to our bank account by March 1, 2009. The balance of $zzz,000 will be due on delivery. This limited time offer will not be repeated' etc etc.

Now, I'm probably wrong about the numbers, but then I don't work for EAI and I'm not a mind reader. But I know that as soon as these offers reach the depositors, I'll be sent a copy. In fact, I'm promised LOTS of them, which I'll be comparing to make sure they are broadly similar.

Why are depositors going to do this? Well, it might be a surprise, but not all of them trust the sales department at Eclipse anymore....

MY BROAD ADVICE TO DEPOSITORS

When this offer issues, which I'm promised it will be in the next few days, do nothing without taking professional advice. Talk to your lawyers, your accountants and others who've also been involved with this sorry saga. Consider alternatives like the Phenom 100 or the Cessna Mustang, both of which are now in serial production and are from companies with extensive service networks and a credible business plan going forward. Above all don't send any more money to EAI (or anyone else) until you've had a chance to reflect on the angles.

You are welcome to join my 'depositor mailing list', where I'll be contrasting the various offers made around the globe. You name and identity will be protected, as all who've dealt with me will attest, and you may learn enough to save yourselves a small fortune. Just email me at 

eclipsecriticng@gmail.com

and include 'Depositor' in the subject line. I'll do my best to get back to you promptly with any information I have to hand.

So, we're back to the 'candle' phrase we started with. The French have a fantastic world view, based on a genuine openness to change and a real thirst for adventure. Many of the things we admire in good food, classic wines and creative design flair comes to us with a Gallic flavor and is presented with a superb zest and 'joie de vivre'. As a people, they correctly despise those who regard money as an end in itself. So, I say, don't waste time trying to squeeze something out of this mess. If you have lost in EAC, think very, VERY carefully before adding to you woes....

Shane

SOLD!

Yes folks, Roel and his merry band are the new owners of the assets of Eclipse Aviation. They've chosen 'Eclipsejet Aviation International' as the name for their 'new' enterprise so, let the celebrations begin, pop the champagne and shower the homecoming champions with ticker tape. Payroll will be made this week down ABQ way, and all bar the fine print is ready for signing in court tomorrow, Wednesday the 21st of January 2009. Those who paid deposits/progress payments on the aircraft currently on the production line (last one is S/N 296) will be offered a 'fixed price' deal at $1.375 million extra for a 'final spec' aircraft, but some of you may need to act, so follow my instructions below.

But....

Shortly after the ink dries, all depositors (other than the ConJet/E400 group, also see details below) will be formally told their contracts are worthless. The new cost price of the aircraft will rise, and no refunds will be paid. The price for the base aircraft will rise, probably to $2.5 million. Suppliers have been offered cents on the dollar and a small share in the company, if they agree to new vendor contracts. The City of Albuquerque will also want to discuss what Roel intends, as there are a number of reporters asking searching questions following the revelations in the bankruptcy court.

The E400 group have managed to get the judge to escrow $3.2 million of the cash due from the sale until the outcome of their claim hearing. At least this will give them time to dig up the audio/video records of Wedges speech at Oshkosh last year, when he stated the $100k deposits would be in escrow.

Al Mann continues to support the company and will at the very least raise the moral tone in the boardroom. He's well known in business for his ethical approach, especially towards staff. It was Al who made sure the payroll 'hiccup' last November was corrected as quickly as possible. It's just a pity that in this turkey, he was surrounded by sharp operators and dodgy computer salesmen.

So, if you are one of those who's serial number is lower than 296, and you have paid your deposit/progress payments, but have NOT been represented by a lawyer, contact me promptly and I'll email you the appropriate details. But be QUICK. You have until 12 noon ET tomorrow to agree to the 'deal' and get included in this part of the Court documents. The usual address will get me

eclipsecriticng@gmail.com

I'm sure this headline will be updated, by events if nothing else. Stay tuned to your favorite Very Cheap Jet, sorry that should read Very Costly Jet, blog.

Shane

Where now?

This week the Bankruptcy Court in Delaware will rule on the Chapter 11 process. As there is only one 'credible' bid in play as I write, from Roel Peiper, it looks as if we can predict the future ownership based on what we already know. With that in mind, I decide to review some court documents that came my way. They are (or were) available to the general public and contain the facts and figures available to the company and it's officers, suppliers, customers and staff at then end of November 2008. Nothing in the files is therefore secret, but some people may find it hard to accept their dirty linen being washed in public, so I'll try to avoid naming too many names. If I've put you in the spotlight unfairly, drop me a line at eclipsecriticng@gmail.com and we'll see what we can do.

The FACTS

1. Total deliveries. 259 aircraft since the 31st of December 2006, although not all are currently in the hands of customers. Some have been retained in companies associated with EAC, or 'loaned' to ex CEO's. S/N 260 was in process of being delivered to a company who had paid EAC not less that $1,288,000 when the aircraft was 'seized' by the bankruptcy process. It's the subject of it's own legal action and I'm sure we will hear more.

2. 'Operations' income, per the 'Statement of Affairs' was $318,000 in 2006, $102,694,000 in 2007 and $210,185,000 (to the date of filing) in 2008. Interest earned (presumably from depositor funds) was $1,659,000 in 2006 and $4,047,000 in 2007. As a historical footnote, DayJet paid $20,000 in 2007, for something....

3. Current spending. In the calendar year prior to filing, EAC had paid $61,606,000 to creditors, and $85,443,000 was listed as the amount still owing. There was $81,455,000 (September 2008) of inventory in stock. There were 28 (give or take one, see s/n 260 above) FPJ's in production at the end.

4. Refunds. Something called "Olympus Aviation Corporation" looks like it was the last one to succeed in recovering a deposit ($175,000) which it did on or before 24th October 2008. That left 22 'pending' lawsuits seeking deposit refunds at time of filing. It's not clear how many aircraft these suits involve.

5. Property held for another person. There was $85,787,857 (and 64 cent) held by EAC, the vast majority of which is for 'City of Albuquerque' or 'Wesco Tools'. The items from Wesco I understand (tools etc) but the City seems to have provided all sorts of stuff, including computer servers and things like a 'Teletronics-Data acquisition unit -Exp AC 106' (listed at $53,523.79). The list is varied, and goes on for a long time.

6. Receivable balances. EAC list $20,720,225 as owing, mainly from customers.

7. Deposits. EAC list 'Creditors Holding Unsecured Nonpriority Claims' (and this is truly AWESOME) of $568,143,152.55. A chunk of this is money claimed by suppliers, but I gave up counting the number of 10% and 60% listed, after I got to 300. In another document, ETIRC were shown as having paid $8,900,650 (and 39 cent) as deposits for FPJ's. At least they had the sense to avoid the Con Jet, which tells its' own story...

Speculation, short term

Roel will buy the assets, probably with input from Al Mann. There will be a round of cuts, including staff reductions. Suppliers will be offered some small amount of cash (cents on the dollar) and be promised the earth to stay on board. Depositors well get some sort of 'coupon' to salve their wounds, but the price of the FPJ will be increased by a similar amount, so they will still have lost everything. Customers will be told that parts are more expensive and that all repairs must be paid in cash before return of the aircraft.

Speculation, medium term

Within a short period, probably less than 6 months, Roel will be facing further cash problems with suppliers and will end up having little or no choice on Chapter 7. Sales of aircraft were already tailing off, which is one of the reasons EAC ran out of cash in the first place. New victims will be hard to find, once the remaining Faithful (and there are very few left of them) have paid up for the aircraft he can build in that time.

Speculation, long term

Much more difficult, post Chapter 7. I wonder how the avionics can be supported, given the very high order of integration within the FPJ. AvioNG is touted as a major strength of the package, whereas most people see it as a liability. P&W can be relied upon to support the engines, but will be able to 'think of a price and double it'. The airframe will present special challenges when repairs to the FSW joints are required. Further AD's will present problems, and the whole area of 'upgrades' to keep EASA happy presents it's own pitfalls.

My opinion

The facts presented in the Bankruptcy documents prove that the numbers don't add up now, and have never added up at any time. A whole range of people were sold a concept which had never any chance of becoming a reality. The City of Albuquerque, depositors, suppliers, banks and shareholders are all left nursing wounds they won't forget in a hurry.

I wish the new owners all the best of Irish luck. This 'business' is a crock, was always a crock and has no chance whatsoever of being anything other than a crock.

But I am biased.....

Shane

Reviews are fashionable, unlike EAC

I thought it timely (and, lets be honest, fashionable) to carry out a 'review' of our year. Ok, ok, it's not a full year for Eclipse Aviation Critic NG just yet, but you get my drift.

As most of you will recall, Stan called it a day at the end of January 2008, whilst allowing 'us' time to find an alternative home. After various forays', a large number expressed dissatisfaction and I decided to copy the style, location and name on the 16th of February 2008. Gadfly made the second 'comment', which really set the tone in those early days:-

"Put on the kettle, and this will seem like home in no time."

The record will show that this was one of the very few one line comments from Gadfly, who later had the courage to stand up for the defense of our 'home' in a very practical way. Thanks again, Gadfly, in case you didn't hear me the first time.

During those first 6 weeks, we managed to have a variety of interesting and wide ranging discussions on the price of oil, the first bank collapse, the Russian factory and the possibility of EAC raising funds at Oshkosh by selling T shirt 'positions'. A series of valuable contributions came to the blog via the blog email address (eclipsecriticng@gmail.com) from suppliers, customers, depositors and, in particular, staff. We also got the first signs of trouble with the FAA.

April was a huge month, beginning with the confirmation that Avio NG would be 'completed' by the Garmin G400's and gathered pace with the announcement of yet another 'special offer' to raise funds. But the action of the Wedge that truly raised the stakes was his attempted SLAPP suit against 29 named bloggers. Turns out this was a really serious mistake by Wedge, who suddenly found himself in the media spotlight for all the wrong reasons. If he was right, and the Honor Roll really did work at EAC, then he was attempting to hide wrongdoings by his company. As it happens, he was wrong and had simply been trying to prevent free speech. Or at least the words he didn't like, as his own actions with Brian Skupa at the same time were rather extreme by any standards.

The month of May included the scaling back at DayJet, increased press coverage of the blog, words from suppliers and staff that all was not right at EAC and various legal actions funded by Rich Lucibella (a.k.a Gunner) who had undertaken the formal defense of the Honor Roll. In the background various attempts were made by EAC lawyers to reach a 'settlement' but Rich was having none of it. He knew that Wedge was on the roasting spit and wanted to turn it a few times. The month closed with the formal announcement of the Con Jet and a price increase for the FPJ.

June contained a few real gems, one of which sticks out, from Shadow:-

"Oh, how I love to watch a cash arsonist at work."

The best definition yet of the Wedge, and a reminder of how some of the best comments are the one liners. The month also saw healthy discussion on the 'Stuck Throttles' including an excellent headline post by Karen Di Piazza and a stellar parody from Black Tulip on the little known crew monitoring systems, FOQA. Read it and weep.

July began with my 'Tales of woe' headline, and the first indications that refunds due after the price increase had not been paid. It ended with the Wedge's departure, which he was forced to announce his own firing at one of the early Oshkosh press briefings. What a way to go. Other highlights included the increased participation by suppliers and staff, and a much higher visibility for the blog on Google, in the aviation media and through the mainstream press. It was a busy month all round.

August and September were varied. We started with the end of the EAC action against the Honor Roll, moved through the DoT IG investigation of the TC and PC awards, had the 'operational excellence' program (fire almost half the staff) from Roel Peiper and had that surprise visit from our old friend Ken Meyer. In the background, suppliers in particular were wailing at me about not getting paid, and the usual roll of legal actions against EAC seemed to gather pace. The 'die hards' were also having real issues with how they were being treated and I started to listen to the various conference calls that took place between EAC management, customers and suppliers. Mike McConnell in particular came across as a self serving twerp of the worst sort. My only regret is that he works in aviation and not in my field of activity, for one of my competitors.

October and November began with another AD for the FPJ, continued with the closure of DayJet, saw our 50th headline post and our 10,000th comment and had the 'Nuclear Winter' speech from the Wedge at the VLJ conference in Florida. It continued with more word from depositors issuing proceedings, a flood of negative press comments on the future viability of EAC, saw the staff unpaid for a short period and finished with the Chapter 11 action by the management. Phew, they were busy months....

December was much quieter, where I seem to have been appointed (by customers and depositors) as the official clearing house for the various groups formed after the Chapter 11 proceedings. We finished with Black Tulip, who was kind enough to see the funny side of a group of lawyers inviting the Wedge to speak at an upcoming event on bankruptcy. Who would have thought American lawyers saw the funny side of things?

So, there you have it. 2008 has left us and the New Year opens on a positive note. We are all still (more or less) in one piece, EAC struggles on and the next two weeks will determine what the short to medium term holds for suppliers, customers, staff and depositors. Shareholders know they are last in the queue, unless of course, you name happens to be Roel Peiper. The remaining banks are very reluctant to fund anything, a new and untested American President has enough problems to test Superman and every company in aviation is shedding workers and/or scaling back product development. The auction results from the 'bidding process' for EAC will make interesting reading on the 14th.

Oh, and a Happy New Year to one and all.

Shane